Superfund Actions ahead of potential budget changes:
With the budget date looming, there have been a number of predictions around likely changes to superannuation. Some members may wish to take action before budget night to ensure that they are not affected by any changes.
1. Reductions in the non-concessional contributions cap and greater restrictions placed around the bring forward rules in the future. Those who are making large contributions this year might choose to do so before budget night
It's entirely legal to borrow money to make a personal super contribution, but the interest is not tax deductible and security from personal assets would be required.
Long-term borrowing in this way is not tax effective, but short term borrowing can assist in getting funds into super ahead of any budget changes. It would allow a contribution to be made quickly if the personal cash is not yet available.
Clients who want to withdraw large amounts of taxable money and make non-concessional contributions should also act before budget night on 3 May. (Traditional Withdraw and recontribute strategy)
2. Transition to retirement pensions may also be reined in, particularly for those who start pensions without any change to their working arrangements.
The original purpose of transition to retirement pensions was to ease the transition from full- time work to retirement by allowing superannuation pensions to start before full retirement, in order to fill the income gap created when someone winds back to part-time.
However, they were legislated by simply allowing anyone over their "preservation age" to start one, regardless of whether or not anything had actually changed in their work life.
The outcome was an excellent tax planning strategy – many people over 55, the preservation age until it increased to 56 this year, made no changes to their work arrangements, started a pension and used the extra income to increase their salary sacrifice superannuation contributions.
Industry experts have mooted that it is likely that transition to retirement pensions will be pushed out to a later age or linked to personal circumstances.
The gradual increase in preservation age has already started to push out the earliest starting date for many looking to start transition to retirement pension.
This budget is a possible time where the eligibility rules might be reined in. It would be politically easier than many other changes to super.
It is the kind of change that could be introduced with effect from budget night without major complexity in the law. If you are over the age of 56 it may be worth considering commencing a Transition to retirement pension and increasing your concessional contributions to Super.
This has a number of benefits both inside and out of Super. Should you wish to discuss these strategies please contact Gary or Karen on 5539 2933.
Please do not hesitate to contact us to discuss any of the above.
Please note we have moved to the following address:
92 Ashmore Road Bundall QLD 4217
PO Box 5143, Gold Coast MC QLD 9726
Phone: (07) 5538 2933 | Fax: (07) 5531 6555