Contributions will most likely drive this increase, however, Dunn said it is important to understand the “matrix” of contributions to ensure that it produces the right benefit rather than create problems.
“There is a growing amount of interest in the use of superannuation as a tool with many of the changes we’re seeing around capital gains tax and the introduction around negative gearing changes, and potentially taxation to trusts,” Dunn said.
“We know that many of these proposed measures are not going to affect superannuation, but the byproduct of that is the fact that people will be looking to utilise superannuation, and more than likely we will see an increase in in-flows rather than a spike in the number of funds.”
Dunn said the increase in in-flows will occur most likely through contributions, whether through pre-tax dollars, or post-tax dollars such as non-concessional contributions.
However, he warned that in some circumstances that while getting more money into superannuation could drive some benefits, it could also result in a “complete disaster at the back end”.
Tim Miller, head of technical and education for Smarter SMFS, said for most funds, the decision to make contributions should not be driven by the Division 296 tax but by a range of factors incorporating retirement benefit needs, or what is needed from a drawdown point of view,.
“Also, despite what is said about superannuation, you need to consider what you can do from an estate planning point of view with regards to the passage of assets to beneficiaries. To do that in the most tax-effective way, a big part of the matrix is to identify not only where there are contribution strategies but whether just because they’re available is it worthwhile for the individual?” Miller said.
“The matrix is about identifying what situations would suggest that it’s not worthwhile doing this for a particular client, and it might be things along the lines of blended families, or no spouse, no tax dependents. There is a lot of things that drive what people will do with regards to which strategies they should use, and when.”
He continued that the matrix has four key areas – single with no dependents, nuclear family, double income no kids, and blended family.
“The ability and wide-ranging opportunities for strategies is quite obvious, so we can explore both deductible and concessional contributions, and looking even to split those contributions, personal non-concessional contributions, and spouse-based NCCs. Ultimately we’re keeping that within the nucleus of that family group, and we can capitalise on those opportunities,” he said.
“But when you come to things such as singles with no dependents, or double income no kids, all of a sudden, something like recontribution strategy doesn’t look as beneficial as what it might be.”
He continued that for individuals with no tax dependents or no dependents whatsoever, the idea of recontribution strategies to reframe from taxable components to tax free is “never a bad idea”.
“We never expected to have tax free super after 60 back in our early days of super and the reality is governments might make brave decisions, like changing CGT rules and negative gearing rules, so super could be next decade’s major reform again,” Miller said.
“When we come around to our cycle of significant changes, the use of strategies to better your own position is always a reasonable way to think, but in the matrix point of view, it’s about understanding the rules as they currently are and asking if there is a purpose in doing this strategy for me or my family members.”
