There have been some significant changes to the tax treatment of transition-to-retirement income streams (TTR) which come into effect from 1 July this year.
Under the new super tax rules if you’re still working and are aged under 65, the assessable earnings from your TTR account will be taxed at up to 15%, the same rate as super assets.
What does this mean for you?
If you haven’t yet retired or met a full condition of release, we’re required to deduct this tax from your TTR account from 1 July this year. You will be able to view this transaction each month when you log onto FirstNet from late August and also in your half yearly statement.
What other information do you need to know?
Important points to be aware of include:
- Tax that applies on the previous month’s earnings will be deducted approximately mid-month and will generally appear in your transaction history and half yearly statement as an ‘Earnings tax adjustment’ or in a small number of cases, as a ‘Reversal’ (or ‘Adjustment Reversal’ where a refund is due).
- Fees and expenses incurred by you are tax deductible to the fund and we will pass the tax benefit on to your account.
- If an investment option you hold incurs realised losses during a month, the associated tax benefit will be provided to you by offsetting any tax payable in a month.
- If your account converts to a retirement phase pension account upon meeting a relevant condition of release and any amount of earnings tax is outstanding for the prior month end, we will deduct this from your account.
- If you have already nominated an investment option for crediting portfolio rebates or other rebates, any tax will be deducted from or refunded to that option. Otherwise, tax will be deducted from or refunded to your most conservative investment option.
- If we deduct tax from your account and this reduces your account balance to zero, we will close your account.
- If you turn 65 years of age:
- earnings tax will no longer apply, and
- your account balance will count toward your transfer balance cap, which may require any amount you hold in excess of $1.6 million to be transferred to an accumulation account or withdrawn from super.
If you satisfy a condition of release other than reaching age 65, we are obliged to continue deducting tax from your account until you formally notify us by completing a Condition of Release form and sending it back to us.
What happens in the future?
In early 2018 we’ll be in touch with more information regarding changes to your account that will make the process of deducting this tax more streamlined.
Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) is the issuer of super, pension and investment products. This document may include general advice but does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement (PDS) carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. A PDS for Colonial First State’s products are available at colonialfirststate.com.au or by calling us on 13 13 36.