Author: Emma Partenza, Senior Manager & SMSF Specialist
With little fanfare, on 6th December 2024, the Treasury Laws Amendment (Legacy Retirement Product Commutations and Reserves) Regulations 2024 were approved by the Governor-General. They were presented as a legislative instrument by Financial Services Minister Stephen Jones as this legislation purely alters existing superannuation and tax legislation.
This applies to all complying pensions (market linked, lifetime expectancy and lifetime complying pensions) from 7 December 2024, so we now have a 5-year amnesty in place whereby trustees and members can exit these inflexible arrangements and fully commute them (including any associated reserves) without penalty (or excess contributions tax from applying).
As this is a legislative instrument, rather than the granting of Royal Assent on a Bill, it’s important to note that it still could be disallowed when Parliament resumes in February 2025, as the instrument is required to be tabled in both houses of parliament. If a member has not submitted a motion by 14th April 2025 to disallow it, then this will be law.
Members now have the same flexibility with complying pensions as those with account-based pensions – complying pensions can be fully commuted into an accumulation benefit for the member or used to commence an account-based pension (subject to the member’s transfer balance cap) or commuted and withdrawn from superannuation altogether).
Impacts on commutation on a member’s transfer balance cap are yet to be known (i.e. special value used in calculation of the member’s TBC).
It’s time to start planning and in 2025 review and discuss with affected members their options with this 5-year window in mind.
To learn more, refer to our November blog, New Draft Regulations Unveiled to Facilitate Exits from Legacy Pension Products.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2024. Please do not reproduce without the expressed written consent of the author.