Income splitting urged around $1.6m cap

Couples should be allowed to income split to help them better deal with the Government's $1.6 million retirement income cap, according to the Self-managed Independent Superannuation Funds Association (SISFA).

While welcoming a number of the Government's Budget initiatives relating to superannuation, the SISFA expressed concern about the setting of the $1.6 million cap and "the level of additional complexity that is being introduced for existing self-funded retirees in particular".

"If this policy objective is to be applied to all retirees, then as a minimum SISFA advocates allowing members of a couple to be able to split accumulated benefits prior to the introduction of such a retirement income cap at 1 July 2017," SISFA said in a response to the Budget.

It said this would extend the current principle of super contributions splitting further and allow existing pensioners the opportunity to reorganise their existing super balances if required given the changes announced.

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"In effect, it would place existing pensioners in the same position as others approaching retirement who now have the ability to plan their future with the new rules in mind," SISFA said.

"Without such a concession, existing retirees are being penalised for having accumulated existing retirement assets in the name of the principle wage earner — a situation typical of the current retiree demographic."

The Association said it was also advocating making any change to the non-contribution caps a forward looking measure that takes effect from 1 July (not Budget night).

"This would minimise administrative complexity and cost while ensuring existing contribution plans can be implemented under current laws by 30 June 2017 or at least 30 June 2016," it said.