Budget 2016 – Superannuation

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Budget 2016 – Superannuation

Last week, in his budget speech, Federal Treasure Scott Morrison put forward a number of proposed changes to superannuation.

Here is a brief roundup of what the proposal are.

  • Lifetime cap on non-concessional contributions
  • Concessional contributions cap reduced
  • 30% tax on super for high income earners
  • Tax free super balances capped at $1.6m
  • Tax deductions on super contributions expanded

You can see by the dates to take effect only the lifetime cap on non-concessional contributions has an immediate impact.

If you are planning to make a non-concessional contribution to your super fund prior to 30 June 2016 and have made previous contributions of this nature please contact us to ensure you don’t breech this cap.

Regarding the other changes they will not take effect until 1 July 2017, so there is plenty of time to plan.

Remember, proposals are not set in stone and could change as legislation passes through parliament.

Once these changes are passed we recommend you strategically review how these changes impact your current circumstances.

If you require assistance with this do not hesitate to contact myself or Susan Stainwald.

Sunshine Coast: 07 5474 8955

JOHN SIEMON

John Siemon

(Partner)


Lifetime cap on non – concessional contributions

Applies to all non – concessional contributions made on or after 1 July 2007
Date of effect: 7.30 pm (AEST) on 3 May 2016

  • The current contributions cap will reduce to $25,000 from 1 July 2017.

A lifetime $500,000 non-concessional contributions cap will be introduced from Budget night.

The current system of annual non-concessional contributions of up to $180,000 per year (or $540,000 every three years for individuals aged under 65), will be replaced with this new lifetime cap.

The lifetime cap will take into account all non-concessional contributions made on or after 1 July 2007 and will commence at 7.30 pm (AEST) on 3 May 2016.  Contributions made before commencement will not result in an excess.  However, excess contributions made after commencement will need to be removed or will be subject to penalty tax.  The cap will be indexed to average weekly ordinary time earnings.

The lifetime cap is available up to age 74.


 Concessional contributions cap reduced

Date of effect: 1 July 2017

  • The current concessional contributions cap will reduce to $25,000 from 1 July 2017.

Age: Under 50
Current concessional gap: $30,000
From 1 July 2017: $25,000

Age: 50 & over
Current concessional gap: $35,000
From 1 July 2017: $25,000


30% tax on super for high income earners

Date of effect: 1 July 2017

At present, individuals with combined income and superannuation contributions of more than $300,000 pay an additional  contributions tax of 15% on concessional contributions. From 1 July 2017, this income threshold will reduce to $250,000.


Tax free super balances capped at $1.6m

Date of effect: 1 July 2017

A new $1.6 million cap will apply to how much can be transferred into a retirement phase account. Earnings on amounts within the account will continue to be tax-free.  Transfers in excess of this $1.6 million cap (including earnings on these excess transferred amounts) will be taxed in a similar way to the tax treatment that applies to excess non-concessional contributions.

Where an individual accumulates amounts in excess of $1.6 million, they will be able to maintain this excess amount in an accumulation phase account (where earnings will be taxed at the concessional rate of 15%).

Members already in the retirement phase with balances above $1.6 million will be required to reduce their retirement balance to $1.6 million by 1 July 2017.  Excess balances for these members may be converted to superannuation accumulation phase accounts.

The amount of cap space remaining for a member seeking to make more than one transfer into a retirement phase account will be determined by apportionment.


Tax deductions on super contributions expanded

Date of effect: 1 July 2017

All individuals up to age 75 will be able to claim an income tax deduction for personal superannuation contributions from 1 July 2017.  This effectively allows all individuals, regardless of their employment circumstances, to make concessional superannuation contributions up to the concessional cap – partially self employed, employees whose employers don’t offer salary sacrifice arrangements, etc.This is a sensible move, which means that it will no longer be necessary for individuals to pass a 10% test in order to be able to claim a deduction for personal superannuation contributions.  Currently, an individual can only claim a deduction for personal contributions where less than 10% of their adjusted income for the year relates to employment activities.  The 10% test can make it difficult for people who have started their own business to make deductible superannuation contributions where they also have part-time work.

(Source: The Knowledge Shop)

I trust my Accountant: why can’t they advise me about an SMSF?

I trust my Accountant: why can’t they advise me about an SMSF?

Written for McAdam Siemon Pty Ltd, by Eric Walters FCPA(FPS) FAICD

 

 

The short answer is – they can, BUT….

Over the past several years, particularly following the Global Financial Crisis (also popularly referred to as: the GFC, the Great Recession, the global credit crunch), the rules and regulations around the provision of advice in relation to financial products have been tightened somewhat: and the regulations dealing with the necessary qualifications and experience of those delivering such advice have resulted in changes in licensing for Accountants as well as increased regulation for financial planners generally.

Whilst the previous provisions (the ‘Accountants’ exemption’) were more often recognised in the breach (‘ignored’) than complied with, the new rules which come into full effect on 1 July 2016 are far more onerous on accountants. Hence it is likely that there will be some reluctance on the part of most accountants to provide even the most basic of advice about whether to start, or indeed to continue, a self-managed superannuation fund (an SMSF) – once they understand how these new rules apply.

Under the Accountants’ exemption, accountants could advise about forming an SMSF – but could not advise about rolling existing superannuation accounts into that SMSF; nor about how to invest the contributions received by the SMSF.

In a change that took effect on 1 July 2014, this exemption is being phased out in favour of a limited licensing regime: accountants who extend their already broad range of expertise to qualify for the granting of the limited licence will need to undertake additional study – and maintain their new skills and knowledge with ongoing professional education.

Under the limited licence, accountants will be able to (amongst a limited range of compliance and associated ‘administrative’ matters) –

  • Advise on the establishment of an SMSF;
  • Advise on the formulation of an Investment Strategy;
  • Provide general information about investment assets – but NOT any specific shares, property of managed fund products; and
  • Provide general information about the various types of personal life insurance – but NOT about any particular insurance company’s product offering.

….and so, in view of the onerous conditions applicable to attaining the limited licence; and the justifiable approach of ASIC in supervising this rapidly expanding area of their responsibility – it is not surprising that many accountancy practices elect to outsource their SMSF advisory tasks to comprehensively-licensed financial planners.

Our position

McAdam Siemon Pty Ltd has operated under the Accountants’ exemption in the past, but since the incorporation of SmartChoice SMSF Administrators Pty Ltd (‘SmartChoice’, as an associated entity of the accountancy practice), refers all requests for advice in relation to SMSFs and their administration to that company.

One of the partners, John Siemon, is a director of SmartChoice: he is qualified and holds a limited advice licence. John will be supported by Susan Stainwald (who works in SmartChoice) who is currently undertaking the requisite licensing process. Under this arrangement, investment advice is often referred to financial planning specialists as appropriate to the circumstances of each SMSF.

ASIC: the Regulator for Financial Advice participants

Whilst the administration compliance of SMSFs is monitored by the ATO, financial planning advice generally is regulated by ASIC. As SMSFs are considered a financial product, advisers dealing with such an entity – whether accountants holding a limited advice license, or comprehensively-licensed financial planners, must be mindful of ASIC’s requirements in administering the legislation and regulations prescribed by the Federal Parliament.

In a couple of recent information papers (INFO 205 and INFO 206), ASIC has provided detail as to what they will be checking on in relation to advice that is provided to trustees of SMSFs, regardless of the license status of the person providing the advice: respectively they deal with the disclosure of ‘risks’ and ‘costs’ to trustees and the members of SMSFs.

Summaries of the above-referenced Information Sheets are attached below: for full details – and for related reading on the ASIC website, refer to the following links: INFO205 and INFO206.

All of the matters covered by these Information Sheets from ASIC are able to be dealt with by a comprehensively – licenced financial planner and/ or by an Accountant holding a limited financial planning licence: the Accountants’ exemption will not allow the provision of such advice by an unlicensed Accountant.

Review of your SMSF decision

If you have been considering either –

  • moving your superannuation accumulations into a self-managed environment, or
  • wanting to review the wisdom of continuing with your SMSF,

John Siemon, is a director of SmartChoice: he is qualified and holds a limited advice licence. John is supported by Susan Stainwald, who is currently undertaking the requisite licensing process. Under this arrangement, investment advice is often referred to financial planning specialists as appropriate to the circumstances of each SMSF.

Call our office on 1300 366 316 to make an appointment to meet with John to gather the information necessary to formulate advice on the matter:

Eric is a Director and Financial Planner at Continuum Financial Planners Pty Ltd: their website has articles on superannuation matters and SMSF particularly – click the link to access these.

 

DISCLAIMER: The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and any relevant product having regard to your objectives, financial situation and needs. In particular, you should seek appropriate financial advice and read relevant Product Disclosure Statements or other offer documents prior to acquiring any financial product.

 

 

Superstream Update

Superstream update

SuperStream is a government reform aimed at improving the efficiency of the superannuation system.

Under SuperStream, employers must report super contributions on behalf of their employees by submitting data and payment details electronically in accordance with the SuperStream standard. All superannuation funds must receive contribution details electronically in accordance with this standard.

The new rules apply to employers that have 20 or more employees from 1 July, 2014.

Employers that have less than 20 employees have until 1 July, 2015 to comply with the new regulations.

It is the employers’ responsibility to collect the required information and ensure that their payroll software can cater for SuperStream.

Employers will have to:

  1. Make contributions electronically to employees’ nominated super funds, and
  2. Provide details of the payment transaction, e.g. employee name, TFN and super fund member number electronically to the relevant super fund via an electronic service address

Super funds will need to provide the below information to the employer:

  1. ABN
  2. Bank account details where the contributions should be paid to, and
  3. Electronic service address (ESA)
  4. Bank account details where the contributions should be paid to

Please contact the team at McAdam Siemon if you would like further information regarding Superstream.