1 July 2017 super changes

Transcription

1 1 July 2017 super changes The new $1.6m Transfer Balance Cap One of the most significant reforms included in the Government s Super Reform Package will be a $1.6m cap applying to superannuation income streams from 1 July This cap is called the Transfer Balance Cap and is designed to restrict the amount of superannuation that can be invested in certain retirement income streams (generally this includes super income streams that receive an earnings tax exemption)*. Amounts above the cap can remain in accumulation phase super accounts. Action required prior to 1 July 2017 for existing Panorama Super pension clients If the total value of all of your client s existing superannuation income stream accounts with Panorama Super and other providers is expected to be greater than $1.6m on 1 July 2017, you may need to remove the estimated excess amount by 30 June 2017 to ensure they don t breach their cap and incur additional tax. If your client wishes to remove their estimated excess amount from their Panorama Super pension account, you can submit a request for one or more of the following transactions: transfer the estimated excess amount to an accumulation phase super account withdraw the estimated excess amount as a lump-sum payment, if your client is eligible withdraw the estimated excess amount as an additional income payment. Note: If your client breaches their Transfer Balance Cap by less than $100,000 on 1 July 2017, no excess transfer balance tax will apply if your client removes the excess amount from their income stream(s) by 31 December 2017.** Options for removing estimated transfer balance cap excess from existing Panorama Super pension accounts Option What do you need to do? When should instructions be submitted (for processing by 30 June 2017)? 1. Transfer the estimated excess amount to a Panorama Super account in accumulation phase via an internal asset transfer 1 2. Transfer the estimated excess amount to a Panorama Super account in accumulation phase as cash, by selling down assets in the pension account (if required) and transferring the cash, which can be reinvested in the account in accumulation phase as required 2 3. Withdraw the estimated excess amount 2, 3 You ll need to contact us on to initiate this transfer You ll need to contact us on to initiate this transfer Withdrawals can be initiated online as a lump sum withdrawal or one-off pension payment (subject to daily payment limits) 4 Withdrawals that exceed the online payment limit can be initiated by contacting Panorama on June June 2017 Online and phone withdrawal requests are generally processed on the same business day they re submitted. However, you should make any requests before 30 June 2017 to ensure they can be processed in time. 1

2 1. Panorama Super will not be offering CGT relief for transfers from Panorama Super (pension phase) to Panorama Super (accumulation phase). 2. As assets will be sold down in pension phase, CGT will not be applicable. However, transaction costs, buy-sell spreads and the risk of market movements may be applicable. 3. Withdrawals cannot be initiated while an account is in the pre-commencement phase. 4. Clients should consider any differences in tax treatment between these 2 options. For options 1 and 2 above, new accounts in accumulation phase should be set up as soon as practicable for clients who don t have an existing account. All other transactions (including asset transfers) are scheduled to be processed in the month of June. What do you need to consider when calculating the estimated excess for your existing pension clients? In determining whether you and your client will need to take action, consider whether the total value of all of your client s existing superannuation income stream accounts with Panorama Super and other providers is expected to be greater than $1.6m as at 30 June When estimating expected 30 June 2017 balances, you should consider factors such as: market fluctuations; expected earnings; and any payments expected to be made from the income streams, between now and 30 June You ll also need to consider whether any items will be treated as a debit against your client s transfer balance account, such as personal injury contributions. Changed tax treatment of Transition to Retirement pensions From 1 July 2017, the investment earnings of Transition to Retirement (TTR) pensions will no longer be exempt from tax. Instead, the investment earnings will be taxed in the same way as superannuation accumulation accounts. In response to this change, Panorama Super TTR pension clients may wish to take one or more of the following actions before 30 June 2017: 1. Continue with a TTR pension 2. Transfer to a new Panorama Super account and commence a pension, which will retain its tax exempt status, if the client has satisfied a full condition of release (such as retirement, reaching age 65, permanent incapacity or terminal medical condition) 3. Transfer to a Panorama Super account in accumulation phase. Please contact us on if you need more detail about these options. What about SMSF clients in Panorama Investments? Panorama Investments will support administration of the transitional CGT relief on a non-deferral basis for assets held on Panorama Investments by SMSF clients. All requests to apply the transitional CGT relief will need to be made to Panorama prior to 31 December More information For more information on the Transfer Balance Cap and changes to TTR pension accounts, please refer to the following FAQs. Alternatively, please speak to your Business Development Manager or call Panorama on , Monday to Friday between 8.00am and 6.30pm (Sydney time). 2

3 * The transfer balance cap will apply to all superannuation income streams that are in the retirement phase. This generally includes income streams that receive an earnings tax exemption, including but not limited to account-based, lifetime, term and life expectancy pensions and annuities and market-linked income streams (also known as Term Allocated Pensions). Currently, transition to retirement (TTR) pension accounts will be excluded, as the earnings on TTR pension accounts will be taxed from 1 July Different rules will apply to capped defined-benefit income streams (including lifetime, term and life expectancy pensions and annuities and market-linked income streams (also known as Term Allocated Pensions)). ** From 1 July 2017, the value of all lump-sum withdrawals from a pension account will be deducted from an individual s transfer balance account. Lump-sum withdrawals will not, however, count towards the minimum annual pension payment requirements from 1 July

4 Super Reforms $1.6m Transfer Balance Cap Panorama Frequently asked questions (FAQ) May 2017 Overview of this FAQ This FAQ was developed for Adviser use only. It s relevant for both Panorama Super clients and SMSF clients in Panorama Investments. Of all the super reforms announced in the 2016/17 Federal Budget, most questions we re receiving are about the introduction of a $1.6 million Transfer Balance Cap on income streams in the retirement phase, which is the focus of this FAQ. Any questions not covered in this FAQ should be sent to your Business Development Manager. Note: For Panorama Super, we need to receive instructions for transfers by 1 June 2017 to ensure all processing is finalised by 30 June We may be prevented from finalising transfers submitted after 1 June 2017 due to high volumes expected across platforms. Online and phone withdrawal requests are generally processed on the same business day they re submitted. However, we will need to receive instructions for withdrawals before 30 June 2017 to ensure they can be processed in time. For SMSF clients in Panorama Investments, requests to apply the transitional CGT relief will need to be made before 31 December Contents Overview of this FAQ... 1 Contents Which Panorama products will be assessed under the Transfer Balance Cap? What do you need to do if you expect your Panorama Super client to exceed the Transfer Balance Cap on 1 July 2017? If your client has to transfer an excess amount from a Panorama Super account in pension phase to a Panorama Super account in accumulation phase, will fees be adjusted across their two accounts (ie super and pension)? What will Panorama Super do when they receive a commutation authority from the ATO? What if you or your client have a query about how their excess transfer balance amount was determined? What happens if your client needs to exit a term deposit prior to maturity to meet the Transfer Balance Cap? Will Panorama Super systems show whether your client has exceeded their Transfer Balance Cap? What type of relief is available to your clients in relation to CGT if they need to transfer an amount from a Panorama Super (pension) account to a Panorama Super (accumulation) account prior to 1 July 2017 to comply with the Transfer Balance Cap? What about Self Managed Super Funds (SMSFs) in Panorama Investments?

5 1. Which Panorama products will be assessed under the Transfer Balance Cap? All accounts in Panorama Super in the retirement phase will be assessed under the Transfer Balance Cap. Currently this includes accounts in the pension phase, but excludes transition to retirement (TTR) pensions*. In addition, you may need to consider the Transfer Balance Cap for clients who have an SMSF. For clients who have an SMSF invested in Panorama Investments, please refer to Question 9 of these FAQs. 2. What do you need to do if you expect your Panorama Super client to exceed the Transfer Balance Cap on 1 July 2017? Your client can avoid breaching their Transfer Balance Cap by taking one or more of the following actions prior to 1 July 2017: transferring the estimated excess amount above $1.6 million to a Panorama Super account in accumulation phase; if eligible, withdrawing the estimated excess amount as a lump sum; and/or electing to receive the estimated excess amount as an additional income payment(s). Note: If your client breaches their Transfer Balance Cap by less than $100,000 on 1 July 2017 (ie their transfer balance account is no more than $1.7m on 1 July 2017), no excess transfer balance tax will apply if your client removes the excess amount from their income stream(s) by 31 December 2017**. Option 1 (Please provide instructions by 1 June 2017): Transfer the estimated excess amount to a Panorama Super account in accumulation phase via an internal asset transfer. Please contact Panorama support on to initiate this transfer. Asset transfers will not be eligible for the transitional CGT relief (allowing a cost base reset). If assets are being transferred from SuperWrap Pension to Panorama Super, where applicable, the transitional CGT relief could be applied prior to transitioning to Panorama Super. Please refer to the SuperWrap FAQs for further details. Option 2 (Please provide instructions by 1 June 2017): Transfer the estimated excess amount to a Panorama Super account in accumulation phase as cash, by selling down assets in the pension account (if required) and transferring the cash, which can be reinvested in the account in accumulation phase as required. Please contact Panorama support on to initiate this transfer. CGT will not be applicable to any assets sold prior to the transfer, however transaction costs, buy-sell spreads and the risk of market movement may be applicable. Note: For Options 1 and 2: Term Deposits cannot be transferred between accounts. Transfers cannot be made while the account is in the pre-commencement phase. Option 3 (Please provide instructions online before 30 June 2017): Withdraw the estimated excess amount online as a lump sum withdrawal or one-off pension payment (subject to daily payment limits). Withdrawals can be initiated online before 30 June 2017 (subject to daily payment limits). Withdrawals cannot be made while the account is in pre-commencement phase. If your client needs to withdrawal an amount over the online daily payment limit, please phone Panorama support on to initiate the withdrawal. * Note that the Government proposes to amend the law so that a TTR account for a member who satisfies certain conditions of release (age 65, retirement, terminal medical condition or permanent incapacity) is considered to be in the retirement phase meaning the account will receive an earnings tax exemption and will be assessed under the transfer balance cap ** From 1 July 2017, the value of all lump-sum withdrawals from a pension account will be deducted from an individual s transfer balance account. Lump-sum withdrawals will not however, count towards the minimum annual pension payment requirements from 1 July

6 3. If your client has to transfer an excess amount from a Panorama Super account in pension phase to a Panorama Super account in accumulation phase, will fees be adjusted across their two accounts (ie super and pension)? A tailored rate card will apply to your clients, as outlined below. Where your client transfers an excess amount from a Panorama Super account (pension phase) to a Panorama Super account (accumulation phase), the rate card will be applied provided at least $1.6m remains in the Panorama Super account in pension phase. Pricing solution to 30 June 2017: Pension account - $1.6m cap Admin fee - BTMPs, managed funds and listed securities Investment balance Super accumulation account excess over $1.6m Admin fee - BTMPs, managed funds and listed securities Investment balance $0 to $250, % $0 to $1,400, % Over $250,000 to $500, % Balance over $1,400,000 Nil Over $500,000 to $1,000, % Minimum fee Waived Over $1,000,000 to $3,000, % Balance over $3,000,000 Nil Minimum fee $ Trustee fee Trustee fee $0 to $1,600, % $0 to $1,400, % Over $1,600,000 Nil Over $1,400,000 Nil Expense recovery Expense recovery Expense recovery $95 Expense recovery Nil ORFR 0.03% ($300 cap) ORFR Nil Pricing solution post 1 July 2017 (for both new accounts and those with the manual rate card applied): The fees on both accounts will be adjusted to ensure the fees paid across both the Panorama Super (accumulation) and Panorama Super (pension) accounts will be no more than what the client would have paid had they maintained a single account. For new accounts opened from 1 July 2017, once the accounts have been activated, advisers will need to request the adjusted pricing be applied across the Panorama Super (accumulation) and Panorama Super (pension) accounts. An applicable form or template will be available through the Forms section of Help and Support on Panorama online. Please note: the adjusted pricing will not apply automatically and therefore advisers must contact us for the adjustment to be applied going forward; and a client will be eligible for the adjusted pricing if they have a Panorama Super (accumulation) account and at least $1.6m in their Panorama Super (pension) account. Existing accounts which had the pre 30 June 2017 rate card applied will switch to this rate card automatically. 3

7 4. What will Panorama Super do when they receive a commutation authority from the ATO? While we ll be required to remove the excess monies stated on the commutation authority from your client s account within 60 days, we ll make a reasonable attempt to contact you and/or your client to find out how they want the excess amount paid (eg rolled over to a super accumulation account in the same fund, rolled over to an accumulation account in another fund, or paid directly as a cash lump sum payment where they re eligible to receive it). 5. What if you or your client have a query about how their excess transfer balance amount was determined? You or your client should be directed to contact the ATO as the issuer of the determination. Where your client makes a request, Panorama may provide transaction details to them to assist in their dealings with the ATO. 6. What happens if your client needs to exit a term deposit prior to maturity to meet the Transfer Balance Cap? Term Deposit assets cannot be transferred from a Panorama Super account in pension phase to a Panorama Super account in accumulation phase. Members will be required to: break a Term Deposit (advisers can do this online on behalf of clients, however 31 days notice is required), or sell or transfer other assets to avoid breaching the cap. 7. Will Panorama Super systems show whether your client has exceeded their Transfer Balance Cap? Panorama Super systems are unable to monitor your client s overall position. However, the ATO will determine whether your client has exceeded their Transfer Balance Cap through maintaining a Transfer Balance Account for all individuals with an income stream in the retirement phase on or after 1 July What type of relief is available to your clients in relation to CGT if they need to transfer an amount from a Panorama Super (pension) account to a Panorama Super (accumulation) account prior to 1 July 2017 to comply with the Transfer Balance Cap? Panorama will not be offering CGT relief for transfers from Panorama Super (in pension phase) to Panorama Super (in accumulation phase). If assets are being transferred from SuperWrap Pension to Panorama Super, where applicable, the transitional CGT relief could be applied prior to transitioning to Panorama Super. Please refer to the SuperWrap FAQs for further details. 9. What about Self Managed Super Funds (SMSFs) in Panorama Investments? Panorama Investments will support administration of the transitional CGT relief on a non-deferral basis for assets held on Panorama Investments by SMSF clients. We ll provide the following support for SMSF clients: Advisers and direct clients can download an Unrealised Capital Gains Report from Panorama online to assist in their decision making. A form will be available through the Forms section of Help and Support on Panorama online to notify Panorama of the asset parcels to which the CGT relief is being applied (ie: asset parcels for which cost bases will be reset) and to confirm that all eligibility criteria for the transitional CGT relief has been satisfied. We ll update the cost base of the selected parcels as at the date nominated and will provide the customer with confirmation of the change. The SMSF trustee will then be required to notify the Australian Taxation Office (ATO) of their election to apply the transitional CGT relief by completing the CGT Schedule and lodging this with the SMSF s 2017 Annual 4

8 Return. If the SMSF is also a customer of BT s Fund Administration service, all required reporting to the ATO will be managed by the Fund Administration team. All requests to apply the transitional CGT relief (ie reset the cost base for a parcel) will need to be made prior to 31 December Note: Tax statements for 30 June 2017 may or may not reflect the changes depending upon when the parcel resets were processed. We will not reissue tax statements to reflect parcel resets. Important Information This communication may contain financial product advice and has been prepared for use by advisers only. It must not be made available to any retail client and any information in it must not be communicated to any retail client. This information has been prepared without taking account of any client s objectives, financial situation, or needs. Because of this, each client should, before acting on this information, consider its appropriateness, having regard to their objectives, financial situation and needs. Any tax position described is a general statement and is for guidance only. It does not constitute tax advice and is based on current tax laws and our interpretation. 5

9 Super Reforms Transition to Retirement accounts Panorama Frequently asked questions (FAQ) May 2017 Overview of this FAQ This FAQ was developed for adviser use only. It s relevant for your clients in Panorama Super and your SMSF clients in Panorama Investments. The focus of this FAQ is the changes to the tax treatment of Transition to Retirement (TTR) accounts which come into effect on 1 July If you have any questions not covered in this FAQ, please speak to your Business Development Manager. Note: For Panorama Super, we need to receive instructions for transfers by 1 June 2017 to ensure all processing is finalised by 30 June We may be prevented from finalising transfers submitted after 1 June 2017 due to high volumes expected across platforms. For SMSF clients in Panorama Investments, requests to apply the transitional CGT relief will need to be made before 31 December Contents Overview of this FAQ... 1 PART 1 GENERAL What s included in the super reforms? When do the super reforms commence? What are the changes to TTR accounts? Will Panorama Super TTR accounts be automatically converted to a standard account-based pension after 1 July 2017? Can you convert your client s Panorama Super TTR account to a standard account-based pension before 1 July 2017? If you transfer your Panorama Super client s TTR account to an accumulation account before 1 July 2017, will Panorama Super offer CGT relief? What do you need to do to close your client s TTR account and transfer it to an accumulation account?... 4 PART 2 PANORAMA SUPER TTR ACCOUNTS AND THE $1.6M TRANSFER BALANCE CAP What s the process when your client meets a full condition of release (other than turning age 65)* and you transfer their TTR account, with more than $1.6m, to an account-based pension after 1 July 2017? What happens to your client s TTR account once they turn 65? What will be the cost base of funds in a TTR account after 1 July 2017, if the underlying assets were purchased before 1 July 2017? Will CGT relief apply? Can the assets be retained in the TTR account and the cost base reset on 1 July 2017?

10 2.4 If tax applies, how will the investment earnings of TTR accounts be taxed and when will the tax be deducted?... 5 PART 3 PANORAMA INVESTMENTS - SMSFs What about your SMSF clients?

11 PART 1 GENERAL 1.1 What s included in the super reforms? Super reform Start date Pension accounts $1.6 million transfer balance cap on pension accounts Removing earnings tax exemption for Transition to Retirement (TTR) accounts Removing election to treat an income payment as a lump sum for tax purposes Removing tax barriers to development of new retirement products 1 July 2017 Contributions Reducing the concessional contributions cap to $25,000 for all Reducing the non-concessional contributions cap to $100,000 and restricting eligibility to make non-concessional contributions to those with total super savings less than $1.6 million Allowing catch up concessional contributions (5 year carry forward) if total super savings are less than $500,000 1 July July 2018 Taxation Introducing the Low Income Superannuation Tax Offset (LISTO) Allowing anyone under age 75 to claim a tax deduction for personal super contributions Decreasing the Division 293 Tax threshold to $250,000 (from $300,000) Abolishing anti-detriment payments Extending the tax offset for making a spouse contribution to super Restricting SMSFs from using the segregated method if a retirement account has exceeded their transfer balance cap 1 July 2017 Administration Streamlining administration of Division 293 Tax 1 July 2017 Streamlining release authorities 1 July 2018 Legislating the primary objective of the super system TBC 1.2 When do the super reforms commence? The majority of the reforms commence on 1 July 2017, with the exception of Allowing catch up concessional contributions (5 year carry forward) and Streamlining release authorities which commence on 1 July What are the changes to TTR accounts? From 1 July 2017, the earnings tax exemption that applies to TTR income stream products will be removed. This means investment earnings on TTR accounts will be subject to tax of up to 15%, regardless of when the TTR commenced. This is the same tax treatment that applies to superannuation accumulation accounts. 3

12 Note: Draft legislation has been released for consultation which proposes to amend how the earnings tax exemption applies to TTR accounts. As part of the proposed draft legislation, if a member of a TTR satisfies a full condition of release (attaining age 65, retirement, terminal medical illness or permanent incapacity) either before or after 1 July 2017, their TTR is considered to be in the retirement phase and will receive an earnings tax exemption. This means investment earnings on TTR accounts will be subject to tax of up to 15% until the member satisfies a full condition of release, at which point investment earnings are no longer taxable. This also means a TTR will count towards an individual s transfer balance cap once a member satisfies a full condition of release. We ll be closely monitoring developments in relation to this and the impacts it ll have on Panorama. 1.4 Will Panorama Super TTR accounts be automatically converted to a standard account-based pension after 1 July 2017? TTR accounts will not automatically convert to a standard account-based pension. Panorama Super is currently working through a solution and we ll provide further information as soon as it s available. 1.5 Can you convert your client s Panorama Super TTR account to a standard account-based pension before 1 July 2017? If your client wishes to convert their Panorama Super TTR account to a standard account-based pension, please call Panorama Support on If you transfer your Panorama Super client s TTR account to an accumulation account before 1 July 2017, will Panorama Super offer CGT relief? Panorama Super won t be offering CGT relief. 1.7 What do you need to do to close your client s TTR account and transfer it to an accumulation account? If your client wishes to transfer their Panorama Super TTR account to an accumulation account, please call Panorama Support on PART 2 PANORAMA SUPER TTR ACCOUNTS AND THE $1.6M TRANSFER BALANCE CAP 2.1 What s the process when your client meets a full condition of release (other than turning age 65)* and you transfer their TTR account, with more than $1.6m, to an account-based pension after 1 July 2017? Please call Panorama Support on if your TTR account clients wish to close their TTR account and commence a new account-based pension account. * A full condition of release includes attaining age 65, retirement, terminal medical illness or permanent incapacity. 2.2 What happens to your client s TTR account once they turn 65? At this time, your client s TTR account will not automatically convert to a Panorama Super account-based pension account. However, we re currently assessing this process and we ll provide further information as soon as it s available. 2.3 What will be the cost base of funds in a TTR account after 1 July 2017, if the underlying assets were purchased before 1 July 2017? Will CGT relief apply? Can the assets be retained in the TTR account and the cost base reset on 1 July 2017? Panorama Super won t be offering CGT relief. 4

13 2.4 If tax applies, how will the investment earnings of TTR accounts be taxed and when will the tax be deducted? Tax is deducted from accounts through monthly instalments. The balance of tax is paid or refunded after Panorama Super s tax return is lodged. PART 3 PANORAMA INVESTMENTS - SMSFs 3.1 What about your SMSF clients? Panorama Investments will support the administration of the transitional CGT relief on a non-deferral basis for assets held on Panorama Investments by your SMSF clients. We ll provide the following support: You can download an Unrealised Capital Gains Report from Panorama online to assist in your decision making. A form will be made available in Help & Support so you can notify us of the asset parcels to which the CGT relief is being applied (ie asset parcels for which cost bases will be reset) and to confirm that all eligibility criteria for the transitional CGT relief has been satisfied. We ll update the cost base of the selected parcels as of the date nominated and will provide you with confirmation of the change. The SMSF trustee will then be required to notify the Australian Taxation Office (ATO) of their election to apply the transitional CGT relief by completing the CGT Schedule and lodging this with the SMSF s 2017 Annual Return. If the SMSF is also a customer of BT s Fund Administration service, all required reporting to the ATO will be managed by the Fund Administration team. All requests to apply the transitional CGT relief (ie reset the cost base for a parcel) will need to be made to Panorama Investments prior to 31 December We re currently working through the detailed processes supporting this change and will advise you when they re finalised. Important Information This communication may contain financial product advice and has been prepared for use by advisers only. It must not be made available to any retail client and any information in it must not be communicated to any retail client. This information has been prepared without taking account of any client s objectives, financial situation, or needs. Because of this, each client should, before acting on this information, consider its appropriateness, having regard to their objectives, financial situation and needs. Any tax position described is a general statement and is for guidance only. It does not constitute tax advice and is based on current tax laws and our interpretation. 5