Super in pension phase

My wife and I have a SMSF in pension phase and I am not clear of the proposed new rules for super in pension phase. The balance of the fund in around the $1.6 limit. I am 74 and my wife 70. I am fully retired and my wife works one day a week.
My questions are:
1. What happens if the account balance is above $1.6m at the end of any financial year?
2. Is the fund allowed to earn a limited amount before being taxed?
3. Is it better to withdraw any amount above the $1.6m for simplicity?
4. As there are two members in our SMSF are we allowed $1.6m each to make our limit $3.2m?

Many thanks for letting me ask these questions.

A: Thanks for sending in your questions.

It is an individual member balance, rather than a SMSF balance, so potentially, your collective assets could be $3.2m.

In relation to your other questions:

  1. a) you will be required to take it out (any amount over the $1.6 m)  This can be via a withdrawal, or rolling it back into an ‘accumulation account’ within the SMSF;
  2. b) depends by what amount you exceed it by. If under $100,000, then yes – there may be no additional tax, otherwise additional tax will apply;
  3. c) many people will roll any excess back into an ‘accumulation account’, where the investment earnings will be taxed at 15%.  If you have no (or virtually no) other investment income outside super and currently aren’t accessing your tax free income threshold of $18,200, then it might make sense to withdraw some or all of the excess, invest it outside super, and utilize the tax free income threshold.

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