The start of new concessional contributions (CC) and non-concessional contributions (NCC) caps, in conjunction with the bring-forward rule, from the 2016 federal budget super changes has added an element of complexity to any contributions advice given after 1 July.
During the recent selfmanagedsuper 2017 SMSF Roundtable, Prosperity Advisers financial services director Gavin Fernando raised a key point for consideration from an adviser’s perspective – that it was apparent there were now many more moving parts to contributions advice that both SMSF advisers and clients will need to get their heads around.
Colonial First State FirstTech executive manager Craig Day agreed and added that from 1 July, advice and strategy in relation to contributions had become more complex.
“It’s no longer just about having a client that’s an employee who wants to get some money into super and it’s a NCC so that’s all I really have to think about,” Day said.
“Going forward, it’s now all about looking at your ability.”
He highlighted that advisers will need to bring up certain discussion points with their clients.
“If I make this NCC, should it actually be a CC or should I be using the concessional cap first?” he said.
“Should I be thinking about making spouse contributions because that’s going to give me some benefits there? What’s my income tax rate threshold?
“So yes, there are a lot of moving parts in that whole contribution piece now.”
An additional consideration was when clients came into large sums of money that could potentially be added to their super.
“They might have $200,000 – it’s come from a windfall somewhere like the sale of a residential investment property or an inheritance or something like that,” Day said.
“If I go and dump that in now, does that knock me out from being able to claim a large tax deduction using those bring-forward rules or catch-up provisions when I’m going to go and sell my investment property?
“Is that something I want to do now or do I want to invest that outside super?
“Actually there’s a fair bit of analysis that you’ve got to sit down and do.
“So we could do this or we could do that, or do we pull this lever or that lever to end up with the client in the best position? The whole contribution piece since 1 July has become a bit more complex.”
The 2016 federal budget introduced measures that reduced the CC to $25,000 for everyone under 75, while NCCs were changed to $100,000 a year if the super balance is less than $1.6 million.
The three-year bring-forward rule was in place until 30 June.
Transitional rules apply for any bring-forward contributions triggered before 1 July.