While the government is unlikely to further tinker with superannuation in the federal budget, advisers should ensure that clients planning to change strategy have done so prior to June 30.
Andrew Yee, a superannuation specialist at accountants and advisers HLB Mann Judd Sydney, believes that further super changes in the budget will be a surprise but notes that the government has not ruled this out. *
“In its announcement of super reforms, the government made no comment about whether there would be further changes to superannuation in the budget, and the reforms recently announced may not be the end of any changes,” he said.
“Nonetheless, investors should base their immediate and short-term super planning on the current laws. Even if any further super changes are included in the budget, it is very unlikely they will start this financial year, or be retrospective.”
However, Yee added that advisers should be prepared in the event of further changes, especially since these can be preempted by reviewing and changing client strategies before the budget.
In particular he suggests:
- Ensuring annual concessional (tax deductible) and non-concessional (undeducted or after-tax) super contributions have been maximised;
- Ensuring super contributions are received by the super fund as soon as possible (they must be received prior to June 30 if they are to be accounted for in this financial year);
- Reviewing all super contributions made, including those by an employer, to ensure relevant contribution caps are not breached. Compulsory super guarantee contribution payments made by employers are counted towards concessional contribution caps, as well as any super fund payments such as superannuation-based life insurance premiums;
- Making any planned transfer of assets into or out of SMSFs sooner rather than later. The government has already announced it proposes to restrict the acquisition and disposal of assets between an SMSF and a related party after July 1. For example, after that date, people will not be able to transfer, off-market, personally held listed shares into an SMSF even though the transfer is at market value;
- Anyone who has reached “preservation age” (55 for those born before July 1, 1960) should consider the tax advantages of a transition to retirement strategy, as well as the opportunity to increase contributions to super while supplementing reduced take-home pay with a pension.
While Yee believes the government is unlikely to tinker with this transition to retirement strategy, he suggests it may be prudent to consider starting such a pension prior to the budget to ensure the opportunity to do so is not lost.
“Those who find themselves no longer needing the income can always turn off the pension at a later date,” he said.
“In addition, there is no maximum annual limit to account-based pensions, other than for those who are drawing a transition-to-retirement pension from their super funds, in which case the maximum annual limit is 10 per cent. Taking an extra sum out of super in pension payments may be a worthwhile strategy for some this financial year.”
* Professional Planner was contacted by Minister Bill Shorten’s office after publishing this article, with a spokesperson confirming that there will be no further changes to superannuation announced in the upcoming budget.
