There are close to 750,000 Australians impacted by the lower concessional / non-concessional caps and the $1.6 million transfer balance. Well over a million Australians are impacted when adding the changes to ‘transition to retirement’ pensions, and many more positively impacted by extending the spouse tax offset, allowing catch up concessional contribution (from 1 July 2018) and encouraging new retirement products.
These are the biggest changes we’ve seen for a decade and this will keep the financial advice industry busy leading up to, and after the implementation of these rules.
KeyInvest surveyed advisers to uncover their thoughts on alternate strategies or structures to overcome the tightening rules. It came as no surprise that over 92% of advisers surveyed have clients impacted by the change. The biggest issues are the lower concessional and non-concessional caps and the changes to the tax treatment of transition to retirement pensions with 72%-89% of advisers surveyed having impacted clients. 52% of advisers have clients with super balances over $1.6 million.
For which rule changes will you need alternate strategies?
Our next question was to ask what advisers plan to do for their clients.
Advisers would look to utilise the following products/strategies;
- 57% would use tax-effective Investment Bonds
- 55% intend to utilise the new catch up facility when it commences in July 2018
- 48% would use Managed funds
- 28% Trust strategy
- 26% Direct shares (LIC’s and ETF’s)
- 12% Property
What strategy alternatives will you most likely use?*
The results confirm the thinking that advisers will look for the next most tax-effective outcome if the benefits of superannuation are diminished. Catch up concessional contributions will work for many clients but only those with a superannuation balance less than $500,000.
A continued resurgence for Investment Bonds is likely due to the concessional 30% (company tax rate) tax-paid rate.
KeyInvest has recently updated its Investment Bond product, the Life Events Bond, with 27 investment options providing more choice and flexibility than ever before. On-line paperless applications will launch within the next two weeks improving the efficiency with which advisers can implement the strategies including using the bond as an alternative to super, estate planning or tax-effective investing.
For more information about the survey results or the Life Events Bond contact KeyInvest on 1300 658 904 email@example.com or go to http://www.keyinvest.com.au/financial-services/life-events-bond/alternative-to-superannuation
* The survey was completed prior to budget announcements on 9 May.