Two items placed on the Class of 72 Facebook page by Rick Davies – many thanks.

Dear Classmates,

Some of you may have seen the article by John Wasiliev in last weekend’s Financial Review titled ‘Got a defined pension benefit? Then read this.’ I understand that the essence of what Wasiliev postulated is reflected in the Exposure Draft of the proposed Bill that aims to change the superannuation landscape (published earlier this week). I have not read the Exposure Draft (Explanatory Memorandum) yet.

Essentially what Wasiliev said is that Defined Benefit Pensions will be treated for taxation purposes thus: the annual income is multiplied by a factor of 16 and that sum is to be included in the $1.6M the earnings from which (in the Pension Phase) tax is not liable for payment. So theoretically, if the DFRDB treatment is as described (yet to be tested) and a recipient drew say $30,000.00 per annum x 16 = $480.000.00 results leaving $1,120,000.00 available to make up the total to 1.6M – say from your SMSF. He says the MSBS pension is treated differently (muliplies by a factor of 10 at 65 years of age).

And another article in this weekend’s Financial Review on page 24 – essential reading I suggest.