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Editorial - Superannuation e-news October 2007

Tuesday 2 October, 2007 by Michael Perry
In last month's editorial we reminded members that limited time remained for those SMSF trustees intending to commence a strategy of using market linked pensions for reducing the asset test assessment of their superannuation savings for Centrelink purposes. Now that 20 September 2007 has come and gone the door has been closed on trustees' ability to commence such a strategy for members, notwithstanding the recent announcement by the government (through IFSA) - and somewhat belatedly - that it now recognises the need for a degree of flexibility when it comes to complying income streams that are commuted post-20 September 2007.
Don't be fooled into thinking that the rules have now been relaxed so that they will allow one to commence the asset reduction strategy for Centrelink purposes after 20 September 2007.
The government seems to have indicated it will allow some leeway in relation to the roll over or commutation of those income streams on, or after that date where the current legislation permits while retaining the asset test that previously applied. (In essence where there are limited options for members other than that they commute and start a new complying pension.) At this point there has been no enabling legislation but it would seem that some common sense has been applied and the government will grant a relaxation of the rollover provisions while the associated asset test exemption is retained.
The proposal covers some situations where SMSF members could be affected. For example upon the death of a member and where a surviving spouse or member seeks to close down the fund and roll over to a new provider, or where the administrative requirements are proving to be difficult to meet in old age, hence necessitating a rollover to a new provider.
Members should also note that in relation to a halving in the asset test taper and a consequent substantial increase in the thresholds to which benefit eligibility will now apply, there is a good chance that members who were previously not eligible for any Centrelink benefits may now find they could be eligible for a part age pension from the government.