Equalisation of member balances

March 2019

With the introduction of a number of member balance capped measures from 1 July 2017, there are a range of benefits from implementing strategies to equalise member balances within a SMSF. It is common for the non-working spouse of a couple to have a significantly lower balance then their working spouse and therefore strategies can be implemented to equalise balances over time.

1)     $1.6 million Transfer Balance Cap – this cap now limits the amount an individual can have in retirement           phase and be entitled to tax free earnings up to $1.6 million member balance. Therefore ideally when a           couple reach retirement phase they each have at least $1.6 million in their member balance.

 2)     Estate Planning – equal balances between spouses can ensure the maximum amount of benefits can             remain within a SMSF when one of the spouses pass away. The $1.6 million Transfer Balance Cap still           applies to the remaining spouse with benefits over this cap potentially being required to be paid out of             the SMSF.

 3)     Non-Concessional Contributions – the ability of an individual to make a non-concessional contribution             can now be restricted depending on their Total Superannuation Balance. Steps could be taken to                     ensure a member’s balance is below the thresholds in order to allow the member to make a non-                     concessional contribution (or utilise the bring forward cap)

 4)     Catch-up unused Concessional Contribution – one eligibility of this new concession is that the                          members Total Superannuation Balance is below $500,000.

 5)      Segregation Method – the ability to utilise the segregation method for calculation of Exempt Current                Pension Income (i.e. tax free earnings) is restricted to Funds who have no members with a Total                      Superannauation Balance over $1.6 million.

The equalisation of member balances and strategies that can be implemented will depend on the individual circumstance and facts for each couple. In some circumstances there may be benefits not to equalise balances and in fact increase the imbalance of member balances within a SMSF.

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Topics: Superannuation

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