Change Is Imminent - Are You Super Ready?

October 2015

There's been a lot of public discussion about superannuation recently. While the overall efficiency of the current superannuation system is a key talking point, the broader conversation is a national policy debate about the long-term future of superannuation and the age pension system. 

Currently, individuals are able to contribute (after tax) $180,000 per annum or $540,000 over three years tax-free into superannuation. It's possible that the annual limit may be reduced, or that a lifetime limit may be introduced. While there would be some benefit to this as members 'back end' their contributions later in life, this takes the system back to the Reasonable Benefits Limits days which was costly to administer.

Tip: Seek appropriate licenced advice and give due consideration to non-concessional contribution strategies prior to Budget night.  This may also mean consideration of SMSF estate planning 'recycling' strategies.  If you have control over your concessional or tax-deductible contributions, it may also be beneficial to consider your concessional contributions early in tax planning for the 2016 financial year.

Transition to Retirement Pensions

One of our main strategy areas since 2005 has been Transition to Retirement (TTR) Pensions.  This strategy provides benefits in three key areas:
1) Taxation savings on earnings within the SMSF (0% tax rate!)
2) Taxation savings on increased concessional contributions
3) Taxation savings through a 15% rebate on the taxable portion of the pension payment (and, once a member is over age 60, ZERO tax personally on the pension payment!)

Essentially this requires a cost/benefit calculation for those over preservation age and under age 60, while for those over age 60 it is almost always worthwhile (with the requisite advice and planning, of course). 

Tip – If you've met preservation age (currently age 56) and are not in TTR pension phase, you should seek advice on the benefits of the TTR strategy for your personal circumstances.

Equalisation of Balances

Both sides of government have floated the notion of taxing a member's benefit if the benefit is over a certain balance (e.g. $2.5 million) or, alternatively, taxing earnings over a certain amount (e.g. $75,000 to $100,000 per member). While this would be an administrative nightmare, there may be an opportunity for a two member fund to look at equalising balances between members/spouses, taking into consideration relevant contribution limits.

Tip – Where you and your spouse have uneven balances, full access to funds and tax-free withdrawals, you should look to whether a re-contribution strategy would apply to your particular circumstances. 

Changes to SMSF in the short term are inevitable, so it will pay to discuss your personal circumstances with a licenced financial adviser.

Topics: Finance, Future, Superannuation

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