The new superannuation changes came into effect on 1 July 2017 and for wealthy superannuation investors and members of some Defined Benefit Superannuation schemes these changes are significant.
As the Australian Taxation Office starts to notify individuals that they have exceeded their Transfer Balance Cap, there is a steady trend developing. Breaches of the Transfer Balance Cap are a major issue for a range of retirees and members of defined benefit superannuation schemes like CSS and PSS. It is also a major issue for senior long serving members of MSBS and DFRDB.
With all changes there are however opportunities. In the last five years the cost of superannuation investments have been falling but unfortunately superannuation members have not all been making changes to benefit from fee savings that are now available.
If you have exceeded your $1.6m Transfer Balance Cap then it is not all bad news. While a significant restructure of your investments may be required and you may end up paying some additional tax on earnings for the future, an excellent way to minimise the effects of the additional tax is to make sure you explore every opportunity to save fees on your superannuation investments.
Let’s consider a hypothetical example where an investor has superannuation investments of $2,000,000 and you could save 0.5% p.a. on fees ($10,000 p.a.). The fee savings in this example will likely more than compensate for an increased 15% tax on earnings for the $400,000 in excess of the $1.6m Transfer Balance cap. A typical $400,000 portfolio earning 6% per annum could equate to around $3,600 p.a. in tax if taxed at 15%.
The latest superannuation changes are potentially really good news if you take the opportunity to seek a second opinion on your current superannuation arrangements and financial planning strategy.
With all of this complexity, isn’t it great to know that our business, The Financial Advice shop, has expertise available to help you make sense of all this and can provide assistance where required. If you feel you might benefit from a Financial Advice Health Check, a review of your Transfer Balance Cap situation or a second opinion on your current superannuation and financial planning strategy as a result of the latest superannuation changes, contact us without delay.
In a complex world, there has never been a better time to contact us to see how your financial situation could be improved.