CFS pinpoints equalising strategies for SMSF clients
SMSF practitioners should consider implementing strategies to equalise the balances between spouses as early as possible in order to get the maximum benefit for clients, says Colonial First State.
Speaking at an event in Sydney, Colonial First State FirstTech executive manager Craig Day says it won’t be difficult for some SMSF clients to end up with a transfer balance cap problem, depending on their level of income or ability to make non-concessional contributions.
“So entering into a splitting strategy earlier on can certainly assist to avoid ending up with a situation where you’ve got one client way over the existing transfer balance cap, and they get to retirement and their spouse is way, way under,” Mr Day said.
“What an adviser really doesn’t want is the client getting to retirement where you’ve got one client at $3 million and the other [spouse] at $200,000, because even with the spouse recontribution strategy you’re only going to be able to get in $300,000 under the current caps out and back into the lower income spouse’s [account].”
Mr Day said this will impact the ability of the couple to get as much as possible into the tax-free pension phase of retirement.
SMSF practitioners will need to look at using contribution splitting strategies earlier on to avoid this.
“What this simply involves is at the end of every year, you take 85 per cent of any concessional contributions and split those off to a spouse that maybe is working but has less in super than you, the main bread winner, maybe you have a spouse on parental leave or maternity leave or looking after a young family with a lower super balance that you’re trying to beef up.
“This will be one of the main strategy tools that advisers have to equalise balances on the way through.”
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
