How you could take advantage of the proposed budget changes
Until the 2021 Federal Budget was announced last night, we had limitations on the amounts and at what age you could contribute to your Superannuation.
Now, things could change, and great opportunities present themselves should the proposed amendments be passed into legislation.
Those aged 67 to 75 could now be eligible to contribute to their Superannuation, which creates a huge range of benefits to those that are already, or soon planning to retire, including:
- Centrelink relief (assets or income test)
- Investing assets within a tax-free environment
- Having assets and income last your lifetime
So, how could you make the most of the changes?
6 strategy options for you to consider with the proposed Federal Budget changes.
1. Superannuation Contributions – Concessional Contribution
The ability to contribute up to $25,000 to your Superannuation and claim a tax deduction could become available for those up to age 75. This could provide the opportunity to reduce your assessable income and minimise your tax.
In addition, if you are over the age of 50, and your Superannuation account balance is under $500,000, you could make additional contributions and claim further tax deductions.
This would be a great opportunity for those who feel like their Superannuation balance is a little low to catch-up, grow their Superannuation, and take advantage of the tax benefits.
This area of Superannuation can be quite technical, and you should make sure you are aware of the implications of your Superannuation choices. Please consider personal financial advice before making voluntary Superannuation contributions.
2. Superannuation Contributions – Non-Concessional
Non-concessional Superannuation contributions are voluntary contributions that you can decide to add to your Superannuation balance from your own personal funds (i.e., your after-tax income). This means you have already paid tax on the money and you will not have to pay additional tax when adding the funds to your Superannuation account.
You can make up to $100,000 in non-concessional contributions to your Superannuation fund every year. NB: You may consider converting to an income stream.
In some cases, people will have the option to use future contribution limits for the bring forward provision and make up to $300,000 contribution to Superannuation.
The main benefit of this strategy is to invest the funds in accordance with your risk profile and support your income requirements in retirement.
If you have a significant age difference in your relationship, our experienced financial advisers at CAG can help you consider alternate strategies and benefits to bring you financial benefits and security.
3. Managing Capital Gains Tax (CGT)
Should the budget pass legislation, we may have the option to manage the impact of Capital Gains Tax on the sale of investment properties or portfolios extended to everyone until age 75.
If you are under 75 years of age, you could potentially offset the CGT with additional Superannuation contributions and claim a tax deduction.
Detailed consideration and calculations are essential for this strategy, but the potential benefits are substantial. Implementing this strategy may provide opportunities for both you (and a partner) to simplify your investment portfolio and your Estate Planning requirements.
4. Recontribution strategies
The ability to be able to withdraw and recontribute to Superannuation may provide you with an opportunity to reduce the impact of taxation on your estate.
Most Superannuation funds consist of Taxable and Tax-free components. In the event your estate passes to a non-financial dependant, the taxable component will be taxed at 17%.
The opportunity through strategy development with consideration of the impact of any withdrawal and contribution could provide an opportunity to reduce the tax payable by your Estate.
5. Downsizer Contributions
Another significant proposal in the federal budget was the adjustment of eligibility criteria surrounding downsizer contributions.
It is proposed that the eligible age be reduced from 65 to 60 which will allow more homeowners within the age bracket to sell their home and downsize to a more suitable property for their life stage. You would then be eligible to contribute some of the funds from the sale to your Superannuation fund to use in retirement.
While plenty of rules apply, any contributions are exempt toward counting towards non-concessional limits.
6. Centrelink Update – Superannuation may be an exempt asset
With all the proposed changes to Superannuation contributions, we would encourage everyone to review their Centrelink strategy.
Depending on your age, Superannuation balance, and asset position, we may be able to develop strategies to increase your Centrelink entitlements.
In times of legislative changes, this is when experience truly counts.
At Coastal Advice Group, we can help you create a complete financial strategy that will benefit you, your partner, and eventually your estate.
Time is off the essence
Now the Federal Budget has been handed down, it’s an ideal time to reassess and work through any impacts and opportunities around your financial position – it could make a huge financial difference to your future.
We now have access to incredible, market leading technology, Wealth Central. This innovative technology allows us to model all your financial strategy options and cashflow projections in real time.
With Wealth Central, you can truly visualise how your financial future will look and simultaneously, see your financial plan working hard for you so that you can live your best life.
To utilise Wealth Central or to make the most of the opportunities from the proposed 2021 Federal Budget, book a complimentary meeting with our dedicated and experienced financial advisers.
BONUS: View complimentary video and budget summary provided by our licensee RI Advice Group below:
The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group and Sydney Wealth Advisers are subsidiaries of Coastal Advice Group which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.