Proposed changes to superannuation reform legislation

The Government is intending to make changes to the total superannuation balance and transfer balance cap to capture the use of limited recourse borrowing arrangements (LRBAs). The Government currently has concerns around the ability of SMSF members to use LRBAs to circumvent contribution caps and effectively transfer accumulation growth to retirement phase via payment of liabilities which is not captured by the transfer balance cap (TBC).   

They have planned two measures:

  1. Amendments will be made to the total superannuation balance to count the outstanding balance of an LRBA each year towards the member’s annual total superannuation balance. Government concern: Trustees making payment of lump sums to members who then lend the money back to the SMSF to purchase an asset through an LRBA. This allows members to keep making contributions by keeping their net balance below the total superannuation balance threshold  
  2. Amendments to the credit provisions of the transfer balance cap to ensure the amount of the repayment of the principle and interest of an LRBA from an accumulation account as a transfer balance credit in a members account. Government concern: Trustees may pay retirement phase liabilities from accumulation phase income through the use of an LRBA resulting in an effective transfer of the accumulation growth to retirement phase, which would not be captured by the transfer balance cap.

 TRIS to gain earnings tax exemption on nil condition of release   

The Government proposes that when a transition to retirement income stream (TRIS) holder has satisfied a nil condition of release they will receive and earnings tax exemption. They believe the commutation of their income streams and recommencement of an account based pension is a significant compliance burden on both individuals and providers.   

Other changes

  • The Government will clarify further that all TRIS products will be eligible to access CGT relief.  
  • The Government will amend the debit provisions of the TBC to ensure that a debit arises before an income stream is deemed non-compliant.   
  • The Government will amend the changes to the six month prescribed death benefit rule in regards to death benefits and non-retirement spouses to apply from the date of introduction of the amending Bill rather than 1 July 2017. This will allow spouses who commute death benefits to comply with the TBC prior to 1 July can cash out any excess as a lump sum without being taxed at marginal rates.   

Contact our SMSF experts

If you have any questions about the above article, please contact our SMSF experts:

Ada Poon


Senior Client Director - SMSF Specialist Advisor

P: (02) 9923 0800


Kim Meredith


Senior Client Director - SMSF Specialist Advisor

P: (02) 4625 7711


Source: SMSF Association - News Alert


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