One of the requirements for a professional adviser is continuing professional development. From a superannuation point of view, one of the best sources of information and strategies for new legislation and rules has been the SMSF Association’s annual conference.
The association’s 2017 event was no exception. The main theme was trust. And much time was devoted to technical sessions detailing the super changes that will commence on July 1, 2017 – as would be expected.
Andrea Slattery, outgoing chief executive of the SMSFA, said in her opening address: “The premise of superannuation relies on trust in the system and trust in the government to protect Australia’s primary savings vehicle. Also, consumers need to be able to trust that the advice they receive from their advisers is accurate and in their best interest.”
World Vision chief executive Tim Costello’s keynote, titled “Trust in uncertain times”, highlighted the importance of operating ethically and how a lack of ethics has led to a “trust deficit”. Association patron and former High Court chief justice Sir Anthony Mason linked the trust issue with clients when he said, “Your industry’s future lies in providing the highest quality advice. It’s what your clients value and, at a time of constant change, so badly need.”
Unfortunately, the SMSF service industry has developed in such a way that some providers have concentrated on maximising revenue at the expense of SMSF trustees. You need look no further than the massive amount of annual compliance documentation produced, which is more about justifying high fees than providing trustees with usable information.
In addition, there has been a trend of some service providers overly complicating the compliance side of SMSFs, which results in trustees paying for documentation they may not need. The pressure put on trustees to constantly update SMSF trust deeds, that in many cases are not technically wrong, is an example of this.
If the SMSF profession is to retain and build trust, advisers must be more vigilant with what they recommend to clients. Anything that is more about increasing revenue streams from SMSFs, rather than providing a net benefit to the trustees, cannot help but reduce a client’s trust in their adviser in the long term.
On the technical side, the conference excelled at explaining the new superannuation system and how it will affect our clients. This was done through plenary sessions open to all delegates, and also through specialist workshops open to limited numbers of specialist advisers.
Explaining the new limits
The main technical points I gained about the system commencing on July 1, 2017, were:
- How the ability to carry forward unused concessional contribution limits for up to five years, and the removal of the restriction on claiming a tax deduction for personal super contributions, could prove to be a major strategy to assist clients in selling lumpy assets when getting close to retirement.
- Although most of the new limits being introduced will be indexed, the $1.6 million value, at which SMSFs can no longer use the segregation method, is not indexed.
- The rule for bringing forward non-concessional contributions is more prescriptive when it comes to the $1.6 million pension transfer balance limit. If a member’s superannuation balance is less than $1.4 million at June 30 of the previous year, they can bring forward up to two years of contributions. But if a member’s balance is between $1.4 million and $1.5 million, they can bring forward only one year of contributions. If it is between $1.5 million and $1.6 million they can contribute only a maximum of $100,000.
There was much more that I learned from the conference in relation to the new superannuation system, including several useful strategies that I hope to cover in future articles.