Lauren Ryan from Thinktank speaks to Laurence Parker-Brown for our IN60 series. The Inside Adviser
That consumers are influenced heavily by well known, trusted brands comes as no great surprise. What does, though, is that they rate life insurance as the least most important tool in ensuring financial security.
Super caps: Keep calm and carry on (for now)
Last week the Federal Government announced a major change to the taxation of superannuation assets. Importantly, this remains proposed and is unlikely to be legislated for at least 12 months.
Under the proposal, the balance of an individual’s member account within a superannuation fund, whether that is an SMSF, platform or industry super fund, will be subject to additional taxation.
Specifically, the earnings on the balance of an individual’s super account that exceeds $3 million will be taxed at an additional 15 per cent.
This will apply in addition to the current taxation rates that apply, being 15 per cent on those assets held in accumulation phase, and 0 per cent for those in pension phase.
Importantly, this is calculated per member balance, or per person, rather than for an entire fund with the government suggesting less than 80,000 people will be impacted today.
We have two key concerns with the proposal.
The first is that the earnings that will be taxed at an additional 15 per cent will be calculated based on the notional or unrealised value of your member balance. That is, if the value of your super fund increases during a financial year, you will be taxed on the increase in the value, whether it is realised via the sale of assets or not.
This sort of taxation does not apply in any other part of the taxation system, hence we do not believe it is likely to be passed in its current form on this basis.
Similarly, the $3 million cap will not be indexed, hence a significantly higher number of people will likely be impacted by it in the future as balances continue to grow and inflation reduces the value of capital.
As retirement and superannuation specialists, we are concerned about the constant tinkering with superannuation and taxation legislation. That said, despite the proposed changes superannuation will remain by far the most tax effective entity structure through which to hold your retirement assets.
As the proposal works its way through the legislative process, however, and the picture becomes more certain, alternative options to maximise tax efficiency will become clearer. These may include family trusts, adding money to the superannuation balance of children, adding members to an SMSF or even setting up a corporate beneficiary.
At this stage, and until the amendments are made clear in their ultimate form, the important thing for retirees who may be affected is to remain calm and refrain from making any drastic financial changes. As ever, with superannuation, the devil will be in the detail.
