Don't complicate superannuation contribution caps: OnePath

11 August 2011
| By Andrew Tsanadis |
image
image
expand image

The best way to deal with clients when it comes to confusion over superannuation contribution caps is to keep it simple, according to OnePath national technical manager Graeme Colley.

Presenting OnePath's top investment and tax strategies for the 2012 financial year in Sydney yesterday, Colley said it's often the simple approaches that work best for financial planners to provide clients with the right advice.

'The use-by date from some strategies has expired, but new approaches are appearing in the dawn of the new financial year,' he said.

According to Colley, one of the difficulties facing financial specialists is a misunderstanding of contribution caps on superannuation funds.

It's a misunderstanding that allows clients to fall into the trap of unwanted tax on their final super payout.

'What we're seeing in many financial practices is that clients end up paying excessive contribution tax simply because they've gotten wrong advice,' he said

Currently, the non-concessional contribution (NCC) cap is placed at $150,000 per year, but Colley said many clients aren't aware that unless they make it clear to the tax office that the extra contributions being made to their super fund aren't an NCC, they may have to pay an excessive contribution tax.

Late reporting of excessive NCCs is another issue that may result in a client being heavily taxed once they hit retirement.

'Once the contribution has been paid, in most cases you won't be able to get it back from the tax office,' Colley said.

'One way members can reduce their super tax is by simply changing the title of their extra contributions from non-concessional to concessional in their tax notice.'

Another issue raised at the briefing was the need for clients to be aware of the difference in insurance premiums when consolidating super, particularly when it comes to issues of cover.

'It may be that while you were covered for total and permanent disability in one fund, you may either not be covered in the other, or may be covered for considerably less' Colley said.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest developments in Super Review! Anytime, Anywhere!

Grant Banner

From my perspective, 40- 50% of people are likely going to be deeply unhappy about how long they actually live. ...

10 months 2 weeks ago
Kevin Gorman

Super director remuneration ...

10 months 3 weeks ago
Anthony Asher

No doubt true, but most of it is still because over 45’s have been upgrading their houses with 30 year mortgages. Money ...

10 months 3 weeks ago

The fund’s inaugural chief retirement officer is looking to establish a new venture. ...

4 hours 45 minutes ago

The sovereign wealth fund remains cautious of the impact of high inflation as it announces a strong return in its latest update....

22 hours 49 minutes ago

In this latest edition, Anna Shelley, CIO at AMP, shares the fund’s approach to current market conditions and where it continues to uncover key opportunities....

23 hours 53 minutes ago