Look beyond cash, super to boost NCCs

SMSFs looking to make non-concessional contributions (NCC) ahead of the new super rules must consider other structures or avenues besides superannuation and pure cash holdings in order to increase their balances, according to an industry executive.

“Most of our client base doesn’t have money there that’s available, but certainly wealthy families will often have money in different structures like a family trust or a company,” HLB Mann Judd Sydney wealth management partner Jonathan Philpot told selfmanagedsuper.

“So their wealth may not necessarily be in super and it’s really about moving money around in order to get it into their SMSF. That’s the bulk of advice I’m doing right now.”

Philpot suggested another example could be using an inheritance to boost NCCs.

“If you knew you had an inheritance coming through and you’ll be getting a payment out of an estate, that’s a way to contribute – we’re talking about 65 year olds here, so often their parents are coming to the end of their life,” he said.

“And while we’re not big fans of borrowing, you might even consider borrowing, but the problem with that is it isn’t deductible.

“Also a lot of people did borrow during the $1 million superannuation contribution opportunity and then we went through the global financial crisis period, which really hurt those who did that.

“So I think the second time around, that strategy is somewhat gone, but still you don’t rule it out completely, particularly if the liquidity event is going to happen, say, six months after.”

Further, he said some clients felt discouraged or unmotivated to contribute to super.

“A lot of clients have read that this is their last opportunity to put in $540,000 and automatically they think: ‘Well, I don’t have $540,000 in cash sitting in my bank account so I can’t do it,’” he said.

“So they’re not looking at their overall [position] and looking at what other structures they have.

“But it’s not like every second client is putting in the $540,000 – it’s not even about putting in $540,000 and that’s it, because for people 65 and over who can contribute, say, $180,000 [it will still make a difference to their super] so it’s about getting clients to consider that.

“So the first port of call is maximising the concessional contributions and then if you’ve got the ability to, the second port of call is to put in larger NCCs.”

At a Pritchitt Partners media lunch in Sydney yesterday, Philpot said his core focus with clients – mainly pre-retirees, retirees and SMSFs – had been on identifying those who could take advantage of the current superannuation rules and contribute large amounts into super.

However, the vast super changes had created questions around superannuation as a structure, he noted.

“There’s been a bit of resistance with just the size of the changes and that feeling of whether superannuation is still the place they want to have their retirement wealth,” he said.

“We believe it is, but obviously superannuation has taken a bit of a battering with what’s going on.”

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