Significant changes to contribution limits to super could prove a challenge

Significant changes to contribution limits to super could prove a challenge

The changes to super and tax laws proposed in this year’s federal budget, then revised and adjusted by the government in September, have been passed through Parliament and are mostly due to take effect from July 1, 2017. That means that you have until July to consider if there is any action you should take to make the most of current super rules or to comply with the upcoming changes.
We take a look at some of the key changes in the table below.
Significant super reforms

Now New*
No limit on funds moved into tax-free pension phase. $1.6 million transfer balance cap on super transferred to the tax-free retirement income phase.
You can contribute $180,000 of after-tax earnings to super each year (or $540,000 for those eligible to bring forward two years of contributions). Reduction in annual after-tax contributions cap to $100,000 (or $300,000 if bringing two years of contributions forward, if eligible). Clients with balances of $1.6 million or more, just before the start of the financial year, cannot make after-tax contributions.
Annual concessional (before-tax) contributions limit of $30,000 (or $35,000 if aged 50 or over by June 30, 2017). Reduction in the annual concessional (before–tax) contributions cap to $25,000. This applies regardless of age.
Unused concessional contributions caps are lost. Catch-up concessional contributions may be available for those with balances less than $500,000 just before the start of the financial year.
If income from employment is less than 10% of total income, you can claim a tax deduction for personal super contributions. Clients under age 65; or age 65-74 who satisfy the work test, can claim a tax deduction for personal super contributions.
Additional 15% tax on certain concessional contributions if your adjusted income exceeds $300,000. Additional 15% tax on certain concessional contributions, if your adjusted income exceeds $250,000.
Earnings on transition-to-retirement super pensions are tax free. No earnings tax exemption on transition-to-retirement super pensions. Earnings will be taxed at up to 15%.
Anti-detriment payments may apply on certain lump sum death benefits (generally a notional refund of contributions tax to be paid on death). No anti-detriment payments on lump sum super death benefits (no refund of contributions tax paid on death).
Offset for contributions to spouse’s super (if spouse earns under $13,800). Offset for contributions to spouse’s super (if spouse earns under $40,000).
The ‘low-income super contribution’ refunds tax (up to $500) on concessional contributions for those earning $37,000 or less. Introduction of the low-income super tax offset (effectively a continuation of the low income super contribution).

*These measures start July 1, 2017, except for the catch-up concessional contribution measure which starts July 1, 2018.
If you are concerned about how you may be impacted, now is the time to talk to your financial adviser so you have time to review your superannuation and retirement plan, before the changes take effect.
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Want to know more? To find out how we could help you, contact our office today and make an appointment with one of our professional financial advisers on 07 5593 0855.

Insurance 101: what do you need and when?

Insurance 101: what do you need and when?

There is a dizzying array of types of insurance available in Australia, although the average person probably won’t be needing aircraft or defamation insurance. But like death and taxes, the majority of people won’t be able to avoid getting at least some of the basic types of insurance such as motor vehicle, house and contents and health cover.

Protect your Assets from Expensive Mistakes

Protect your Assets from Expensive Mistakes

Protecting yourself from frivolous creditors and lawsuits is becoming an increasingly common concern. Here we outline some of the ways you can insulate your assets.

Check your insurances

Liability insurance is a must if you want to safeguard your assets in the event that you need to pay compensation. Lawsuits can arise for a range of reasons – from personal injury to financial loss resulting from any products or services you provide.
You can choose from three key types of cover – public liability insurance, professional indemnity insurance and product liability insurance. Seek advice from your financial adviser or insurance broker to determine which, if any, of these are suitable for you.

Separate business and personal assets

If you are a business owner and your family home is held in your name, it may be at risk from bankruptcy or litigation procedures.
One way to protect your home is to give majority ownership of the home to a person who is not an owner of the business, typically a spouse. The business owner generally retains some interest in the home, however, to ensure the asset is not dealt with without his or her authority. It is also important that the spouse does not having any dealings in the business, for example guaranteeing loans. You should also know that the trustee in bankruptcy will consider other factors to determine the bankrupt’s interest in the house and if you transfer your home to your spouse for no consideration or for less than its value, before bankruptcy, the trustee in bankruptcy can in some cases reverse the transaction.

Create a trust

Trusts can be beneficial asset protection strategies, as you are transferring ownership of an asset away from yourself and into a legal structure, so the asset is not yours to lose in the event you are sued.
Anthony Lieu, Lawyer at Legal Vision, says trusts also provide a degree of flexibility.
“Just as each family is different, each discretionary or family trust is also different. Trusts generally take their rules and operation from the trust deed, so each trust will have to abide by a different set of rules,” Lieu says.

Summary

Structuring your assets the right way is one of the most important things you can do to protect your hard-earned wealth. As these strategies can be complex, always seek the help of a qualified professional such as your financial planner, lawyer or accountant.

Do you have a valid Will?

Do you have a valid Will?

Creating a valid will is one of the most important things you can do to protect your loved ones. Here we explain how to go about it.

infographic_do-you-have-a-valid-will

Seek legal advice

While DIY will kits can seem like an easy and inexpensive way to make a will, they can be fraught with pitfalls.
Your affairs are probably more complex than you think – your family home, business assets, super, investments and belongings. Some of things are covered by a will and some aren’t!  Having a properly drawn up will helps to determine who gets what and can save your family time and stress when you are gone.
Your lawyer or financial planner will also be able to provide insights into how to best structure your will, both to protect assets and to minimise tax. Examples include setting up a testamentary trust to provide for minors or protecting your estate from creditors and making binding nominations for your superannuation funds.

Safeguard your children’s future

Probably one of the most important reasons to make a will is to ensure any dependent children are well cared for should the worst happen.
Sydney wills, probate and estate specialist, Graeme Heckenburg of Heckenberg Lawyers, says generally parents should make separate rather than joint wills, as they are likely to die at different times.
Heckenburg says a will should also appoint a guardian to take care of the day to day living and housing arrangements for the children and a trustee to execute the will and make any financial decisions. This can be one person or two different people.
“If you don’t appoint a guardian and there are young children, ultimately the decision will be made by the Guardianship Tribunal [in NSW]. If the guardianship is contested, the matter could even end up in the Supreme Court,” he says.

Keep your will updated

Once you have made a will, don’t leave it in a drawer gathering dust. Circumstances change over time change, so ensure your will reflects your current situation, particularly if your spouse has died, you have married or divorced or you have become a parent.

Get your finances ready for this year's changes!

Get your finances ready for this year's changes!

With many changes coming into effect this year – and more reforms being suggested – now is a great time to get your finances organised so you’re prepared.

Changes to the Age Pension

Changes to the Age Pension assets test kicked in at the beginning of January 2017.
The good news is that the threshold has been increased, so you can now own more assets before your pension is affected. But the penalty for going over the threshold has also increased. For every $1,000 of assets you have above the new threshold, your pension will be reduced by $3 – double what it used to be.
The asset test threshold varies depending on your marital status and whether you own a home, so it’s best to talk to your adviser about the changes.

The age of entitlement

A Grattan Institute report titled Age of entitlement: age-based tax breaks published in November last year suggested that making several changes to the entitlements seniors receive could save the federal government $1 billion a year.
The institute recommended winding back:

  • the seniors and pensioners tax offset (SAPTO)
  • the Medicare levy income threshold for seniors
  • the private health insurance rebate for seniors, so they receive the same rebate as younger Australians.

The recommendations focus on retirees who have incomes at taxable levels. These may be retirees who are self‑funded or on a part Age Pension. The changes would have little effect on seniors who receive a full Age Pension. While these are only recommendations at this stage, you may benefit most from preparing early.

Stay informed and plan ahead

Staying up to date about any changes to superannuation and seniors’ entitlements – locked in or potential – may help put you one step ahead. Regularly reviewing your retirement plan to ensure it can adapt to changes is an excellent way to keep your retirement strategy resilient. Talking to a trusted financial adviser may help you achieve that peace of mind, so feel free to give us a call.

https://learn.thryv.com/hc/en-us/articles/360002070591-Sales-Payments-Getting-Started