There is currently a lot of discussion on these super changes and what you should do.
We outline below some common questions for your reference. Please note these comments are not intended to be advice and they will not have application in all circumstances. It is critical that you seek specific advice before finalising any actions in response to the new rules.
Should I take my money out of super?
Probably not the best approach in most circumstances. While the rule changes are complex and increase the tax take out of super, a superannuation fund is still a tax effective investment structure. Earnings in super are taxed at 15% and capital gains (for assets held > 12 months) at 10% which is a favourable tax structure compared to an average tax rate of say 30% for investments held outside super.
Should I sell my assets before 30 June 2017 while the tax rate is still 0%?
Again, probably not the best approach in most circumstances as the CGT relief provisions may achieve the same outcome without incurring transaction costs.
There is complexity in the CGT relief provisions that may mean people choose to sell assets as an easier approach. However, you would need to ensure tax avoidance and that the “wash sale” rules do not apply if you did prefer selling.
Should I open a second SMSF and separate my pension/non-pension balances?
Possibly. There may be an opportunity to maximise access to the 0% tax rate on earnings by having your higher achieving growth investments in a special purpose pension fund. Also, there has been some discussion around with people preferring to separate pension money from non-pension money.
Operating a second fund will result in setup costs and additional ongoing administration costs which would need to be considered if this approach were to be adopted.
I have a transition to retirement pension, what should I do?
As a general rule, there will be little incentive to continue running transition to retirement pensions. Unless you need the pension income to meet your living expenses, we believe most people will probably be better off stopping a transition to retirement pension.
It is likely many people will not know if their pension is a transition to retirement pension. If this is the case, you should discuss your circumstances with us.
What is required for the CGT relief rules to apply?
The CGT relief rules are very complex. Key issues will be ensuring you can value current pension assets as at 30 June 2017 and making sure you make the necessary elections for the CGT relief to apply before your super fund’s 2017 income tax return is due.
Next Steps
The new rules constitute a significant change in the superannuation landscape. We are in the process of reviewing all of our clients and will be in contact shortly to provide strategic planning for those clients affected by the new rules as well as those clients who may/will be affected in the near future by these rules.
