GFM Wealth Advisory senior partner Paul Nicol says the proposals are having an enormous impact on clients’ retirement plans.
“There is no doubt that the proposed changes to the caps, concessional and non-concessional, are causing terrible confusion and apprehension,” Mr Nicol said.
“I think it’s mainly the non-concessional $500,000 limit and particularly I think the proposal to have it count from July 2007 has a lot of people unsure whether or not they have used up their allotment.”
Mr Nicol said his interaction with his clients parallels the latest SuperConcepts report, which found that the last quarter’s SMSF contributions were down 38 per cent on last year.
He said trustees have been most concerned about the proposed change to the non-concessional cap.
“It’s unequivocally the non-concessional cap that is creating the greatest confusion. I can tell you I have clients that are totally withholding contributions to super until they’re clear of the legislative stance with the non-concessional cap.”
Mr Nicol said the cap risks worsening reliance on the pension by restricting the ability of those nearing retirement to contribute.
“I think it really hurts people with sub-optimal super balances closer to retirement not being able to make good size contributions that will enable them to be fully independent of the Centrelink system.”
Meanwhile, Moran Howlett Financial Planning principal Cameron Howlett said that with budgetary proposals yet to be legislated, he is advising clients to get a handle on their contribution levels before deciding on a plan of action.
“We’re not sure exactly what the changes are going to look like so I get clients who may not have exceeded the cap to call the ATO and ask them specifically what their level of non-concessional contribution since 2007 is. Irrespective of how the rules fit, if you’ve got $450,000 or $480,000 in non-concessional contributions, you are going to be ok,” he said.
While the non-concessional cap remains the most controversial of the proposals, Mr Howlett said not all changes would prove to be negative.
“Some of the rule changes have been OK. The $1.6 million cap for individuals is OK and the vast majority of my clients that have more than that understand that there is going to be some sort of change there.”
While Australians remain in the dark about what exactly these changes may look like, there may be other tax effective options worth exploring.
“In terms of confidence in the super system, we’re looking at other tax-efficient ways to grow wealth, with things such as family trusts, investment bonds, bucket companies etc all under consideration,” Mr Howlett said.
“The super system, however, is still better than investing personally… it’s still tax effective.”
