Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 197

Five urban myths about super changes

Much of the conversation about the superannuation reforms relates to reducing pension balances to a person’s transfer balance cap, resetting the Capital Gains Tax (CGT) cost base for investments and making last minute contributions before the caps drop on 1 July 2017. This article covers a few urban myths that have developed among some trustees and their advisers concerning these new regulations.

As a general rule, from 1 July, a person’s transfer balance cap of $1.6 million is the maximum value of pensions that can be transferred to retirement phase after that date including the value of pensions in place as at 1 July 2017. It is possible for a person to have a higher transfer balance cap if they receive a defined benefit pension because of the restrictions placed on receiving lump sum withdrawals. Transition to retirement income streams (TRIS) are excluded from measurement against the transfer balance cap as the income earned by the fund on investments that support a TRIS will be taxed at 15% from 1 July 2017.

Urban myth no. 1

Amounts transferred from retirement phase to accumulation phase cannot be withdrawn from superannuation.

Incorrect. Any amount used to provide an account-based pension must have met a condition of release of retirement after reaching the person’s preservation age or age 65, whichever is the earlier. Meeting either of these conditions of release means that the benefits are totally non-preserved and can be withdrawn from superannuation at any time.

Urban myth no. 2

A minimum amount equal to a percentage of a person’s accumulation account is required to be withdrawn from the fund each year.

Incorrect. Only account-based pensions and transition to retirement pensions require a minimum set percentage of the account balance on commencement or as at 1 July each year to be paid to the pensioner. Where defined benefit pensions are paid from the fund, the amount required to be paid annually is determined through an actuarial valuation.

Urban myth no. 3

Only one pension is able to be paid from retirement phase under the rules from 1 July 2017.

Incorrect. There is no limit to the number of pensions that can be paid from superannuation for an individual. A person may have a number of valid reasons for commencing more than one pension, which may be due to the manner in which contributions were made to the fund, changes in the pension rules or use of pensions to gain the greatest taxation advantage.

Urban myth no. 4

Any pension balance in retirement phase must be reduced to $1.6 million each year.

Incorrect. The value of the relevant pension measured against a person’s transfer balance cap occurs at the time an account-based pension commences from 1 July 2017 or on the amount supporting account-based pensions on 30 June 2017. The withdrawal of regular pension payments or changes to the pension account balance due to investment gains or losses do not impact on the amount measured against the person’s transfer balance cap.

Different rules apply to the valuation of defined benefit pensions, which are based on the pension payable and a special valuation factor.

Urban myth no. 5

The amount a person is permitted to have in superannuation is limited to $1.6 million.

Incorrect. 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 balances in all superannuation funds exceeds $1.6 million, it is not possible to make more non-concessional contributions.

The new superannuation rules 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 TRIS pension. 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.

 

Graeme Colley is the Executive Manager, SMSF Technical and Private Wealth at SuperConcepts, a leading innovator in SMSF services. The material in this article is for general information and does not consider any person’s investment objectives.

RELATED ARTICLES

The mechanics of the $3 million super tax must be fixed

Tips when taking large withdrawals from super

Optimal ways to use the Transfer Balance Cap after a death

banner

Most viewed in recent weeks

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Maybe it’s time to consider taxing the family home

Australia could unlock smarter investment and greater equity by reforming housing tax concessions. Rethinking exemptions on the family home could benefit most Australians, especially renters and owners of modest homes.

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Chinese steel - building a Sydney Harbour Bridge every 10 minutes

China's steel production, equivalent to building one Sydney Harbour Bridge every 10 minutes, has driven Australia's economic growth. With China's slowdown, what does this mean for Australia's economy and investments?

Supercharging the ‘4% rule’ to ensure a richer retirement

The creator of the 4% rule for retirement withdrawals, Bill Bengen, has written a new book outlining fresh strategies to outlive your money, including holding fewer stocks in early retirement before increasing allocations.

Latest Updates

Economy

Why we should follow Canada and cut migration

An explosion in low-skilled migration to Australia has depressed wages, killed productivity, and cut rental vacancy rates to near decades-lows. It’s time both sides of politics addressed the issue.

Investing

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Property

Australian house price speculators: What were you thinking?

Australian housing’s 50-year boom was driven by falling rates and rising borrowing power — not rent or yield. With those drivers exhausted, future returns must reconcile with economic fundamentals. Are we ready?

Shares

ASX reporting season: Room for optimism

Despite mixed ASX results, the market has shown surprising resilience. With rate cuts ahead and economic conditions improving, investors should look beyond short-term noise and position for a potential cyclical upswing.

Property

A Bunnings play without the hefty price tag

BWT Trust has moved to bring management in house. Meanwhile, many of the properties it leases to Bunnings have been repriced to materially higher rents. This has removed two of the key 'snags' holding back the stock.

Investment strategies

Replacing bank hybrids with something similar

With APRA phasing out bank hybrids from 2027, investors must reassess these complex instruments. A synthetic hybrid strategy may offer similar returns but with greater control and clearer understanding of risks.

Shares

Nvidia's CEO is selling. Here's why Aussie investors should care

The magnitude of founder Jensen Huang’s selldown may seem small, but the signal is hard to ignore. When the person with the clearest insight into the company’s future starts cashing out, it’s worth asking why.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.