Limit advice to 30 June issues

Financial advisers and licensed accountants have been instructed to keep advice to issues that must be resolved before 30 June as many are being overwhelmed by the impact of the incoming super changes on their clients.

SMSF Association head of technical Peter Hogan said it was a question of what level of advice is needed before the laws apply on 1 July.

“But this is where all the confusion comes in – if you are simply addressing the 30 June issues, I’m not talking about estate planning advice, reversionary pensions, or all the other advice around how you’ll be dealing with the fund going forward,” Hogan told the recent SMSF Association NSW Sydney Local Community breakfast event.

“If you can address more, that’s great, but most of us don’t have the time to do that.

“We just want to get the 30 June stuff done.”

Hogan recommended advisers and accountants focused on advice in line with the 30 June priorities, along with providing a limited statement of advice (SOA) or record of advice.

“You might just need to address some tax advice components,” he noted.

“I think you want to make that advice, for want of a better description, as skinny as you can in order to get it done before 30 June so your clients have clearly made a decision, and that decision can then be actioned when the accounts are done at a later date.

“I think a limited SOA is appropriate for many clients because the clients’ circumstances are not changing as such, really what’s changing is the law.”

BT Financial Group head of financial literacy and advocacy Bryan Ashenden added: “It’s almost about not being too specific or too tricky at this point in time.

“But in the scenario, taking into account any defined benefit pensions or even if you don’t have one, try to figure out what you need to move to get below the $1.6 million and giving advice at that specific level now is actually fraught with danger.

“Because if you start identifying the assets that you’re going to move, that’s nice based on today’s value, but the question is what’s the value at 30 June?”

Ashenden warned it was a possible scenario for assets remaining in the pension phase to increase in value after 1 July, pushing a client’s pension balance over $1.6 million.

“So you’ll have to deal with it again, and then depending upon how you worded it you might not get capital gains tax relief,” he said.

“Keep it simple right now and get clients to understand that they need to make the change, get them to agree on it, and post 1 July then get the specifics and work it out physically – that’s probably the best way to do it.”

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