In an online article, SuperConcepts executive manager, SMSF technical and private wealth, Graeme Colley said in terms of the year ahead, there’s plenty of strategies to think about for helping clients build their retirement savings.
For clients nearing or in retirement
For this age group, Mr Colley said one of the significant changes that happened during 2020 was the increase in the age at which personal contributions can be made.
“Since 1 July 2020, the age at which personal contributions can be made has been raised from 65 years of age to 67 before the work test of 40 hours in 30 consecutive days in the financial year cuts in,” he said.
“Personal contributions include concessional and non-concessional contributions. The age increase provides a little bit more flexibility for anyone retiring prior to the age of 67 to make last-minute tax-deductible and non-deductible super contributions.”
Recontribution strategies can also come in handy for those aged between 65 and 67, as they have access to their superannuation when they choose, he noted.
“It is possible to recontribute any amounts withdrawn from super back to the fund as non-concessional contributions, provid[ed] the person has a total super balance of less than $1.6 million,” he said.
“This can reduce the amount of tax an adult child is required to be pay on the death of a parent if they receive a super payment. To see whether there is any benefit in using the recontribution strategy, advice is always recommended.”
If either client is at least 65 and has just sold their home, then the downsizer contribution may be available, he added.
“The downsizer contribution is available as a once-off opportunity for members of a couple who are at least 65 years of age to contribute up to $300,000 each to super from the sale of their residence. The contribution must be made within 90 days of the sale of the residence,” he explained.
“There is no upper age limit to make the downsizer contribution.”
Once clients have reached their preservation age, Mr Colley said, they can access transition to retirement income streams, and if they haven’t retired or reached 65 years of age, they can commence account-based income stream.
“The rules require that a minimum amount is obliged to be withdrawn each year and it is possible to withdraw lump sums depending on the rules that apply. A maximum amount applies to transition to retirement income streams,” he said.
“For some people, it may provide flexibility for anyone with a transition to retirement income stream or an account-based income stream to pause it and have it recommenced at a later time as it is required.”
Mr Colley said, for mum and dad, making personal concessional and non-concessional contributions to super can be beneficial where they qualify.
“This could include getting access to the bring-forward rule for concessional contributions if their total super balance [is] no more than $500,000,” he said.
Mr Colley noted that whenever clients make non-concessional contributions to super, it’s important to ensure their contribution caps are not exceeded and that their total super balance is taken into consideration in working out whether they can make non-concessional contributions to super.
It may be possible for clients in this age group to also make spouse contributions, which are counted as non-concessional contributions of the spouse and can have the effect of evening up the couple’s super balances.
“To be eligible, if the spouse is under 67 years of age, there is no need to meet a work test, but if they are between 67 and 75 years old, the work test must be met prior to making the contributions. Spouse contributions are unable to be made after the spouse has reached 75 years of age,” he noted.
“If the spouse is a low-income earner and has an adjusted taxable income of less than $40,000, it is possible for the contributor to receive a tax offset of up to $540 for the first $3,000 of the spouse contribution.”
Some clients, he said, may also qualify for co-contributions, which are paid by the government to their super fund.
“If [they] have an adjusted taxable income of less than $54,837 for the 2020–21 financial year and make a non-concessional contribution of up to $1,000, the government’s co-contribution can be up to a maximum of $500,” he noted.
The low-income superannuation tax offset, he explained, is available for anyone with an adjusted taxable income of less than $37,000.
“It applies to concessional contributions because the tax payable on the contribution received by the fund is usually greater than the personal tax they would pay if the contribution was paid to them as salary and wages,” he said.
“The offset is calculated by the ATO and paid directly by the government to the superannuation fund.”
Another contribution strategy advisers may want to consider is contribution splitting which allows a person to split concessional contributions to their spouse.
“To qualify, the split to the person’s spouse can take place if they are under preservation age, currently 58 years of age, or between preservation age and 65 years old if they have not retired,” he said.
“Concessional contributions include employer super guarantee contributions, salary sacrifice contributions and personal deductible contributions. It is possible to split up to 85 per cent of the person’s concessional contributions or up to their concessional contributions cap.”
Our younger clients
Younger clients who are older than 18 years of age are entitled to the same superannuation concessions as their parents, but will depend on whether they qualify for a tax deduction, government payment or tax offset for the contributions they make to super, Mr Colley noted.
“However, for children under the age of 18, it is possible to have contributions made for them. This could be made by their parents or guardians as non-concessional contributions. The amount of the non-concessional contribution is limited to the caps that apply to everyone,” he said.
“Some children under 18 years of age can make personal contributions to super. However, if they wish to claim a tax deduction for the contributions, they must be working.”
28 December 2020
BEc (Acc), MBA, CPA, FFin
David has been in the Financial Services Industry for nearly 30 years. He was one of the founding Directors of the successful Financial Planning and Stockbroking Practice, Henderson Gregory Forrest, for a decade. Prior to that, he held senior roles in companies such as ING, KPMG Accountants and AMP. David was previously Chairman of OAMPS Superannuation Trustee Board and currently serves as an independent Board Director for several companies.
David’s extensive experience in all forms of superannuation, including Self Managed Super Funds (SMSF), Defined Benefit Funds, retirement funding through Account Based Pensions, stockbroking with a focus on Direct Share Investment, Taxation/Remuneration Planning, Centrelink, Aged Care and business management, equip him to advise expertly on all aspects of Financial Advice.
Those with a particular interest in superannuation/SMSFs, direct share investment, salary packaging or applying for the Centrelink Pension will find his knowledge and ability in formulating and implementing creative, logical and simple wealth creation strategies a valuable asset.
David maintains a strong personalised client service focus, providing tailored solutions for clients.
David Forrest is an Authorised Representative of Integrity Financial (SA) Pty Ltd ABN 16 133 921 187 — AFSL No 334846
Business Finance Manager
B Bus (Acc), CPA
Michelle’s career has spanned across the Financial Services, Retirement Living and Aged Care industries working in the private sector, not for profit and more recently with the state government for over 20 years. Her experience extends to many facets of the financial services industry, having worked in superannuation administration, technical support and financial planning practice administration.
Commencing with AMP and subsequently working in commerce and accounting roles with companies such as Brambles, Adelaide Bank Retirement Services, ECH Inc and SA Health and Wellbeing, Michelle returns to financial services after working in practice financial management at Henderson Gregory Forrest. This wide range of experience from senior accounting and management roles has provided Michelle with a strong background in business administration.
With an astute financial acumen and keen interest in business improvement strategies, Michelle ensures the smooth running of the Integrity Financial Advisory practice providing valued management support to our personalised client service focus.
B Com, Dip FP
Darren joins the Integrity team as a strong technical specialist with almost 20 years’ in the Financial Services industry. He has extensive experience advising clients on how to build and protect wealth, prepare for retirement and retire comfortably.
Commencing with advising clients on direct equities for over 10 years at Baker Young, Tolhurst Noall, and ABN AMRO Morgans, his career expanded to providing holistic client advice, having operated his own financial services licence and company. Most recently having worked for a 'Big 4' bank, he has welcomed the more personalised ‘client first’ approach that is evident at Integrity Financial Advisory.
With a deep understanding of investment markets, he is appropriately qualified and authorised to provide direct share advice, as well as superannuation/SMSF advice, encompassing both investments and insurance.
Meticulous in his approach, he aims to deliver quality outcomes for clients by understanding their financial situation and needs before providing advice which is central to our advice process. Darren supports David in tailoring solutions for all client financial advice needs.
Darren Chalk is an Authorised Representative of Integrity Financial (SA) Pty Ltd ABN 16 133 921 187 — AFSL No 334846
Client Service Manager
Natasha commenced working in the financial services industry in June 2008 and is a new addition to the Integrity team. During the past 11 years, she worked closely with advisers providing administration support in a share broking and financial advice business.
Having successfully completed her RG146 accreditation in securities and managed investments and continued her studies to complete her competency in Superannuation, Natasha can ably assist with all aspects of fixed interest, cash management, portfolio administration, direct shares and client advice implementation.
Natasha takes time to ensure she understands our client’s financial goals and needs and believes in creating, preserving and utilising wealth through effective financial management as a key objective in helping clients.
Client Service Manager
Kelly has worked in the Financial Services Industry for over 10 years and has supported David since 2013. Kelly’s primary background is in customer service and administration.
On starting in the industry, Kelly initially focused on direct shares, stockbroking administration and client liaison. Since moving to the Client Service Manager role, Kelly has developed skills encompassing all aspects of financial planning including client advice implementation and term deposit management.
Kelly’s experience in the direct share environment, especially management of estates, provides a key part of the direct equity expertise in Integrity’s Client Service Team.
Returning from Parental Leave following the arrival of her second child, Kelly has developed further honed multi-tasking skills after juggling the demands of a growing family.
Client Service Manager
Jasmine has worked in the financial services industry for over 12 years in all areas of client administration, working with David since 2013.
Jasmine has extensive knowledge and experience in client service including implementation of advice, portfolio reporting, assisting with the establishment of Self Managed Super Funds (SMSFs), term deposit management and a long history of helping clients with their enquiries.
Jasmine’s attention to detail, yet gentle approach, means she is able to solve the trickiest of questions for our client community.
Jasmine has gained her Certificate III in Financial Services qualification.
Client Service Manager
Merrilyn has worked in the financial services industry for over 11 years in all areas of client administration, and is a new addition to our client services team, returning from Melbourne to join the team in June 2019.
Merrilyn has extensive knowledge and experience in client service including implementation of advice, managed fund administration, assisting with the establishment of Self Managed Super Funds (SMSFs) and process improvement for the previous practices she has worked with. Merrilyn’s experience with direct shares constitutes the other part of our administrative support for direct equity investments.
Merrilyn’s warm and caring nature continues to endear her to our clients and she has already established herself as a valued member of our team.