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Between the 2017 overhaul of the super system, the productivity commission and the recent findings of the royal commission, I have to admit I wasn’t looking forward to the budget night. I am also dreading the opposition’s response in a couple days’ time.
There is a reason advisers’ flag with their clients that super is subject to legislative risk. It almost always becomes embroiled in the political campaign trail leading up to an election. However, as I like to remind my clients:
1. Super is always going to be a concessionally taxed environment.
2. They almost always have grandfathering rules put in place when the rules do change.
3. We are always here to advise our clients on how the changes will impact them.
4. And while it might be a hassle, and we may not always be able to get them back into the great tax environment some of them were enjoying since 2007, we can at least ensure we minimise the impact of any changes and get the best possible outcome within the new rules.
Tonight’s budget has been pretty light on for super. But there were a couple of free kicks for people in the right situation:
1. A proposed relaxation of the works tests for people aged 65 and 66. This allows them to get more into super in the last couple of years around retirement.
2. This includes allowing people who are 65 and 66 to use the bring forward rule for extra non-concessional contributions; and
3. Spouse contributions will be extended to people aged 70 and 74 years of age. Previously, you couldn’t receive a spouse contribution if you were aged 69 or over.
The catch to these concessions is that you still need to meet the overarching contribution rules which require you to have a less than $1.6million Total Super Balance. So whilst this may seem a great measure, I expect that there will be limited people in the self-managed super environment that will be able to benefit from these changes if they do go through.
The biggest hit to the super and the self-funded retiree market will be Labor’s much publicised franking credit policy changes. While I haven’t been very vocal about this in our recent blogs – my view is quite simple.
If the franking credit changes come in, all my clients who receive franking credit refunds in their self-managed funds should be sitting down with their investment adviser. They need to be re-considering the overall return of their underlying assets and restructuring their portfolios if they can do better.
There are a few other strategies out there around bringing in adult children to the fund to offset the tax they are paying on their super contributions with the parent's franking credits. However, this has many pros and cons and should not be entered into lightly.
[note – the proposed legislation to increase the allowable number of SMSF members from 4 -6 has not yet been passed and may lapse if not passed before the election]
In summary, there really isn’t anything big to discuss just yet in relation to tonight’s budget announcements. But that doesn’t mean you shouldn’t be thinking about your super.
I’m finding many clients are still getting used to the changes that were implemented from 1 July 2017 and haven’t realised the impact that this has had on their situation. Obtaining advice around your super moving forward is going to be more personalised than ever. You should be seeking advice specific to your circumstance before you make any decisions around contributions or withdrawals. The new rules are complicated, and it is important that we all work together to get you the best outcome for your future [even if it seems a long way away].
It also means that now more than ever you need to consider moving to real-time reporting for your self-managed fund, so you can get accurate and real-time advice.
If you would like to know more and book in a personalised catch up with a member of our super team, please call me on 07 3193 3020 or email me on email@example.com