FUTURE OF RETIREMENT STRATEGIES

Transcription

1

2 FUTURE OF RETIREMENT STRATEGIES

3 Disclaimer Heffron Consulting Pty Ltd 2017 This presentation is based on our understanding of the law as at 25 October 2017 and is for general information only. This presentation does not constitute financial product advice and has been prepared without taking into account any individual s personal objectives, situation or needs. Every effort has been made to ensure that it is accurate, however it is not intended to be a complete description of the matters described. Furthermore, it is not intended that it be relied on by recipients for the purpose of making decisions and is not a replacement of the requirement for individual research or professional tax advice. This slide handout was accompanied by an oral presentation, and is not a complete record of the discussion held. No part of this presentation should be used elsewhere without prior consent from the author.

4 Contribution Strategies CONCESSIONAL CONTRIBUTIONS

5 Reduction in Concessional Cap From 1 July 2017 Year Ended Under age 50 Age 50 or over 30 June 2017 $30,000 $35,000* 30 June 2018 $25,000 $25,000 * at least age 49 on 30 June 2016

6 10% Rule Gone From 1 July % rule for making personal deductible contributions abolished All individuals up to age 65 able to make personal deductible contributions up to concessional cap Individuals age 65 to 74 too if meet work test

7 But Be Careful Still need assessable income Still need to comply with notice requirements

8 Unused Carry Forward From 1 July 2018 not 1 July 2017 as originally announced If don t fully utilise concessional cap Unused amounts carry forward Rolling basis Over 5 consecutive years

9 Unused Carry Forward But! Only unused amounts from 1 July 2018 can carry forward Only available if total super balance <$500K Calculated as at 30 June of year prior to year in which you want to make additional contributions

10 Strategy Implications Make earlier in life lower limit Unused carry forward Sale of CGT assets in future planning around 5 year rule $500K cap issue Contribution reserving still useful Funding children s super

11 Strategy Implications 10% rule Salary sacrifice arrangements still beneficial Increased flexibility for those taking capital gains Increased flexibility to offer strategy to late comers Use to offset tax on termination payments Can stop many risky practices

12 Contribution Strategies NON - CONCESSIONAL CONTRIBUTIONS

13 Reduced NCC Cap From 1 July 2017 $180,000 annual cap reduced to $100,000 New eligibility threshold

14 Eligibility Threshold From 1 July 2017 If individual s total super balance is $1.6m Non-concessional contribution cap = $nil in that financial year $1.6m calculated as at previous 30 June What if balance subsequently drops below $1.6M?

15 Exemptions Amounts which are already excluded from NCC cap Structured settlement/personal injury payments Amounts which qualify to be tested against the CGT cap $1,445,000 in current year Use of CGT cap & timing more valuable than ever $1.6m eligibility threshold doesn t apply But influences eligibility to make NCC in following year

16 Bring Forward Rule Will trigger if exceed annual cap Eligible if < age 65 at any time in trigger year If contribute after 65 th birthday, must meet work test No longer always 3 x std cap No longer always 3 years to use

17 Bring Forward Rule If individual s total super balance is close to $1.6m, bring forward amount & period reduced Total Super Balance Bring Forward Amount Bring Forward Period < $1.4m $300,000 3 years $1.4m but < $1.5m $1.5m but < $1.6m $200,000 2 years $100,000 n/a $1.6m or more Nil n/a

18 Bring Forward Rule If bring forward amount not fully utilised in trigger year Ability to use remainder depends on total super balance

19 Transitional Rules For those who triggered b/f mode prior to 1 July 2017 but didn t fully utilise by 1 July 2017 Remaining bring forward mode reassessed If triggered in 2016 year = $460,000 for 1 July 2015 to 30 June 2018 If triggered in 2017 year = $380,000 for 1 July 2016 to 30 June 2019 Total super balance needs to be < $1.6m immediately before start of year in which remaining amount is to be contributed

20 Strategy Implications 1. Planning for clients around total super balance of $1.6m critical 2. Still using W&R strategies, potentially spanning two years

21 21 Using 2 financial years Contribute $300k Balance $1.65m Growth $1.7m $1.39m $1.69m 30 June June June 2019 Withdraw $310k Critical factor: Withdrawal meant balance BELOW $1.4m at 30 June 2018, allowing $300k contribution in 2018/19

22 Strategy Implications 3. Make NCC before CGT cap amounts 4. If possible, make non-concessional contributions later in year balance known 5. Contribution timing - ECPI

23 23 New ATO view 100% pension phase Contribution made Assets segregated (100% income tax exempt) Unseg assets (% income tax exempt) 1 Jul Dec Jun 2018

24 24 Or 50% pension phase % (unseg) New pension starts, now 100% pension phase Segregated (100%) Contribution made % (unseg) 1 Jul Dec Jun 2018

25 Contribution Strategies PROPOSED CHANGES

26 Downsizer Contributions Bill before Parliament Contribution into super with proceeds of home sale Only contracts entered into on/after 1 July 2018 Must be principal place of residence Held for min 10 years (by contributor or spouse) Property in Australia, not mobile home, caravan or houseboat

27 Eligibility Criteria Age 65 or over (no upper limit, no work test) Contribution amount limited to lesser of Sale proceeds of dwelling $300,000 per person ($600,000 per couple) Only one dwelling per person Contribution made within 90 days of disposal

28 Treatment Not taxed in fund Creates tax free component Excluded from NCC & CC cap Can be made regardless of total super balance If converted to pension, counts towards TBC No changes to Age Pension assets test

29 Strategy Implications 1. No need to downsize 2. Clients not meeting work test 3. Not cap tested

30 Pension Strategies

31 Strategy Implications Only drawing minimums Extra from accumulation? Extra as commutation from pension? More likely to have income/assets outside superannuation

32 TRIS Issues Now have 2 types of TRIS Retirement phase TRIS TRIS If not age 65, retired TRIS Balance not counted towards cap Since 1 July 2017, no tax exemption on earnings If reached age 65, retired pre 30 June 2017 TRIS is retirement phase TRIS Balance counted towards cap on 1 July 2017 Fund entitled to tax exemption on earnings

33 Strategy Implications For clients not yet 65, retired Fund tax exemption now reduced What does that mean for fund income/asset sales? If pension ceased, when likely to recommence pension? If pension continued, when likely to qualify as retirement phase TRIS?

34 Reach Age 65 Post 1 July 2017 Immediately becomes retirement phase TRIS Immediately regains tax exemption in fund Immediately counts towards cap

35 Retiring Post 1 July 2017 Doesn t become retirement phase TRIS until notify trustee Regain tax exemption in fund on notification to trustee Counts towards cap on notification to trustee

36 Strategy Implications TRIS balance on 65 th birthday/retirement needs to be reported to ATO Clients need to contact you in lead up to reaching age 65, retiring

37 Asset Realisation Strategies

38 No CGT Relief If didn t need to reduce pension balance because no mbr has > $1.6m Not eligible for CGT relief Eg Spouses with $1m each in ABP No impact now because no accum balance but what will happen on death? Timing of asset sales?

39 Unit Trust Assets Units eligible for CGT relief, not underlying assets of trust If trust asset sold after 1 July 2017 & distribution made to fund Taxable to fund in usual manner Unless trust wound up & units sold, fund gets no benefit from CGT relief (although will have cap loss to offset against future gains) What can be done to maximise ECPI in year of sale?

40 Death Benefit Strategies

41 Strategy Implications Anti-detriment going. gone Ability to rollover but not rollback Lump sum death benefits able to be rolled over to new fund Provided recipient is spouse, child < 18, disabled child etc & used to immediately commence pension Death benefit pensions not able to be rolled back to accum

42 Clients not yet Impacted by Changes Drawing retirement phase pensions but <$1.6m each Fund tax exemption remains the same For couples, may have issues once one dies if combined balance will exceed $1.6m Focus on estate planning

43 Clients already Impacted by Changes Drawing retirement phase pensions & >$1.6m Had to rollback or take monies out of super Fund tax exemption potentially reduced What does that mean for fund income/asset sales? For couples, may have further issues once one dies Focus on estate planning

44 Questions

45