SMSF owners have an advantage over other superannuation members if pension legislation which has passed through the House of Representatives commences at the start of 2015.
The proposed legislation has largely slipped under the radar, Supercorp policy head Mark Ellem told Wealth Professional.
Changes to the age pension income test were put forward by Labor in April and not included in the swathe of bills the Liberal’s intend to retract.
The change will assess superannuation pensions starting from 1 January 2015 under a less generous rule – the Centrelink Income Test – just the same as non-super pension.
“It’s snuck in under the radar, and it’s something the Liberal government didn’t highlight so it’s obviously something they support,” said Ellem.
“We just wanted to highlight it because it’s a big change. It seemed the change got through the lower house without much fanfare. But this can cause you significant impost, it means less pension.”
Ellem suggests people approaching pension age need to consider whether they start a pension before 1 January 2015, so once they do become of pension age they have a private pension – out of their superannuation – that is more generously assessed for the income test than if it is started post-Jan 2015.
He points out SMSFs have a “considerable advantage” over non-SMSFs.
“Because if you have a pension being provided from a non-SMSF before 1 January 2015, under the current more generous rule, that will be grandfathered and continued after January 2015.
"However, if you no longer like the institution that’s providing your pension and you swap institutions, and that swap happens after January 2015 – then your new pension will be subject to the new less generous rules.”
Whereas an SMSF is not affected as trustees can change the fund’s investment advisor without changing the pension provider, as the provider of the pension remains the SMSF. “So SMSF has the advantage as it means the grandfathering will last longer,” says Ellem.
“If this gets through the senate, there is quite a lead up time before it comes into play, so everyone should consider their position on whether they should commence a pension and for that pension to be forever grandfathered from the new rules.”
The bill containing this change was passed by the House of Representatives on November 20, and will now move to the Senate where, if passed, will become law.