“If you are over age 60 and you terminate an employment arrangement, you have met a nil cashing restriction — it doesn’t matter if I leave my job and go to work for the Tax Office 100 hours a week; if I have done that at age 60, I have met a nil cashing restriction,” Ms Steed said. 

“So, from a business point of view, it is necessary for [advisers] to build that type of questioning into our reviews with our clients, to make sure that we are asking them about any termination of employment that has occurred.”

Ms Steed gave the example of Ty, who takes out a $300,000 LRBA at age 55 and changes jobs at age 60 due to poor health. Ty also has $600,000 in cash and shares in his SMSF and has purchased a $900,000 property with his LRBA.

“Ty has an account balance of $1.2 million, so he is otherwise eligible for $300,000 of non-concessional contributions, but when we add back the loan of $300,000, he is suddenly thwarted down to only $100,000 worth of non-concessional contributions,” she explained, pointing out that Ty’s TSB would be $1.5 million under the new rules.

“With people like Ty, not all of them will acknowledge or appreciate that this is going to happen to them, so again building that information into our checklists will become really valuable.”