On July 1, 2017 the Australian Government rolled out major superannuation reforms.
The changes were put in place in an effort to improve the fairness, sustainability, flexibility and integrity of the Australian superannuation system.
Recent research from Morgans Financial reveals that there are still many people who remain unaware of these changes and could be missing out on financial opportunities or alternatively, be at risk of disadvantage from the negative changes.
Michael Sheridan, adviser with Morgans Port Macquarie, recently shared insight into some of the major effects that these Super changes were having on Australian households and businesses.
“These are the most significant changes to our superannuation system in a decade. There are many opportunities for investors but the rules are complex and fraught with danger,” said Mr Sheridan.
“An example of one change that could result in a positive outcome is that contributions to super can now be tax deductible regardless of being self-employed or an employee (up to certain limits) and this can really help when developing tax effective financial strategy.”
“Another positive is the full ‘Spouse Super Contribution Tax Offset’ is now available if the spouse earns less than $37,000 (this was previously $10,800). This rebate can provide a tax saving of up to $540.”
On the negative side, the $1.6m transfer balance cap limits how much a person can transfer to pension phase in super. This has created increased administration and reporting issues for Self-Managed Superannuation Funds (SMSF’s) and has significant implications for many common tax planning strategies.
“Most people are unaware that this rule change can lead to unintended estate planning outcomes – effected retirees really need to check the interaction of their super funds, wills and other estate planning mechanisms,” Mr Sheridan said.
A particularly concerning outcome of the Superannuation reforms has meant that people who had to restructure their super pensions due to the $1.6m rule have been given some transitional relief on the CGT effects that may occur because of the changes.
“Unfortunately this is proving a nightmare in reality as SMSF auditors are allegedly reporting a large percentage of SMSF returns received so far are incorrect.”
Mr Sheridan encourages that people seek professional advice around this matter to ensure they are maximising any financial opportunities that may be available to them and to safeguard themselves from making costly errors in the administration of this complex area.