The Federal Government is almost encouraging Australians to remove money out of superannuation through their super reforms and it is this thrust of the discussion that is concerning.
Such is the opinion of HLB Mann Judd wealth management partner, Michael Hutton, who told a media luncheon on Tuesday that while transferring money from pension phase to accumulation phase was an option under the new regime, people who did not wish to do so would deliberate investing in their own assets.
Hutton said that while that might be a more tax-effective strategy for those no longer in the workforce to avoid the 15 per cent tax in super, he reiterated that super was still the most robust system to invest money.
“I think a lot of individuals don’t really have a good sense of what to do with the money. They might go to the bank, different bodies,” Hutton said.
“Whereas the superannuation system would be entirely regulated, it’s well understood, entirely developed.
“Why shouldn’t people be encouraged to live in superannuation rather than almost being encouraged to take it out of superannuation and then probably do something worse with it and/or spend it unnecessarily and/or feel the pressure from the kids?”
Super members had five months left to make large contributions into their super such as the $180,000 a year non-concessional contribution or three years’ worth of contributions of $540,000 in one hit before new changes come into effect on 1 July this year.
In terms of the $1.6 million cap on pension benefits, Hutton said his clients have not been too deterred by the changes and the fact that any money exceeding that amount must be transferred to an accumulation phase where it would slapped with a 15 per cent tax rate.
“I reckon to a T every client I’ve explained that to has thought that’s okay. Your earnings on your super are still tax-free on the first $1.6 million,” he said.
Estate planning was also an important element for advisers to focus on with their elderly clientele to avoid financial abuse. When large pools of money suddenly become available, the elderly might be subject to financial abuse from family or property spruikers, Hutton said.
