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The Financial Planning Association of Australia (FPA) welcomed fairness measures in the Federal Budget but cited concerns with increased complexity, changes to the “transition to retirement” (TTR) strategy in tonight’s 2016-17 Federal Budget announcement and called on FPA members to carefully consider the effect on clients.
FPA CEO Dante De Gori CFP® said: “The TTR strategy that helped thousands of middle to low income earners has effectively been killed off by the Government, meaning almost all financial planners and clients will need to carefully review the circumstances of those approaching retirement.
“The FPA believes that the ‘effective’ abolition of TTR is a net negative for low to middle income earners. The tax exemption for earnings on assets supporting TTR income streams will be removed, and concessional contribution caps reduced.
“These changes mean financial planners must help clients navigate an increasing number of rules and consider the retrospective nature of these changes particularly around tax and super.”
In particular, there will be a:
Mr De Gori said the FPA welcomes measures to improve fairness in the superannuation system. “There are measures in tonight’s 2016-17 Federal Budget to help low-income earners and those with low superannuation balances, such as the introduction of a Low Income Superannuation Tax Offset (LISTO) to reduce the effective tax rates on concessional contributions to super for individuals with incomes under $37,000.
“The FPA also welcomes measures to encourage catch-up contributions. Individuals, especially women, with superannuation balances under $500,000 will be able to rollover their unused concessional contributions cap from previous years.
“Individuals will also be able to claim a deduction for personal contributions to superannuation, regardless of their employment status. Currently, the deduction is limited to self-employed or ‘substantially self-employed.
“As a result of tonight’s announcement, the FPA encourages planners to plan client reviews carefully, giving priority to those affected immediately or very soon, versus those where the potential impact is very significant.
“From a consumer point of view, we encourage consumers, particularly those most affected to seek professional advice in order to navigate the various potential effects of tonight’s announcement,” concluded Mr De Gori.
The FPA is hosting a webinar on Wednesday 4 May, 2:30pm-3:30pm AEST to help FPA members understand how the budget announcements could affect financial planners and clients. For more information, click here.
Dante De Gori CFP® will be live on Twitter on Thursday 5 May, 12.00pm-1.00pm AEST to answer questions about how the budget announcements could affect financial planners and clients. Follow the conversation #AskDante @ddegori10.
| Who will not need to review their arrangements | Who is affected, and how? |
| Those with less than $1.6m and fully retired (receiving an income stream) who do not wish to make further savings within super | Those with an account balance of $1.6m and over in superannuation – including those in pension phase (i.e. taking an income stream) |
| Income earners who don’t contribute more than the current super guarantee, and who don’t earn more than 250k | Anyone transitioning to retirement and taking advantage of the current “transition to retirement” (TTR) rules |
| People in accumulation phase (working Australians) who have proactively made or are thinking or making non-concessional (post-tax) super contributions to their superannuation | |
| Those currently or thinking of salary sacrificing into super up to the current $35k limits – concessional contributions cap limits will change |