Bryan Ashenden

The future of superannuation has been in the spotlight in adviser conversations with clients over the past two quarters. The still unlegislated Division 296 for high super balances continues to be a hot topic of discussion, as does the question of what happens to super on death.

The BT Technical team answer around 2,000 queries from advisers each quarter. Topics include legislative, regulatory and taxation issues, and superannuation related issues continue to be the most popular area of concern.1

Bryan Ashenden, BT’s Head of Financial Literacy and Advocacy said: “The potential operation of the Division 296 tax is of interest and concern. While a client may not be above the $3 million threshold today, it is the potential impact of a death benefit pension from a spouse, together with insurance proceeds inside super, that has many considering what options exist.

“We’ve been dealing with high volumes of queries from advisers trying to understand what changes will be made by the Government and when, so advisers can give greater clarity to their clients and implement appropriate plans,” said Mr Ashenden.

The most popular technical topics from the September quarter are outlined below.

1. Tax on super balances above $3 million

“There has been an expectation that legislation to enact Division 296 would happen early in the new parliamentary sittings. However, that has proven not to be the case. With delay comes increased uncertainty, particularly given recent speculation there may be some changes to the previous proposals or a change to the start date,” said Mr Ashenden.

“If the legislation is enacted as previously announced, and with its initially proposed start date 1 July 2025, there would still be time to act as it will be an assessment of whether clients have total super balances exceeding $3 million at 30 June 2026 that will determine if a liability arises.

“However, we would urge caution in withdrawing any excess amounts above $3 million at this time in the absence of the legislation, as clients would not be eligible to recontribute that amount if they changed their mind or if there were changes to the proposal itself,” said Mr Ashenden.

2. Death benefit nominations in the spotlight

With the release earlier this year of ASIC’s2 report into the claims handling processes by superannuation funds around death benefit payments, many advisers have been focussing on the death benefit nominations their clients have in place and the effectiveness of them.

“With the range of death benefit nominations available, it is important for advisers to understand the benefits and limitations of each option, so they can help guide their clients in making appropriate choices as part of their estate plans,” said Mr Ashenden.

“It is necessary for a beneficiary to meet the definition of a superannuation dependant at the time of death that is crucial – not at the time of making the nomination. Regular reviews should be conducted, even for nominations that are non-lapsing, in case circumstances or wishes have changed, or an event has occurred to invalidate an existing nomination.

“Care should also be taken with binding reversionary pension nominations and the interplay with the proposed Division 296 tax as it could result in a higher tax liability under the proposed rules for the surviving spouse,” said Mr Ashenden.

In October, BT Panorama made three-year binding death benefit nominations available on its superannuation platform, to provide more choice for clients. This is in addition to the existing non-lapsing nomination, discretionary nomination, and reversionary pension options.

3. New thresholds, indexation and opportunities

With many superannuation thresholds indexing from 1 July 2025, advisers were assessing the retirement plans of their clients.

“With the general transfer balance cap, and therefore the total super balance threshold, indexing from $1.9 million to $2 million from 1 July 2025, we received queries around the level of non-concessional contributions that could now be included in the current financial year.

“The answer is obviously dependent on each client’s situation, but many advisers weren’t factoring in the potential increased availability of non-concessional contribution from 1 July 2025, following total super balance indexation. This could mean a greater benefit for clients who thought they no longer had the opportunity to contribute.

“Another issue to be considered is the expectation we will see the non-concessional cap index from 1 July 2026, meaning decisions about triggering the bring-forward cap should potentially be delayed until later in the financial year when we have certainty whether the contribution caps will index or not,” said Mr Ashenden.

4. Broader considerations around the increase in super guarantee to 12%

There are broader issues to consider around the increase in the compulsory superannuation guarantee rate to 12% from 1 July 2025.

“If clients have salary sacrifice arrangements in place, then these should be reviewed to ensure compulsory employer contributions together with salary sacrificed amounts don’t inadvertently result in excess concessional contributions,” said Mr Ashenden.

Building in a buffer to ensure an excess is not triggered could be a reasonable approach to take, especially given it is now easier to make a personal deductible contribution closer to year end if any cap space remains available.

For higher income earners, changes to the maximum contribution base (MCB) should also be considered. “The MCB sets a quarterly limit to the amount of super guarantee an employer is required to pay for each employee. From 1 July 2025 with the increased rate of super guarantee, but no increase to the concessional contribution cap, the MCB will fall from $65,070 to $62,500 per quarter for the new financial year. Clients captured by this may have less contributed by their employer as a result, and it may reduce their overall remuneration package,” said Mr Ashenden.

5. Delay to the implementation of the Aged Care reforms until 1 November 2025

The implementation of the new Aged Care Act, originally slated for 1 July 2025, has been delayed by four months and will now begin on 1 November 2025. The delay is due to concerns about the aged care sector’s readiness to implement the new legislation, provide clarity and finalise the new rules and regulations.

The delay provides an opportunity for aged care providers, and impacted individuals, to better prepare for the changes, understand the new rules and regulations, and ensure a smoother transition. Key aspects of the reforms will include a new Aged Care Act to focus on the rights of older people, aiming to enhance the quality and safety of aged care services.

“Means testing arrangements will change for new participants and likely increase the costs they pay towards any in-home or residential aged care,” said Mr Ashenden.

The rebalancing of the means test will make the asset test harsher and the income test slightly more favourable. Based on scenarios from adviser queries, the changes will result in higher total fees paid by a majority of new participants.

“However, a no worse off principle will apply to individuals already in permanent residential care or already approved for a home care package. Individuals in these circumstances will not be negatively impacted by the new fee arrangements unless they choose to opt into the new system.

There are also changes to accommodation costs for new residential aged care residents entering after 1 November 2025.

“The facility will be able to keep a retention amount from any Refundable Accommodation Deposit paid by a resident calculated at 2% per annum but on a daily basis, meaning clients or their estate will not receive the full balance they paid upon exit from the facility. Daily Accommodation Payments will also be indexed to inflation to maintain the real value of the expense. For clients with an impending need for residential care and depending on their circumstances there may be merit to enter residential aged care prior to 1 November 2025 rather than delay this until after the new rules commence,” concluded Mr Ashenden.

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Notes:
[1] Based on BT’s internal reporting. For the avoidance of doubt the BT Technical team respond to queries from advisers and do not provide legal or taxation advice.
[2] 25-049MR Super industry hit with long list of actions in landmark death benefit claims handling report, ASIC 

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Bryan Ashenden

Bearish predictions about the Australian property market in 2023 have turned out to be wrong, with population growth and a short supply of housing pushing prices up, especially in capital cities. To combat the rising cost of living, it seems many Australians are realising the values of their properties wisely, as part of their superannuation and tax strategies.

“Good old real estate and the strategies around property ownership will continue to be topical amongst financial advisers and their clients, going into 2024,” said Bryan Ashenden, Head of Financial Literacy and Advocacy, BT.

“Australians have long had a love affair with property, and so for many who are on the cusp of retirement, the family home is their most valuable asset.”

Clients are discussing with their advisers how downsizing from a large property they no longer need can be integrated into their financial plan, especially if they are looking to self-fund all or part of their retirement. “And as part of this, they’re exploring what’s the most tax-effective strategy in regard to the sale proceeds,” Mr Ashenden said.

Bearish predictions about the Australian property market in 2023 have turned out to be wrong, with population growth and a short supply of housing pushing prices up, especially in capital cities. To combat the rising cost of living, it seems many Australians are realising the values of their properties wisely, as part of their superannuation and tax strategies.

“Good old real estate and the strategies around property ownership will continue to be topical amongst financial advisers and their clients, going into 2024,” said Bryan Ashenden, Head of Financial Literacy and Advocacy, BT.

“Australians have long had a love affair with property, and so for many who are on the cusp of retirement, the family home is their most valuable asset.”

Clients are discussing with their advisers how downsizing from a large property they no longer need can be integrated into their financial plan, especially if they are looking to self-fund all or part of their retirement. “And as part of this, they’re exploring what’s the most tax-effective strategy in regard to the sale proceeds,” Mr Ashenden said.

Bryan Ashenden

Head of Financial Literacy and Advocacy, BT

Based on the more than 8,000 questions that the BT Technical Services team have been asked by financial advisers in 2023, their prediction on the topics that will be top of mind for advisers and clients in the new year are:

• Downsizer contributions
• Owning commercial property in self-managed super funds (SMSFs)
• Imminent tax increase for clients with more than $3m in super
• Income tax cuts commencing in July 2024
• Progress of implementation of Quality of Advice Review

More details on these topics are below.

1. Downsizing the tax-effective way

Clients who are downsizing can make contributions from the sale proceeds of their home into their super, which can be a more tax-effective environment compared to, for example, putting it all in a savings account.

“The BT Technical Services team are consistently fielding high levels of calls on downsizer contributions,” said Mr Ashenden. “It would not be surprising if some of this is driven by the rising cost of living and retirees needing to explore options to boost their savings or increase cash flow. Another potential reason is this strategy has become accessible to more Australians, with the eligibility age reduced down to 55 years at the start of 2023.”^[1]

To be eligible, clients also need to have owned their home for 10 years or more. Downsizer contributions to a maximum of $300,000 per eligible person do not count towards any of the contribution caps, and can still be made even if a person has a total super balance exceeding $1.9 million.

2. Business clients transferring commercial property into SMSFs

High inflation rates and reduced consumer spending in some sectors are biting into the revenues of small businesses – prompting business owners to ease cash flow for their business by using their SMSFs to buy their commercial properties, often with gearing involved.

“A typical scenario in this arrangement is the SMSF buys the commercial property, sometimes with a limited recourse borrowing arrangement, which can then be leased to the business that one of the trustees owns,” Mr Ashenden said. “The sale contract and lease – and loan, if relevant – have to be formalised and the arrangements must be at market rates, and so it’s advisable to engage lawyers who can prepare the appropriate commercial documents.”

Clients with SMSFs need to be careful of any improvements they make to real estate assets owned via their SMSF, as these can potentially be regarded as a superannuation contribution. Mr Ashenden said: “If the value of that improvement, together with other contributions, is below the client’s caps, it’s not an issue. If their contribution limits have been breached, there may be penalties.”

3. $3m super tax looms

The government has proposed to reduce the superannuation tax concessions for those with total superannuation balances that exceed $3 million. Legislation implementing this change was introduced into Parliament on 30 November 2023. Its passage through Parliament will be delayed through the referral of the Bill to a committee for review and comment.

Under the proposal, from 1 July 2025, affected clients will pay an additional 15% in tax on earnings corresponding to the portion of their superannuation balance above $3 million. “Advisers have plenty of lead time to update impacted clients’ super strategies,” said Mr Ashenden.

4. Tax cuts for many Australians from July 2024

Many clients may not be aware of the impending cuts to income taxes. Mr Ashenden said: “Working Australians will see more in their pay packet from July 2024, with anyone earning an annual income of $45,000 or above benefiting from tax cuts. The reduced tax rates will be a welcome reprieve for clients facing cost of living pressures.”

For those who have the capacity to top up their super with personal deductible contributions, and are considering the best timing for doing so, Mr Ashenden said that at the current marginal tax rates, and bearing in mind the 15% concessional tax rate within superannuation, the tax saving resulting from putting money into super in FY2024 is greater, compared to FY2025 when the reduced marginal tax rates take effect.

5. Quality of Advice reforms – what to expect and when

The Government has recently made some additional announcements on its intended position on the Quality of Advice, including the ability for superannuation funds to provide advice to their members.

Mr Ashenden said that while these latest announcements may provide further clarity, it will be important to wait and see how draft legislation intends to implement these reforms, to gain a full understanding of how the proposed regulations can deliver more affordable and accessible avenues to quality advice.

“There is still a way to go,” said Mr Ashenden. “We saw the release of the first tranche of draft legislation for consultation. And now with the Government’s latest announcement around some of the big ticket items that will impact advisers the most in terms of simplifying advice – changes to the statement of advice and the best interest duty – we are starting to get a fuller picture of how the advice environment might change in the future. Advisers have dealt with a great deal of complexity in recent years and are vested in how these proposed changes might be implemented. Whilst further consultation may take more time, it’s important that collectively we stay invested in the process to gain the best possible outcome from implementation.”

——–

[1] Effective from 1 January 2023, Treasury Laws Amendment (2022 Measures No. 2) Act 2022 lowered the age (from 60 to 55 years) from which individuals can make downsizer contributions to their super fund from the proceeds of selling their home.

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John Maroney

Allens partner and superannuation law expert Michelle Levy, who is heading the Quality of Advice Review with Treasury, will join a panel dissecting Quality of Advice at the SMSF Association Technical Summit being held on 27-28 July on the Gold Coast.

Levy will be one of five speakers on the Breakfast Panel discussing the topic, “Quality of Advice – A new horizon”. The other speakers will be BT Financial Group Head of Financial Literacy & Advocacy, Bryan Ashenden, FPA Chief Executive Officer, Sarah Abood, AFCA Acting Leading Ombudsman, Investments and Advice, Shail Singh, and Institute of Public Accountants Group Executive, Advocacy & Policy, Vicki Stylianou.

SMSF Association CEO John Maroney says: “The panel will examine what the quality and affordability of advice will look like in the future. It will also provide an opportunity for the industry to collaborate on proposed practical solutions to remove complexity and lower costs.”

One session certain to attract strong attention will focus on how advisers can take better care of their mental health and emotional well-being.

To be run by Artemis Investments Director Philippa Hunt, this session takes on special relevance for many delegates in the wake of a recent survey of 700 financial advisers that showed more than 50% of respondents had suffered a significant decline in their mental health since the Royal Commission and subsequent legislation.

Maroney says: “The survey returned quantitative results and anecdotal evidence of widespread issues with mental health across the industry.  This session will identify aspects of mental health and emotional well-being, how to recognise undue stress and when to take action to alleviate it. “

Another session with three SMSF specialists will use a case study to bring to life the “superannuation life cycle” of a professional surfer, from setting up her SMSF in her 20s to her final wipe-out in her late 70s.

SuperConcepts’ Graeme Colley will be the session narrator and client adviser whose decisions and documentation will be critically reviewed by the fund auditor, ASF Audits’ Shelley Banton. The third actor in this compelling drama will be the client’s lawyer, Coleman Greig Lawyers’ Peter Bobbin, who will provide a risk management overlay from both a client and adviser perspective.

“We’re always looking for fresh ways to give the sessions ‘a practical bent’ by creating life-like client situations to make them more compelling listening as well as stimulating delegate participation.

“With this session I believe the organisers have scored the perfect 10 by offering a documented history of a female surfer’s super life cycle, beginning with a ripple then moving on to a gnarly ride before she rides off into the sunset.

“It’s a case study that will consider the importance of documentation from different perspectives, including the client, accountant, auditor and lawyer, as delegates follow her wild ride from setting up the fund to admitting new members to the ongoing acceptance of the annual fund accounts and its final winding up.”

Cryptocurrencies will also come under the spotlight with ATO statistics showing this asset comprised $226 million of SMSF assets at 31 March 2022. RSM Director Katie Timms and Associate Director Tracey Dunn will explain the basics of blockchain, cryptocurrency and digital assets, the taxation treatment of digital assets, and sole purpose test considerations with non-fungible tokens and crypto wallets.

Register for the event.

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John Maroney

SMSF Association CEO John Maroney and Association Chair Scott Hay-Bartlem warmly welcomed a strong delegation of over 950 multidisciplinary SMSF professionals from across the country at the opening of the 18th Annual National Conference this morning, demonstrating the appetite for collaboration and education in the SMSF sector.

The National Conference presents two and a half days of premium technical education starting this morning with a stimulating Thought Leadership Breakfast, presented by Act2 Solutions, focussed on technology in the SMSF sector, and a bustling SMSF exhibition showcasing the latest products and services in the sector.

In response to the strong turnout this year, Mr Maroney said that, after two years of restricted events, there is a clear appetite for SMSF professionals to get together and update themselves on how the SMSF sector has evolved.

“The energy at the National Conference has already been incredible, you can feel the appetite for in-person events and the excitement it brings following the relaxation of travel and event restrictions,” he said.

“We’re diving right into the educational program this morning with a focus on movements in the regulatory landscape with Deputy CEO / Director of Policy & Education, Peter Burgess. This year’s technical program will once again kick off with this high-level, rapid-fire SMSF legislation stocktake session.”

“The SMSF sector has continued to grow strongly, and, from a legislation perspective, it’s been one of the busiest years on record. The scope and impact of these changes on client strategies is considerable, such as the new SuperStream rules, the introduction of Director Identification Numbers, and some of the regulatory changes to residency rules and the work test.”

SMSF Association Director, Bryan Ashenden, will also explore significant changes in the regulatory landscape for the provision of financial advice and related services that are currently under examination by the Australian Law Reform Commission and Treasury’s Quality Advice Review post the Royal Commission.

Mr Hay-Bartlem said that the conference has drawn in professionals from all over the country, acting as an example of how major events can be reintroduced slowly, as Australia returns to business as usual.

“I am thrilled to be the Association’s new Chair and to welcome so many of our members to Adelaide. What we have delivered is a program focused on bringing our members up to speed on technical and regulatory developments in the SMSF space, delivered by some of the very best in the sector,” said Mr Hay-Bartlem.

“The SMSF sector depends heavily on the advice from SMSF specialists and we are here to support you every step of the way,” he said.

Both Senator Jane Hume, Minister for Superannuation, Financial Services, and the Digital Economy and Dr Jim Chalmers, Shadow Treasurer, provided video addresses to the conference, a sign of the growing importance of SMSFs as a retirement vehicle and policymaker interest in supporting the sector.

“I’m pleased to be speaking with you at the SMSF Association National Conference, an event that continues to increase in size and stature as more Aussies take their future into their own hands. The SMSF Sector is a great strength of the Australian retirement system and it’s only getting better,” Senator Jane Hume said.

“One quarter of all super assets are now in self-managed funds and the traditional demographics of SMSFs are changing – more women and younger people.”

“With the changing landscape of the sector, regulatory settings need to be targeted and effective without the burden of red tape. The Morrison Government is a great ally of the SMSF sector,” she said.

Dr Chalmers commented: “I’m really proud of my long association with you all the way back to when Andrea Slattery was running the organisation and through more recent consultations and conversations. I want to thank you for your advocacy, availability and for the opportunity to confer with you from time to time.”

“I know that Stephen Jones and the rest of the economics team and indeed the whole Shadow Cabinet and Parliamentary Party are grateful for the work that you do,” he added.

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They are Professor Deborah Ralston, a former Chair of the Association who stepped down in September 2019 on being appointed by Treasurer Josh Frydenberg to the three-member Retirement Income Review panel, and Bryan Ashenden, Head of Financial Literacy & Advocacy at BT, Westpac’s wealth management arm.

SMSF Association Chair Andrew Hamilton says: “We are delighted to be able to announce these two appointments. Deborah proved an invaluable Board member during her last stint, playing an important role in the public debate on a broad range of retirement incomes policy issues.

“Her many years of being involved in key public policy debates in the financial services industry, with a focus on innovation and retirement issues, is a resource that the Association will be able to tap again, and we look forward to hearing her wise counsel.

“Deborah is a Professorial Fellow at Monash University and is a member of the Steering Committee for the Mercer CPA Global Pension Index. Aside from past academic roles, Deborah is a member of the Reserve Bank Payments System Board, and a non-executive director of Kaplan Business School, Kaplan Higher Education and SuperEd. Deborah was also the inaugural Chair of ASIC’s Digital Finance Advisory Board.

“Bryan’s primary focus at BT is to interpret legislative and regulatory change and distil this into meaningful actions for advisers, advice businesses, clients and consumers.

“A principal focus in this role is to assist building consumer trust in the advice process and supporting advisers in raising professional standards, a role that makes him eminently suitable for our Board at a point of time when the advice industry is undergoing major change.

“Aside from his BT role, Bryan is a lecturer on ethics and professionalism in financial advice and the economic and legal context for financial planning and is a member of various working groups at the Financial Services Council.”

Ralston says: “I found my previous time on the SMSF Association Board to be extremely fulfilling, so I was delighted to accept when asked to join again. As our work on the Retirement Income Review highlighted, we have many challenges ahead and I look forward to contributing to the debate, particularly as it affects the SMSF sector.”

Ashenden says: “I am honoured to be asked to join the Association’s Board. Having been a specialist member for the past decade, I am confident my experiences, especially my current role at BT interpreting legislative and regulatory change, equips me to make a meaningful contribution to the Association and the SMSF sector more broadly.”

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John Maroney

The 2021-22 Federal Budget has given the SMSF Association’s Technical Summit a cutting edge as delegates will get the opportunity to hear the ramifications of one of the most significant budgets ever handed down for the SMSF sector.

The two-day Technical Summit is being held live on the Gold Coast from 21-22 July. It is only available to 500 of the Association’s Fellow and Specialist Members.

SMSF Association CEO John Maroney says: “Measures to reform the residency rules for SMSFs, remove the work test for non-concessional contributions for individuals aged 67 to 74 and lower the eligibility age to make downsizer contributions will impact on many SMSFs, so it’s critical SMSF specialists are fully aware of what these changes will mean for their clients.”

Deputy CEO/Director of Policy & Education, Peter Burgess, will fully air these Budget measures in his always compelling Technical Update, and other speakers will also examine what these changes mean in their specific areas of expertise.

Burgess says: “Aside from the Budget update, this Technical Summit will cover a broad range of technical sessions delivered by an outstanding line-up of speakers.

“There will be 90-minute workshops on property development, succession planning, death benefits and the FASEA code of ethics and shorter technical sessions on contributions, cryptocurrency, pensions, gearing, and auditor independence.

Maroney says delegates will also have the opportunity to hear Jeremy Gordon, a leading authority on UK pension transfers.  “Gordon will provide an update on the latest changes to the UK pension transfer rules, discussing the often overlooked and misunderstood issue about how SMSF trustees should be handling UK sourced pension money that has already been transferred.

“Another compelling workshop session will be behavioural finance expert Simon Russell discussing how SMSF professionals can use their knowledge of behavioural finance to better understand and influence their clients.”

Other speakers include Craig Day, Head of Technical Services, Colonial First State, Mary Simmons, Technical Manager, SMSF Association, Bryan Ashenden, Head of Financial Literacy & Advocacy, BT, while industry veteran Meg Heffron, Managing Director, Heffron, will close off the Technical Summit with the topic, “SMSFs Looking forward: Where to from here?”

For those unable to attend, there will be an on-demand option. It will be a shorter version of the Technical Summit and be released a week after the live event.

Registrations now open.

See the program.

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John Maroney

The SMSF Association Technical Summit will be a face-to-face event as COVID-19 restrictions ease. The premium event will include a highly interactive workshop discussion and problem-solving Summit on 21-22 July on the Gold Coast that will allow SMSF specialists to network in person for the first time since the February 2020 National Conference.

SMSF Association CEO John Maroney says: “The feedback from members has been that they would prefer to ‘get back together’ as soon as possible, to mix with their peers while receiving high-quality technical updates and earning their CPD hours.

“Considering the success of the 2020 National Conference with members, we have opted to return to the Gold Coast and have a two-day Summit intensively focussed on the latest SMSF technical education delivered by an expert line-up of speakers.

“We have decided to limit the number to 500 to increase interaction and networking opportunities between speakers and SMSF Specialists and their peers.”

The invite-only Summit will offer three keynote addresses and three concurrent streams offering a choice between five practical workshops and eight technical concurrent sessions. Most workshops will be repeated during the Summit so delegates will be able to construct a conference program tailored to their own individual needs.

Keynote speakers include the Association’s Deputy CEO and Director of Policy & Education Peter Burgess, Meg Heffron (Heffron SMSF Solutions), Craig Day (Colonial First State), Bryce Figo (DBA Lawyers), Bryan Ashenden (BT Financial), Belinda Aisbett (Super Sphere), Aaron Dunn (Smarter SMSF) and Mark Ellem (Accurium).

Maroney says: “The workshops will last 90 minutes and focus on issues of growing importance in the SMSF sector and the application of strategies. Day 1 will start with Burgess’s traditional SMSF legislative update and day 2 will start with the Industry Breakfast on the topic of ‘The future of IT in the SMSF sector’ and conclude with a special address from Meg Heffron on SMSFs looking forward: where to from here?

“We are also excited to announce the holding of a special Fellows function on the evening of 20 July that will acknowledge their enormous contribution to the Association and the wider SMSF sector, as well as welcoming the new Fellows to the Association.”

For those unable to attend, there will be an on-demand option. It will be a shorter version of the Summit and be released a week after the live event.

Registrations are now open via the SMSF Association website.

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Bryan Ashenden

A TTR (transfer to retirement) strategy remained valid even if the 2016 Budget proposal to change its tax status became law, Bryan Ashenden, Head of Financial Literacy and Advocacy at BT Financial Group, told the 2016 SMSF Association Technical Conference.

Addressing the topic Pension strategies for the super savvy, he said it was proposed that from 1 July 2017 earnings on assets that support a TTR strategy would have the same tax treatment as funds in the accumulation phase, and as a consequence the value of TTRs was being questioned.

But Ashenden cautioned against speculation that suggested the worth of a TTR strategy was only valid if its tax benefits remained, and said this represented missed opportunities.

“Rather, consideration should be given to the many reasons why a TTR has been, and will remain, a valid option for many members as they reach their preservation age.” This includes:

• The ability to trade off taxable employment income with pension income that is taxed more favourably to an individual, with the benefit of increasing the amount that is accumulated in the super fund to help a member reach their retirement goals;
• The ability to allow a member to transition to retirement through a gradual or partial reduction in their employment hours and using the TTR to supplement income needs;
• The ability to access some accumulated superannuation savings to accelerate repayment of debts, such as a home loan, which will reduce expenses when the member fully retires.
  Ashenden said what needed to be remembered was that from a TTR perspective the only benefits lost were the tax exempt status of the pension earnings and the reduction in the concessional contribution cap.

Effectively, the consequences were:

• 15% of the taxable earnings on assets that support the TTR income stream; plus
• The difference between the member’s marginal tax payable on the (up to) $10,000 reduction in the concessional cap that would otherwise have been contributed to super and the 15% tax that would have been payable in the fund on that amount; less
• The amount of tax that the member would have paid on the TTR income drawn during the year that would be above the amount expected to be withdrawn post 1 July 2017.

“Applying the above formula will result in the loss of some amount of a benefit to the member, but it is unlikely that it will reduce the tangible benefit of a TTR strategy to nil.

“In fact, the only scenario where there may be cause to consider ceasing to utilise a TTR is where a member is drawing income that is surplus to their needs and would otherwise be recontributing that amount back to their super fund.”

Ashenden said it was imperative that SMSF specialists were cognisant to the proposed change to the TTR strategy, and they needed to ensure their trustee clients were across the issue.

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