Countdown to Super Deadline

Countdown to Super Deadline

The clock is ticking for investors who want to take advantage of the more generous tax concessions available in super this financial year. As of July 1, new rules come into effect that will reduce contribution limits.

Until then, individuals under 65 can make a non-concessional (after-tax) contribution of up to $540,000 under the bring-forward rule which allows you to bring forward two years’ contributions. That means couples can put up to $1.08 million into super while the opportunity lasts. 

From July 1, the cap on non-concessional contributions will reduce from $180,000 a year to $100,000 or $300,000 under the bring forward rule.

But this is only one of the wide-ranging super changes you need to plan for if you want to take full advantage of the existing rules.i

Concessional contribution caps

Tighter rules will also apply to tax-deductible concessional contributions. This financial year contributions of up to $35,000 are permitted for people aged 50 and over, or $30,000 for those under 50. But from July 1, the limit will be $25,000 for everyone. These limits include the 9.5 per cent compulsory super contributions made by your employer.

These changes to the concessional and non-concessional caps provide an incentive to take full advantage of the existing rules if you can, while you can. This is especially so if you have an opportunity to make a large non-concessional contribution funded by an inheritance, the sale of a property or other assets.

Before you bring forward a sale or take any other action, be aware that there could be tax or other considerations to take into account so it’s important to get advice.

There is an added incentive for people who already have large account balances to act soon though. That’s because from July 1 non-concessional contributions won’t be allowed if your super balance is higher than $1.6 million.

Pension account limits

Super has two phases, an accumulation phase where you grow your retirement savings in a concessional tax environment, and pension phase where no tax is paid on earnings or withdrawals. Under existing rules, there are no limits on the amount of money you can hold in super. But from July 1, a maximum of $1.6 million will be allowed to be held by a retiree in a tax-free pension account. 

Non-concessional contributions before July 1 that push the balance above $1.6 million will be able to stay in super. But individuals who have more than $1.6 million in a pension account on that date will be required to put the excess back into an accumulation account where earnings are taxed at 15 per cent, or take the excess out of super entirely.

Transition to retirement tax changes

Earnings in a transition to retirement (TTR) pension will lose their tax exemption from July 1. All earnings on income and capital gains will be taxed at the concessional super rate of 15 per cent. Capital gains on assets held for longer than 12 months will be taxed at the discount rate of 10 per cent.

If you are one of the many people using a TTR strategy in combination with salary sacrifice to boost your super, the loss of the tax exemption may reduce the total amount you accumulate for retirement. While TTR pensions are still attractive, you may like to talk to us about additional ways to boost your retirement savings.

High earners to pay more tax

Individuals who earn $300,000 or more currently pay tax at a rate of 30 per cent on their super contributions, instead of the 15 per cent everyone else pays. But from July 1, the higher tax rate will apply to incomes of $250,000 or more.

If you expect to earn between $250,000 and $300,000 next financial year, you may want to make the most of your allowable concessional contributions before June 30.

Issues for SMSFs

The new rules will create some headaches for self-managed super funds. For starters, SMSFs won’t be able to segregate assets between pension and accumulation accounts.

SMSFs can, however, reset the cost base of assets that are reallocated from the retirement phase to the accumulation phase before July 1. The good news is that any tax-free capital gains can be locked in, with capital gains tax only payable on gains made after the reset. The bad news is that capital losses can’t be carried forward, so it’s important to value all fund assets before the deadline.

The reforms that will be ushered in on July 1 amount to the biggest shake-up of super in a decade. While we have covered most of the major changes in this article, there are other measures that could affect your retirement planning.

As always, if you would like to discuss how the changes might affect you and what you can do to prepare, don’t hesitate to call.

Things to do before June 30:

• Make the most of the existing contribution rules to maximise the amount you hold in the tax-efficient super environment.

• If you have more than $1.6 million in a pension account, remove the excess to avoid potential penalties.

• Be careful to plan the timing of contributions with other caps and account balances.

• If you have a self-managed super fund, review and value assets to make sure you don’t exceed your caps.

• Contact us to make the most of any opportunities before June 30 and to prepare for the changes ahead.


Getting your balance right in 2017

Getting your balance right in 2017

“We should catch up more often!” “Ooh, I could get used to this!” “I’ve been meaning to do that more often” “Mmm, this is the life…”

Sound familiar? If you’ve ever said (or thought) the above, you’re not alone. It’s natural for the holidays to shape your ambitions for work/life balance in the year ahead. Unfortunately, the stats show for most the situation is less than ideal. The OECD Better Life Index ranks Australia a miserable 31 out of 38 countries for work/life balance. In late 2014, the Australia Institute found that only one in five workers are working the hours they would like to. Does this include you?
What does your ideal life look like?

The first step is working out what you want the ‘life’ part to look like.

Everyone’s values, commitments and drivers are different. Working out and acknowledging what you want from life is an important first step. You might want to spend time looking after an elderly relative, keeping an eye on kids or grandkids, or volunteering in your community. You may want to broaden your horizons by going back to study, or filling up the pages in your passport. It could be as simple as having enough hours in the day to shop for produce and cook a delicious meal from scratch. The important thing is to formulate your own vision.

Once you’ve worked out what you want, beyond just ‘more work/life balance’, it’s time to turn those wants into goals, and those goals into plans. And that starts with knowing how to cut down on the work side of it.
Finding more time for the good things in life

• Trying to cut down your hours? It might be a matter of working smarter, instead of just stacking on the hours. Try implementing one simple time management initiative at a time. Start by creating a to-do list at the start of each day.

• Feel like you’re at work even when you’re not in the office? Time to start setting some limits. Avoid taking calls and responding to emails out of hours.

• Don’t hoard your annual leave and save it up for one huge holiday every year. Take time off throughout the year; you’ll feel better in the long run.

• It doesn’t hurt to enquire about flexibility. Even if flexi-hours aren’t a standard policy where you work, you have the legal right to at least ask your employer.

• Working for yourself? It’s all too easy to pour all your (non-sleeping) time into your business, but try setting boundaries so that you’re not working 24/7. Making the aforementioned to-do list will help you feel better about stopping work for the day, when the only things left to do are less urgent tasks.
Things to consider

There’s a strong likelihood that your new work/life balance goal will throw up a few financial challenges. If you’re reducing your overall working hours, you’ll have less in your paycheque. Depending on your life stage, coping with this may mean getting smart with your household budget, developing a new income stream, or transitioning to retirement. It’s not just a matter of opportunity cost, either; the very thing you want to spend time on could become a growing line item on your expense list. Setting firm savings goals can help ensure you have enough to cover more frequent holidays, outings with friends and relatives, or that brand new set of golf clubs.

If you’re running your own business (or thinking about striking out on your own), the game changes altogether. You may have much more or much less flexibility to alter your working hours outside the 9-5, take on staff to cover your responsibilities, or work remotely. It could take some serious business strategy adjustment.

Seeing our clients achieving their lifestyle goals is what gets us out of bed in the morning. Make an appointment with us today and we’ll get you started with a financial plan that fits your new work/life goals.



4 easy tips for building a successful brand

4 easy tips for building a successful brand

Every successful company, large or small, has a strong brand. In fact, the most important and valuable asset of some of the largest companies in the world – Apple, Google and Coca-Cola – is their brand.
But you don’t need a massive marketing budget to build a successful brand. It can be done with just a few simple changes to the way you think about and operate your business.