It’s essential to be super vigilant
THE SUPER CHANGES ARE BROAD AND COMPLEX AND WILL BE SPECIFIC TO YOUR PERSONAL SITUATION.
GARRY FRIZZO DRAMATIC changes to superannuation regulations have once again changed the landscape.
For financial advisers the changes, which only became law in November, means they only have a few months to get on top of how their clients are impacted, make appropriate recommendations to them, and implement appropriate strategies before July 1.
Changes to contribution limits will make it harder than ever for people to accumulate the sort of superannuation balances that they will require to support them in what they would like to be a long and comfortable retirement, unless they plan and start early.
From July 1 the maximum concessional contribution that can be contributed to superannuation, reduces to $25,000 a year.
It is currently $35,000 for those aged 49 and over and is $30,000 for those under the age of 49.
For people under 65, the next few months represents the last opportunity to contribute up to $540,000 using the bring forward rule as a nonconcessional contribution, irrespective of how much they already have in super.
From July 1, not only will the cap reduce to a maximum of $300,000 using the threeyear bring forward option, but anyone with over $1.6 million in their super will not be able to make any further non-concessional contribution.
The introduction of the $1.6 million cap in pension phase is also a noteworthy change.
Until June 30, all earnings inside a pension are tax-free.
From July 1, only $1.6 million can be in the pension phase with no tax – any extra funds must be withdrawn from pension and either moved to accumulation phase or withdrawn from super all together.
Earnings from assets in accumulation phase will be taxed at 15 per cent or if held in your personal name, at your marginal tax rate.
For those lucky enough to be in a position where the $1.6 million cap is an issue, planning for the best tax outcome will be important.
It could be a fine line balancing tax payable, having flexibility in options available now and later, and understanding how any changes to personal circumstances in the future could impact the outcome.
Similarly, changes to the transition to retirement (TTR) pensions will impact many clients.
TTRs were originally introduced to assist people who were gradually moving into retirement via part-time work.
You didn’t have to retire to withdraw your super benefits.
However, many people used the strategy for boosting super savings and for tax management.
Well, the zero-tax environment ends on July 1.
The income generated from the investments supporting the TTR pensions will now be taxed at 15 per cent, which means many clients may need to review this strategy.
The super changes are broad and complex and will be specific to your personal situation.
An adviser can simplify things by removing the technical jargon and recommend some strategies after analysing how they would impact you, now and in the future.
There really is no one size fits all solution.
Not getting the right advice could be costly, both now and later, not just for you, but for your estate. Garry Frizzo is an authorised representative of Primestock Securities Limited. AFSL No: 239180