Adviser focus shifting back to pre-pandemic strategies as COVID relief ends

“Most of the additional social security measures have ended as expected and advice priorities are once again on longer-term retirement planning and building wealth,” Mr Howard said.

“The most pressing issue for advisers is the proposed legislation regarding clients’ ability to make bring-forward non-concessional contributions into their super. Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 remains in the Senate, following proposed amendments which are yet to be debated.

“Importantly, it should be noted these proposed amendments are not in relation to the part of the legislation which changes the bring-forward age (from under 65 to under 67), but are additional proposals around employer contributions, concessional contribution limits, and COVID-19 early access integrity measures.

“While it is unlikely that the age increase will be opposed, nonetheless, the delay serves as a reminder to be cautious about providing clients with any advice outside of what is the law at the time.”

Mr Howard said the delay has resulted in advisers having to consider hypothetical scenarios, particularly for clients who are about to turn 67 years old.

“Currently, those clients would have a non-concessional limit of $100,000. Should the rules change, effective from 1 July 2020, as proposed, they may have a non-concessional limit of $300,000 — if their total super balance is below $1.4 million,” he said.

Indexation of super caps 

One of the biggest concerns for advisers that have been seen by the BT Technical team approaching the end of the financial year, is around the indexation of the transfer balance and super contributions more broadly.

Due to existing indexation, the general transfer balance cap will increase to $1.7 million from 1 July 2021 (up from $1.6 million).

“There’s confusion around how much of the increase applies to each client, as the indexation takes into account the highest transfer balance cap amount a client has previously attained,” Mr Howard said.  

“In simple terms, clients who have not used any of their cap previously will benefit from the new maximum; those who have only used some of the previous cap will benefit from the increase proportionally; and those who have previously transferred up to the $1.6 million maximum will not be able to take advantage of the increase.”

Related to the effects from the TBC is also the indexation of other key superannuation caps, applicable from 1 July 2021: for example, the concessional cap increases to $27,500 and the non-concessional cap to $110,000. Meanwhile, the superannuation guarantee increases to 10 per cent.

“The indexation of various thresholds is all due to existing legislation, and not any recent changes,” Mr Howard continued.

“Existing legislation provides guidance on the indexation requirements, without providing an actual dollar figure. Fortunately, the ATO has just updated their Key super rates and thresholds webpage, which provides advisers with additional certainty around the dollar value of these various indexation outcomes.

“Additionally, the superannuation preservation age will increase for those turning age 59 from 1 July 2021, and the age pension qualifying age will also increase to 66 years and six months.”

Fee consent changes and property transfers relating to SMSFs

From 1 July 2021, advisers will be required to obtain annual client consent for ongoing fee arrangements for all clients. ASIC had recently provided additional clarity regarding the processes for obtaining consent.

Mr Howard noted ASIC’s legislative instruments have clarified that advisers may incorporate the disclosure and consent requirements into existing processes.

For example, if the fee disclosure statement provided to clients is clear in regard to the services, and also the amount the client will be charged, these do not have to be provided again or restated in the annual consent form itself.   

“For non-ongoing arrangements, such as the deduction of fees from a client’s super account for initial advice on their retirement and super planning, it may be possible to include an extract from the Statement of Advice as an attachment to the consent form. ASIC has also clarified that consent may be obtained electronically,” Mr Howard said.

“However, further clarity is needed to address privacy concerns on providing details of multiple accounts with different providers. In this case, one consent form is not practicable, and a possible solution may require the use of multiple forms.”

Lastly, with property values rising across many parts of the country, tax planning related to the sale of properties held within SMSFs has also become a hot topic, according to Mr Howard.

“Advisers are also asking about the impacts of transferring property into a client’s SMSF, with the intention to have an asset of value appreciate over time in a concessionally taxed environment,” he said.

“In addition, limitations and considerations related to transferring property out of SMSFs to allow clients to use the property personally, generally at retirement, are generating queries from advisers.”