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Super cap 'administratively clumsy': KPMG

Super cap 'administratively clumsy': KPMG

Tim Stewart
— 1 minute read

The government's proposed $1.6 million cap on superannuation pension accounts must include a "buffer" in order to be practicable, warns KPMG.

In a note on the proposed changes to superannuation in the 2016 federal budget, KPMG head of superannuation Dana Fleming said the government faces a "practical issue" when it comes to the the $1.6 million pension cap.

Under the government's proposed changes, from 1 July 2017 superannuation members will only be able to hold $1.6 million in the pension phase (ie, tax-free).

"Values of most fund assets are changing every day, and thus it would be difficult on any given day to leave assets in the 0 per cent [tax] pool valued at exactly $1.6 million," Ms Fleming said.

"In practice, if members want to have exactly $1.6 million in the 0 per cent pool it may be necessary to initially shift more than the excess back (leaving a buffer), and then after 1 July 2017, once the size of the remaining cap can be accurately measured, transfer assets and cash equal to this as the commencement of a second pension.

"But clearly this is administratively clumsy, resulting in two separate pensions where the member would prefer only one.  

"The solution may be to write the legislation so as to allow a level of trueing up as soon as practicable after 1 July 2017, without this triggering an additional pension," Ms Fleming said.

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Super cap 'administratively clumsy': KPMG
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