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Tax strategy options open up via catch-up contributions
Catch-up superannuation contributions have just become a staple of tax management strategies under the changes which came into effect on 1 July, according to wealthdigital technical manager, Rob Lavery.
Pointing to the changed arrangements under which the unused portion of a previous year’s concessional contribution cap can be carried forward, Lavery said the strategic opportunities were “immense”.
“Capital Gains Tax (CGT) bills can be controlled by deductions, high taxable incomes can be reduced and bonuses can be added to super tax-effectively,” he said. “Catch-up contributions just became a staple of tax-management strategies.”
However, he said the biggest change which came into effect from 1 July was that lifetime income streams purchased after that date were subject to different social security rules.
He pointed to asset test concessions of 40 per cent up to the owner’s 85th birthday, and 70 per cent thereafter, as well as an income test concession of 40 per cent.
He said these represented attractive propositions for some clients.
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The future of superannuation policy remains uncertain, with further reforms potentially on the horizon as the Albanese government seeks to curb the use of superannuation as a bequest vehicle.
Superannuation funds will have two options for charging fees for the advice provided by the new class of adviser.
The proposed reforms have been described as a key step towards delivering better products and retirement experiences for members, with many noting financial advice remains the “urgent missing piece” of the puzzle.
APRA’s latest data has revealed that superannuation funds spent $1.3 billion on advice fees, with the vast majority sent to external financial advisers.
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