In our last edition of urban myths (published in March) and the super changes, we covered the misunderstandings of the transfer balance cap, amounts withdrawn from accumulation accounts and how much a person was allowed to keep in super. Well, ‘that’s not all’ as they say in the classics. In this edition, which has 5 more myths we cover amounts in super, contributions, death benefits and, of course, the cap.

Urban Myth No. 5: The amount a person is permitted to have in superannuation is limited to $1.6 million. 

There is no limit to the amount a person is permitted to accumulate in superannuation. However, the value of pensions measured against a person’s transfer balance cap for amounts in retirement phase is not permitted to exceed $1.6 million (which is subject to indexation). Also, if a person’s total balance(s) in all superannuation funds exceeds $1.6 million, it is not possible to make non-concessional contributions to superannuation

The new superannuation rules, which commence from 1 July 2017, will impact on the amount of tax paid in the superannuation fund for members with a pension value of more than $1.6 million or receiving a transition to retirement pension (TRIS). Any excess over $1.6 million will be required to be transferred to a taxed environment in accumulation phase or taken from the fund as a lump sum. Investments supporting a TRIS will be transferred from a tax exempt to taxed environment in the fund. While there are a number of decisions to be made, members should understand the facts and ignore the myths that confuse and complicate some relatively straightforward changes.

Urban Myth No. 6L I can even out the $1.6 million between me and my spouse without the money leaving the fund.

Incorrect. In situations where either a fund member or their spouse has more than $1.6 million in superannuation, it is not possible to transfer any excess from their account to the other person’s account. It may be possible to help build up the other member’s account by withdrawing an amount from their account and giving it to their spouse. The spouse would build up their superannuation balance by making a concessional or non-concessional contribution to the fund, if they are able to contribute.

Urban Myth No. 7: I can’t make concessional contributions to super once I have more than $1.6 million.

Incorrect. It is possible for a person to have concessional contributions made to superannuation irrespective of the total amount they have in super. Non-concessional contributions are not permitted to be made to superannuation where a person’s total balances in superannuation, as at 30 June in the previous tax year, exceed $1.6 million.

Urban Myth No. 8: To transfer from retirement to accumulation phase, I need to take money out of the fund.

Incorrect. The transfer of amounts from retirement phase to accumulation phase is really an accounting entry. The member’s pension account balance will be reduced and the accumulation balance will increase by a corresponding amount.

Urban Myth No. 9: On the death of my partner, I can transfer their superannuation to my accumulation account.

Incorrect. From 1 July 2017, it is only possible to have a reversionary pension or death benefit pension maintained in superannuation. The legislation does not allow a beneficiary to credit a death benefit to his or her accumulation account in the fund. Any death benefit pensions in excess of a member’s transfer balance cap are required to be paid from the fund as lump sums.

Urban Myth No. 10: Everyone is entitled to the benefit of the indexed transfer balance cap.

Incorrect. Once a person has used up 100% of their transfer balance cap, which is $1.6 million on 1 July 2017, they are unable to access any increase in the cap due to indexation. The transfer balance cap is indexed to CPI in increments of $100,000.

Keep tuned for more myths that could send you down the wrong path, if you think they are real rather than fairy stories.