Financial advisers needed to take advantage of the current settings where large contributions could be put into superannuation, according to a sector expert.
NowInfinity director Grant Abbott said former treasurer Peter Costello created a minefield in May 2006 when he announced superannuation withdrawals after the age of 60 were to be tax-free.
“Since then, the biggest game in town is to get as much into super as possible whether by way of deductible contributions, undeducted contributions or related-party loans with a limited recourse borrowing arrangement,” Abbott said during a NowInfinity webinar last week.
“But contributions were always limited due to big penalties when in excess of contribution caps.
“Now with those penalties lifted [if] you’re above the caps, although we do have to watch out for some of the excess charges, it is a new ball game – one that may be short-lived if superannuation concessions are considered unsustainable.
“It means we’ve got this opportunity to start to put some really big capital into super.”
He said there needed to be lots of planning to get as much money into super as possible, particularly if clients were close to the age of 50.
“Or that magical preservation age where they can start to withdraw their money,” he said.
“The prime reason is that once it goes into the superannuation fund, it stays there and Treasury has already said that if there are any [new] measures that they are going to be grandfathered.
“So even if you’ve got $50,000 or $100 million, you’re going to be grandfathered and it will only be the next generation putting in a lot of money into super that are going to be caught with [any changes].”
Furthermore, the particular contribution settings had resulted in Treasury and the Association of Superannuation Funds of Australia now “starting to nip at the heels of the wealthiest people in super”, which also necessitated the need for action, he said.
