Everyone is talking about superannuation.
Right now, we are working hard to ensure our clients are in the most tax-effective situation under the government’s new super reforms.
Quantum Financial’s Claire Mackay recently presented on this topic at the Gordon Chapter of Probus at Pymble Golf Club. In what was a lively, interactive session, Claire provided the audience with good general advice guidance and some great practical tips on how best to position themselves.
We summarise Claire’s key points below and share a copy of the Powerpoint presentation she shared with Probus members at the bottom.
Claire presenting to over 50 Probus members at Pymble Golf Club
The headline changes to super
Claire summarised the most important key changes to super:
- Concessional contributions reduced – $25k for all
- Removal of 10% rule – deductibility of personal contributions
- Reduction in high income surcharge (threshold now $250k income per year)
- Introduction of $1.6m Transfer Balance Cap for pensions
- Transitional Capital Gains Tax relief on application
- Tax on Transition to Retirement pensions reduces attractiveness of these pensions
- Non-concessional contributions restricted where member balance >$1.6m
- Non-concessional contributions cap reduced to $100k per year or $300k bring forward, subject to transfer balance cap
- Triggered in 2015/16 $460k
- Triggered in 2016/17 $380k
- Spouse contribution offset for spouse earning less than $40k per year
- Anti-detriment payments abolished
The devil is always in the details
There are only circa 3 months until the end of the financial year and so audience members were urged to contact their financial planner immediately to ensure they were on top of what they needed to do.
The stunning Pymble Golf Club
Things you need to consider NOW
Claire urged all the Probus members in the audience to consider the following issues:
- 3 or 2 bucket strategy
- First bucket in super = $1.6m tax free pension
- Second bucket in super = Accumulation account at 15% tax
- Third bucket outside of = Non super investments company/personal tax
- Withdraw and re-contribute to partner’s super?
- Withdraw and invest outside of super?
- The mechanics
- $1.6m transfer balance cap
- Transition to retirement – retain, transfer to account based pension or commute?
- Things your advisors should be looking at
- Transitional Capital Gains Tax relief
- Structure of your Self Managed Super Fund?
- Review estate planning
Tax you will pay
Many of Claire’s clients hold member balances well in excess of $1.6m and she shared with Probus members Quantum Financial’s estimate of what tax may be paid depending on what account balance you may have. You can view this analysis in Claire’s Powerpoint presentation attached below.
What is included in $1.6m cap?
Claire explained that it was important to understand what exactly would be included in the $1.6m cap from 1 July 2017.
- Defined benefit pensions
- Defined benefit lifetime pension
- Defined benefit life expectancy pension
- Market linked pensions (term allocated pensions)
End of Transition to retirement pension?
Transition to retirement pensions have long allowed those aged 55 to 65 still working to have their cake and eat it.
The reforms that will be introduced from 1 July 2017 significantly reduce the attractiveness of Transition to Retirement pensions so if you have one, review it now.
Probus was founded in 1965 in the UK by retired members of Rotary. The name Probus is derived from PROfessional and BUSiness. It is also a Latin word from which ‘probity’ is derived.
Transitional CGT relief
Claire highlighted that your accountant and advisor need to work together to look into this
- Must be made investment by investment
- Must own asset from 9 November 2016 to 1 July 2017
- Must make irrevocable CGT relief election by due date of FY 2016/17 tax return
- 31 October 2017
- 28 February 2018
Key dates you should be aware of
1 January 2017
- Stricter aged pension rules
30 June 2017
- Up to $1m withdrawal?
- $180k/$540k contribution?
- Aim to finish in May
1 July 2017
- New super rules take place $1.6m transfer cap,
reduced $300k/$100k Non-concessional contributions & $25k Concessional contributions, etc
Submit SMSF accounts
- Make Capital Gains Tax relief election
- 31 October 2017
- 28 February 2018