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Superannuation

Impact of contribution change unclear

voluntary contributions age 64

The government should provide more information on changes to voluntary contributions after age 64 to allow them to be factored into this year’s strategies.

Allowing superannuants to make voluntary contributions after age 64 is likely to impact the operation of bring-forward and downsizer contributions, as well as contribution strategies currently in place, but the federal government needs to supply guidance on the move, an SMSF expert has said.

Smarter SMSF chief executive Aaron Dunn said while pre-retirees will be able to make voluntary concessional and non-concessional contributions up to the age of 66 from 1 July 2020, up from the current age limit of 64, no guidance has been released nor has any draft legislation been presented.

“We don’t have any further guidance other than what the government has issued,” Dunn said as part of a recent webinar.

“It is important for us to get a look because someone that has the ability to make voluntary contributions will no longer cease at 64, but extend into 65 and 66, so 67 becomes the new 65, and therefore contribution strategies will begin to recalibrate.

“The reason why it is so critical to get certainty now is because the shift will change the timing of when people want to do things, such as making final contributions at age 64, and whether that action would cut out later actions, such as a three-year bring-forward contribution.”

He said given the time frames involved, it was important for the government to draw up draft legislation and quickly bring it to royal assent so financial advisers had clarity on the advice they could provide and consumers planning to make contributions in the second half of this year could factor in the shift.

“This is on the government’s radar and the reason for that is that we are seeing 67 becoming the new 65 with an increase to the age pension to age 67 by 1 July 2023,” he said.

“The next question will then be are we going to see changes to the conditions of release and will attaining age 67 replace attaining age 65, and will that lead to changes to downsizer contributions.

“If there is a disconnect between some of these changes, we need to know how can we interact with what is happening and how advisers can capitalise on opportunities, so watch this space.”

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