Super budget changes ups family trust appeal
Family trusts may suddenly seem like a more appealing option for investors in light of the changes to the superannuation system in the 2016 Federal Budget delivered on 3 May, according to HLB Mann Judd Sydney.
The chartered accountant and financial advice firm said family trusts may be increasingly attractive to families as superannuation was clouded by further regulation and uncertainty.
The firm's wealth management partner, Michael Hutton, pointed to several unattractive features of the Budget in relation to superannuation, including the $500,000 lifetime limit on non-concessional super contributions compared to the current amount of $180,000, and the reduction of the concessional contribution limit for those aged over 49 from $35,000 to $25,000.
He said that people have overlooked family trusts as a way of managing wealth as the popularity of self-managed super funds (SMSFs) have risen.
"Yet family trusts have a number of advantages over SMSFs — and these advantages have increased with the budget changes — meaning they are a vehicle that may now make even more sense to manage family wealth," Hutton said.
Advantages included asset protection options, intergenerational wealth transfer, no limit on contributions to the trust and the option to increase capital, no age limits to access funds, income splitting to all family members, which may aid those who are low income earners, and estate planning flexibility.
"Even before the federal budget changes, family trusts had far fewer restrictions and rules than SMSFs and were simpler to operate. Now they are even more so," Hutton said.
He also raised several questions about the $1.6 million pension account limit per person.
"Presumably this equates to $3.2 million for a couple. But what about the situation where one member has $4 million in super but the stay at home partner has $200,000. Is this disadvantaging that couple? Will there be any opportunity to equalise the accounts?"
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