While superannuation remains a highly tax-efficient vehicle for retirement savings, it is not as good as it used to be, a leading PwC adviser says.

Liz Westover, speaking at the SMSF Association National Conference in a Sydney, at a session titled “Complementing your SMSF with alternative tax structures”, noted that the transfer balance cap, tighter contribution limits, and the repeal of the transition-to-retirement income stream tax discount were pushing people to consider other options for their savings.

The reduction in annual non-concessional contribution allowances to $100,000, in particular, can leave people with leftover funds that need to be invested outside of the SMSF environment.

“If you’ve got surplus income, and the client has already maxed out their $300,000 in bring-forward contributions, there are another two years where they might have some extra money that needs a home,” Westover said. “You don’t necessarily want it sitting in a bank account.”

A client might also start looking elsewhere after reaching the $1.6 million transfer balance cap, Westover said, particularly if they don’t have any other income and can achieve a better outcome than paying 15 per cent tax on the excess.

Other strategic reasons to stray from an SMSF include members being unable to segregate assets for tax purposes, and an assortment of estate-planning issues.

Westover also warned that many people want to get out because they no longer have an interest in maintaining an SMSF or lack faith in the superannuation system.

“Cognitive decline is also a huge issue,” Westover warned.


Advisers are generally conversant in the alternative options available, Westover said.

“Of course, you can use an APRA fund, set up a company or set up one of several types of trusts,” she advised. While superannuation is generally the best place for your money, it often needs to be complemented by these types of investment vehicles.

The important thing to remember, she reminded the audience, was that the client’s wishes should come before any strategy.

“What you think might be the best outcome may not be the best option for a client,” Westover said. “You’ve got to talk to them and find out what keeps them awake at night.”

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