Paul Paxton-Hall, Director of Paxton-Hall Lawyers, said self-managed super fund (SMSF) members, in particular, will be impacted by the changes.

“The $1.6 million transfer balance cap will not only affect the amount a person can retain in a tax-free retirement account but also how superannuation death benefits are paid,” Mr Paxton-Hall said.

“From July 1, if a super fund member receives a death benefit payment in the event their spouse passes away, this amount will count towards their total transfer balance cap.

“If the surviving spouse’s account then exceeds $1.6 million and breaches the cap, they will need to withdraw the excess as a lump sum or commute part of their pension back into an accumulation phase account, which attracts a 15% tax.

“In this case, people will need to consider how their accumulation account or benefits that are forced out of the superannuation system will be dealt with in their estate plans.”

Mr Paxton-Hall said people should review their wills and estate plans in light of the upcoming changes to ensure they reflect their estate planning intentions.

“Now is the time to review your estate planning strategies and make sure your death benefits nominations are up to date,” he said.

“Many super fund members will need to restructure their plans to minimise any adverse tax implications and ensure their estate planning goals can be achieved.

“Good estate planning can help reduce the amount of tax paid by beneficiaries and ensure death benefits are used to their full potential.”

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