The superannuation changes have been the talking points the past few days and many people may now be thinking, what’s next? What opportunities do I have to understand before 1 July 2017.
Bryan Ashenden wrote for the Financial Review, stating, rather than being faced with the uncertainty, right now you actually have a period of certainty, stating, there are almost seven months to prepare and take action with the the knowledge about how super will operate into the future.
He went on to say, “as a starting point, focus on those matters that have an impact this financial year.
“Take the new rules about non-concessional (or after-tax) contributions as an example, they don’t apply until July 1, 2017.”
It is important to note that there is not a lot you can do at this point about the new non-concessional contribution rules at the moment as they won’t apply until the middle of next year, but to remember that if you do qualify for the current contribution levels of up to $540,000 yearly (and can make this sort of contribution), to make it before 1 July 2017.
Of course, as Bryan says, not everyone has a lazy $540,000 lying around to contribute to super, but if you have a self-managed super fund (SMSF), you also need to remember what some of your other options are. In addition to cash contributions, you can make in-specie asset contributions.
What he is suggesting is that you can transfer certain assets from your own name into that of your SMSF. Shares and managed funds are among the most commonly transferred assets, but if you owned a commercial property in your own name, such as one you use in your own business, then you could consider transferring it (or a share of it) to your SMSF. Do remember, super rules work on an individual basis, so a couple could potentially transfer a $1 million property to their SMSF if they meet all the right conditions. It is always best to discuss with your financial advisor.
The other significant change to super that has many people concerned is the $1.6 million limitation that will apply from July for super pensions. Again, remember that this limit is per person, so if you are in an SMSF with more than $1.6 million total balance, you don’t need to be concerned – it’s a question of how much each member has.
If you are lucky enough to have or potentially get to a position of having more than $1.6 million in super yourself, all these new rules say is that the excess needs to stay in the so-called accumulation phase. It can’t be transferred to a pension account. Being in an accumulation account, it will be subject to the standard 15 per cent tax rate in super, but that’s really the only impact.
Of course, it would be good if things were as “simple” as that, but there are a number of other considerations. If you have a transition to retirement pension, or you have more than $1.6 million in a pension, there is an ability to reset the cost bases of underlying assets in your SMSF to their market value, and essentially reduce (or eliminate) current unrealised gains.
While there are certain steps to take to do this, including deciding when, notification about the resetting of the cost base must accompany the 2016-17 tax return for your SMSF. It’s important to ensure the tax agent to your fund is aware of this so it is done right.
There is no guarantee that the super rules won’t change again at some point in the future, but it feels like we may have a couple of years ahead of us without substantive changes. If you still think that super is uncertain, then perhaps it’s important to go back to the fundamentals.
The purpose of super is about providing a mechanism for people to save towards their own retirement. Super always has been, and I suspect always will be, a concessionally taxed environment to encourage this. There is nothing on the horizon that can take away from the certainty that a well-planned approach to super can help Australians towards a more comfortable retirement.
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