Information You won’t get from Unlicensed Accountants #13

October 29, 2019

 

Along with this raft of legislative change, the Australian Securities and Investments Commission (ASIC) has also introduced new licensing requirements for accountants who work with and advise Self Managed Superannuation Fund (SMSF) Trustees. Only approx. 10% of accountants have complied with these changes to date.

 

As such if you, as many, consider your accountant would be your 1st port of call for Financial Advice, they will likely advise you, they are unable to provide the information you require & should consult a qualified Financial Adviser / Planner.

 

This is general advice only and you should seek expert financial advice from a qualified financial adviser before acting on any of the information covered in these topics.

 

Are Transition to Retirement Income Streams (TRIS) still worthwhile? Here are 3 Good Reasons why they might be.

 

TRIS were one of the few things that were to good to be true. They were originally introduced, as the name would suggest, to allow superannuants to transition to retirement. So for individuals that were over the age of at least 55, that did not wish to work full time, a TRIS could be commenced. Payments from the TRIS could then supplement income for those moving to part time work.

 

However, even if the income payments were not required, it was still attractive to start a TRIS as any super balance supporting a TRIS would move from a 15% rate of tax to a Nil rate of tax. This had the benefit of boosting after-tax returns, particularly where the super fund had high levels of refundable franking credits.

 

More recently legislative amendments have been made so that any super balance supporting a TRIS will continue to be taxed at 15% (as if the fund was still in accumulation phase). The logic being that only individuals truly seeking to transition to retirement will use this strategy rather than being motivated by tax outcomes. However, for individuals between the ages of 60 and under 65, a TRIS may still be an attractive strategy under a few scenarios.

 

1. Individuals who do not generate surplus cash flow from earnings and are not fully utilising their $25,000 annual concessional contribution cap could commence a TRIS to give them the capacity to either start salary sacrificing through their employer or start making personal concessional contributions. This strategy would have the benefit of reducing personal income tax and boosting the amount of funds available for investment in super ultimately driving a higher retirement balance. Any surplus above the $25,000 cap could then be contributed as a non-concessional contribution which would also have the benefit of reducing potential future death benefits tax.

 

2. TRIS payments could also be used to accelerate the repayment of non-deductible debt (e.g. mortgage). This strategy works well where the individual is maximising their $25,000 concessional contribution cap (reducing persona tax) and then drawing on these fund via a TRIS to pay down their mortgage.


3. TRIS payments could also assist in providing additional cash flow to support the payment of a larger concessional contribution made under the 'catch up' provision. This strategy allows an individual who has a super balance below $500,000 to use up to 5 years of previously unused concessional contributions in one year. The resulting tax deduction could then be used help to offset the CGT impact of the sale of an asset where the proceeds from the sale of that asset are not available to be contributed to super.

 

Again professional expert advice from a fully licensed financial adviser should be sought, prior to implementing any of these strategies.

 

”If everyone is moving forward together, then success takes care of itself” - Henry Ford

 

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