Nicholas Ali
Neo Super, Australia’s leading independent SMSF service provider, welcomes the passing of the Treasury Laws Amendment (Legacy Retirement Product Commutations and Reserves) Regulations 2024.
The legislation, enacted on 7 December 2024, introduces long-awaited flexibility for self-managed superannuation fund (SMSF) members dealing with legacy pensions. These changes allow non-commutable legacy pensions to be ceased, enabling members to roll capital into accumulation accounts, commence new income streams, or withdraw lump sums.
Neo Super’s Head of SMSF Technical Services, Nicholas Ali said, “This legislation represents a turning point for SMSF members trapped in outdated pension arrangements.”
“It not only eases administrative burdens but also provides more equitable options to manage reserves and align with modern superannuation strategies.”
This development addresses a long-standing challenge for SMSF members burdened by inflexible income stream products, such as Market-Linked Income Streams (MLIS) and lifetime pensions, that no longer align with modern superannuation needs.
Key benefits to the change include:
- Exit legacy retirement products within a five-year window.
- Allocate reserves from ceased pensions with greater flexibility, including exemptions from contribution caps when allocations meet certain conditions.
- Move from outdated income streams to more suitable and effective arrangements.
While the reforms are broadly positive, Neo Super advises SMSF members to approach the changes with careful planning:
- Allocations from general reserves must be monitored to avoid breaching non-concessional contribution caps.
- Members should consider the impact on government benefits, as commutation may make previously exempt assets assessable under Centrelink’s Assets Test.
- The five-year grace period requires timely action, especially for funds with complex or illiquid assets.
As an innovative end-to-end SMSF service provider, Neo Super is uniquely positioned to assist trustees and intermediaries in navigating these changes. From compliance and documentation services to tailored advice, Neo Super ensures trustees and advisors can achieve optimal outcomes under the new framework.