Super reforms | don’t miss out on providing advice to your clients prior to 30 June 2017| April 2017 Therefore, it is imperative that your clients review their current position to ensure they can make the most of the current superannuation system prior to 30 June 2017. This leaves only 2 months for review and implementation of any strategies prior to 1 July 2017. Time is running out.
As an advisor or tax agent, it is important to note that the changes will affect all clients who are:
- Contributing to superannuation;
- in receipt of Account Based Pensions (ABP) or Transition to Retirement Income Streams (TRIS) regardless of their superannuation member balance.
Clients in receipt of ABPs will:
- Need to consider whether their current fund and income stream is adequate. All clients in receipt of ABPs will have their ABP account balances recorded as a credit against the $1.6M pension cap as at 1 July 2017. If the client intends to roll over the funds to another super structure, they could lose out on quarantined tax exempt pension assets depending on the value of the commutation.
- For those with balances over $1.6M, whether they take advantage of the CGT relief being extended to assets that have to be rolled out of pension phase to accumulation. These rules are complex and action for many will be required in the 2016/17 financial year to ensure their fund is structured in such a way to place them in the best position possible.
All clients in receipt of TRIS will need to review whether they should continue with their TRIS from 1 July 2017 with the loss of tax exemption on earnings supporting these pensions. These clients will also need to assess whether they take advantage of the CGT relief on assets required to be rolled out to the standard superannuation tax concessional environment.
Prior to 30 June 2017 most clients will need to consider:
- The new $1.6 million transfer balance cap, which places a limit on the amount an individual can hold in the tax-free retirement phase from 1 July 2017 and whether they should take up CGT relief
- Removing the tax-free treatment of assets that support a transition to retirement income stream and whether to take up CGT relief.
- Review of superannuation death benefits. Under the new rules, some clients will have no option but to cash out death benefits from their spouses or tax dependents.
- The lower contribution caps for all taxpayers applying from 1 July 2017. The new caps will be:
o Concessional contributions (pre-tax contributions) — $25,000 per year,
o Non-concessional contributions (after-tax contributions) — $100,000 per year.
- This financial year will be the last year for eligible members that can contribute the three year bring forward amount of $540,000 to super. This also extends to clients looking at rebalancing or tax exempting strategies prior to 30 June 2017. These changes will require most clients to adjust their investment, contribution, pension and estate planning strategies prior to 1 July 2017.
- Clients for over $1.6M total superannuation balances from 1 July 2017 will be prohibited from making any further non-concessional contributions to super. These clients need to consider their options prior to 30 June 2017.
To provide advice under the new superannuation licensing regime, any personal recommendations need to be provided care of a statement of advice (SOA). Considering much of the super reform advice is structural advice you need to ensure that you have an advisor who is able to provide this type of specialised advice and prepared to provide one off advice if needed. Proper advice delivered care of an SOA can take up to 2 to 3 weeks to provide. So it is important that your clients who are affected are having their positions reviewed now.
How we can help?
Partners Wealth Group is actively working with our accounting clients to:
- Assist with alerts to your clients concerning the changes,
- Hold review meetings with clients to run through the impact and advice requirements under the new changes,
- With 30 June 2017 just around the corner, there is little time to act. Contact your Partners Wealth Group advisor on 1800 333 143 now, to discuss how we can help.