Superannuation and Retirement Applications (SRA) common mistakes
Superannuation and Retirement Applications (SRA) · Understand the traps and how to avoid them.
Treating the transfer balance cap as a single fixed dollar figure that applies identically to every client, rather than indexing it and applying the personal cap based on the highest ever balance used.
Candidates memorise the general cap from study material and then apply it to clients who have already started a pension, missing that proportional indexation gives each person an individual cap and that the general cap only rises in $100,000 increments.
What to do instead
Before answering, establish (a) the current general cap, (b) whether the client has ever had a transfer balance account credit, and (c) their highest ever balance, then compute the personal cap as general cap minus unused cap proportion. Practise with three client profiles where one has partial usage.
Calculating the age pension under the assets test and income test but reporting only one result, or adding the two reductions together, instead of taking the lower of the two assessed rates.
The two tests are learned in separate study blocks, so candidates default to whichever they revised last and forget the rule that the test producing the lower pension governs, and that the income test uses deemed income on financial assets rather than actual returns.
What to do instead
Adopt a fixed two-column working template: compute assets-test pension, compute income-test pension using deeming tiers, then explicitly write 'lower of the two applies'. Do ten drills where the two tests produce close results to build the habit.
Applying the concessional contributions cap without checking the client's total superannuation balance against the general transfer balance cap threshold, and without checking unused cap amounts carried forward.
The carry-forward rule is conditional on a total super balance below $500,000 (indexed) at the prior 30 June, and candidates often apply the five-year carry-forward to everyone or forget the balance test entirely.
What to do instead
For every contribution question, run a checklist: cap type, client age, total super balance at previous 30 June, available carry-forward from the prior five years, and Division 293 threshold. Write the checklist answer before computing the tax.
Confusing the tax treatment of a lump sum versus an income stream, and of a taxed versus untaxed source, so that the tax-free component and taxable component are taxed at the wrong rates.
The matrix of preservation age, age 60 and over, tax-free versus taxable component, and taxed versus untaxed fund has many cells, and candidates collapse it into a single rule such as 'over 60 means tax free'.
What to do instead
Memorise and redraw the four-cell matrix from scratch weekly: tax-free component always untaxed; taxable component from a taxed source tax free from age 60; taxed element from untaxed source attracts marginal rates with a 10 per cent offset from age 60. Then apply it to a benefits question under time pressure.
Recommending a transition to retirement income stream as a way to fund retirement spending before the client has met a condition of release, ignoring that TRIS earnings are taxed at 15 per cent and no lump sum commutation is allowed.
TRIS and account-based pensions look similar in product terms, and candidates focus on the tax-free pension payments for a client over 60 while overlooking the restriction on accessing the capital.
What to do instead
Before recommending any income stream, state the client's condition of release in writing. If none is met, restrict the recommendation to a TRIS with limited commutation and flag the 15 per cent earnings tax. Build a one-page comparison table of TRIS versus account-based pension and use it in every practice answer.
Giving a single-product recommendation without documenting the client's relevant personal circumstances, the alternatives considered, and the basis for preferring one option, then presenting it as a statement of fact rather than advice.
Candidates treat the advice process as a calculation exercise and under-invest in the best interests and appropriate advice steps, so the file fails the safe harbour requirements even where the numbers are right.
What to do instead
Structure every advice answer with the four safe harbour steps explicitly labelled: client objectives, subject matter and scope; identification of relevant circumstances; investigation of products; and a written basis for the recommendation. Draft the basis-for-advice paragraph first, then attach the calculations.
Ignoring the work test and work test exemption for personal deductible contributions and non-concessional contributions made after age 67, and applying the bring-forward rule to clients aged 65 to 74 without checking total super balance.
Contribution eligibility rules combine age, employment status, fund balance and cap type, and candidates learn the caps in isolation from the age-based eligibility gates.
What to do instead
Use an age-banded eligibility grid (under 65, 65 to 66, 67 to 74, 75 and over) and map each contribution type onto it before calculating amounts. Include the work test exemption's $300,000 total super balance condition in the grid.
Assuming the family home is always exempt from the age pension assets test without checking whether the client is absent, renting it out, or whether the excess home equity means test applies to a homeowner receiving an income-tested payment.
The 'home is exempt' rule is taught as a simple fact, and candidates do not consider partial exemption for the principal home on more than two hectares or the treatment of proceeds from a sale held for up to 24 months.
What to do instead
For every assets test question, list each asset and classify it as assessable, exempt, or partially exempt, with the reason noted. Explicitly address the former home proceeds window and any granny flat interest before concluding on assessability.
Treating the minimum pension payment for an account-based pension as a single percentage, or applying the reduced minimums permanently rather than only for the temporary concession period, and failing to pro-rate for a pension commenced partway through the year.
The minimum drawdown factors rise with age and were temporarily halved, so candidates mix up the standard and reduced tables and forget the pro-rating rule for a partial year.
What to do instead
Memorise the standard factors by age band (4, 5, 6, 7, 9, 11, 14 per cent), note the temporary halving as a dated concession, and always pro-rate the first year's minimum by the number of days the pension was in place divided by 365.
Answering a question about the regulatory framework by naming the wrong regulator or the wrong power, for example attributing member complaint handling to APRA or assuming the superannuation guarantee charge is administered by the fund.
APRA and ASIC have overlapping but distinct remits, and the ATO administers the superannuation guarantee and the transfer balance cap, so candidates default to whichever regulator they saw most recently.
What to do instead
Build a three-column regulator map (APRA, ASIC, ATO) with the specific obligations each administers, and test yourself by placing ten scenarios into the correct column. Add the Superannuation Industry (Supervision) Act obligations, the sole purpose test, and the best interests duty to the map.