SuperConcepts general manager of technical services and education Peter Burgess says SMSF practitioners will need to exercise caution with any clients planning to hold off on contributions and make catch-up contributions in future years.
Superannuants cannot make catch-up contributions unless they have less than $500,000 in superannuation, Mr Burgess told a Sydney conference.
“Now this is a problem for financial planners, there is a liability for advisers in this,” he said.
If you have clients who are planning to make catch-up contributions, you need to be careful that they do not exceed the $500,000 super balance limit.
Mr Burgess said if a client plans to use the catch-up contributions in five years, their super balance could easily exceed $500,000.
“We have proposed to Treasury that this $500,000 is, first of all, very difficult for SMSFs. Let’s link this $500,000 to the $1.6 million limit to keep everything as easy as we can,” Mr Burgess said.
“We have too many limits and too many caps so I think it makes a lot of sense to link it to the $1.6 million.”
Given the Labor Party already has some issues with the idea of catch-up contributions, Mr Burgess said it is unlikely it will agree to increasing the limit to $1.6 million.
He said the catch-up contributions are a positive measure as they will bring flexibility to the system for those with broken work patterns.
With the catch-up contributions delayed by one year, individuals will be able to make catch-up amounts in the 2019-20 financial year, if the legislation is passed.
“I think the treasurer is likely to dig his heels in on this one. He has made it very clear that changes need to be made to the contributions,” Mr Burgess said.