Life Interests Testamentary Trusts


With all of the talk around the $1.6m superannuation transfer balance cap, something that hasn’t been discussed a great deal in the media is around the treatment of defined benefit pensions in relation to the cap. The application of the cap differs depending on whether the pension is sourced from taxed funds (generally private sector funds and some public sector ones) or from untaxed sources (some public sector funds). If you are unclear if your pension account fits one of these descriptions contact your superannuation fund and they can confirm. 

You can establish if a defined benefit pension will be valued at over the transfer balance cap limits by multiplying the amount received annually by 16. Therefore if you receive a pension from a defined benefit fund at or over $100,000 you will be considered as using up all of your cap.  

The taxation treatment is therefore as follows:  

Untaxed Defined Benefit Pensions – 100% of pension amounts over $100,000 will be included in the taxpayers assessable income taxed at marginal rates, and the 10% offset available will be capped at $10,000.  

Taxed Defined Benefit Pensions – 50% of pension amounts over the current cap of $100,000 will be included in the taxpayers assessable income at marginal rates, no offset is available.

Please contact Andrew Marshall or Janine Orpwood at Langley McKimmie Chartered Accountants on (03) 5427 8100 to discuss further.

We provide accounting and wealth management services to clients in WoodendGisborne and Macedon Ranges areas within Victoria Australia.  

The content within these articles was correct at the time of writing. Please contact us for updated information and advice. 

We provide accounting and wealth management services to clients in Woodend, Gisborne and Macedon Ranges areas within Victoria Australia.

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