More people are likely to benefit than be hurt by the revisions to the proposed changes to super announced by the Federal Government last week.
Yet working with senior executives on a daily basis has revealed that many are:
- failing to make the most of the superannuation rules
- not utilising Family Trusts and other structures as an accompaniment to their super fund
- not leveraging their current high income to prepare for their retirement.
Despite the changes super remains a very attractive solution for those looking to maximise the money they are currently making and the opportunities they have.
What has changed?
The most significant revision announced by the government last week is its intent not to proceed with the proposed $500,000 lifetime cap on non-concessional (or after tax) contributions.
When originally proposed in the 2016 Budget, this measure had the potential to deny many Australians the ability to make any further voluntary after tax contribution to super in order to fund future retirement plans.
This was due to the need to count any and all non-concessional contributions made from 1 July 2007 when calculating how much of the cap remained. Many would have no capacity left to contribute.
3 ways to make the most of the revised Super changes:
- One-off opportunity to contribute – for those with excess money to deploy, the removal of the proposed life time cap has re-opened the opportunity to contribute to super. In the lead up to new rules applying from 1 July 2017, there may be an opportunity for those under 65 years of age to contribute $540,000 each for yourself and your spouse.
- Up to $3.2 million in tax free assets in super – by ensuring that both spouses have super (regardless of whether they are both working), a couple can benefit by having a combined total of $3.2 million in tax free assets in the superannuation system (comprising $1.6 million each).
- Spousal concessional contributions to super – where a spouse is not working, the couple can benefit from generating an income in the non-working spouse’s name. The non-working spouse can then make concessional (pre tax) contributions to super. Options to explore include investing income generating assets in the spouse’s name or setting up a discretionary family trust (known as a Family Trust) that can direct income to the spouse.
We have found that clients who use a combination of a super fund and a Family Trust have the best outcome over the longer term – as they are able to make the most of certainty, flexibility and tax effectiveness.
It is important to remember that the Federal Government’s revised changes need to be accepted by the Parliament. Legislation to give effect to the changes is expected to be introduced by the end of 2016.
It is also important to remember that the rules around contributing to super are complex and any proposed or actual changes may or may not apply to you.
We offer A Second Opinion for high income earners who want an objective, high level review of your current financial plans; to ensure that your super plans truly meet your needs and your goals in an environment of uncertainty, increased restrictions and government meddling. Click here to request a confidential discussion.
* Please note this is general advice only; click here to read our Disclaimer.