SMSFs urged to utilise contributions before potential reforms
Practitioners should encourage clients to maximise their contributions and commence pensions this financial year, before the government introduces potential tax reforms in the May Budget, HLB Mann Judd has warned.
Speaking at an event in Sydney, HLB Mann Judd partner, wealth management, Jonathan Philpot said the level of contributions individuals are allowed to make appears to be one area where the government is looking at making changes.
Mr Philpot said there could be a potential change with the large non-concessional contribution limit of $180,000 or $540,000 with the three-year bring-forward rule.
“We’d like to see clients who are in a position to make these large contributions in this current financial year to do so,” he said.
He also added that any potential changes could mean that trustees need to think about building up super at a younger age.
Traditionally, Mr Philpot said, superannuants have looked to transfer assets such as personal investments, shares and investment properties into their super in their 50s as they approach retirement.
“That is what we think might change in the future, you’ll no longer be able to just move it all in pre-retirement or at retirement,” he said.
“With the potential changes that are coming along, at a younger age you’ll have to start considering superannuation if you do wish to build up a larger balance and at the moment it’s a use it or lose it system, if you’re not maximising those concessional contributions then you can’t carry them forward, that’s it for the year and a year gone.”
If trustees are 55 or older, they should also be looking at commencing a pension if they’re eligible, said HLB Mann Judd director of superannuation Andrew Yee.
“People should be looking at turning on a pension if they’re eligible, if they’re over 55, start turning on that transition to retirement pension – this could be a good time to do it, before any changes,” said Mr Yee.
“The government sees there are so many tax concessions on the pension side, they may put a tax on it.”
H&R Block director of tax communications Mark Chapman told SMSF Adviser last month that it is unlikely that superannuation tax concessions will be left untouched in the government’s mission to reform Australia’s tax system.
“Of all the various pots of money that the government could raid to reduce the deficit, superannuation seems to be one of the biggest,” said Mr Chapman.