Peter Vickers, Chartered Accountant
The government’s recent changes to super only commence on 1st July 2017. The major impact is going to be on those people with more than $1.6 million in all their super funds. In most cases this will just end up as an increase in the amount of tax that has to be paid and there is nothing that needs to be done. However in some cases some interesting planning strategies are available. These depend on your age and the age of your partner and other family members and their fund balances.
Some ideas are:
Contribute to the partner with less than $1.6m. Pay out the amount above $1.6m and re-contribute for another family member. Bring forward the capital gain on the assets or defer till when the assets are sold.
This new transfer balance cap will also affect your estate planning. Pensions tended to be set up as reversionary to the remaining spouse on death. This kept the money in the super fund at a zero rate of tax. This could now lead to you exceeding the $1.6m cap. The reversionary pension is notionally added to the existing pension 12 months after death. The planning procedure is to move the excess from the existing pension to accumulation phase so that when the reversionary amount is added, the total is below the $1.6m.
If you are over the $1.6m cap, then there is a limit on non-concessional contributions of $500 000
When the last of a couple die, the children will be up for 17 per cent tax on the money they receive. Again planning is required to avoid this.
And, it is not all about saving tax. If you have what we now call a ‘blended’ family then even greater care needs to be taken to sort out your estate issues.
So please get good advice so you don’t lose money or cause family discord!