Superannuation changes: From complexity to sensible strategy.
Putting the new superannuation rules into effect.
As usual, Government's first step was to...
...announce the major deadline: 30-Jun-17.
Then came the legislation (November 2016 - see Wealth Intelligence 9 November 2016 ).
And then came the regulations and ATO guidelines (as recently as March 2017 for the $1.6m Transfer Balance Cap).
So, Government: You want all of the changes analysed; applied to each client; formal advice given; recommendations reviewed; etc, all done prior to 30-Jun-17?
First Samuel has successfully navigated the complexity of the new superannuation regime for our clients
Ignoring for a moment those of our superannuation clients who were affected only by the decrease in Non Concessional Contribution (i.e. almost all), we had some 36% of our client base likely to be affected by the other major changes. These clients are close to or in retirement phase and with member balances near or more than $1.6m each.
And many accountants and media 'experts' were saying, it's all okay, you've got until March 2018 to sort it all out (when FY-17 SMSF tax returns, generally, must be lodged). No. To ensure successful ongoing portfolio management the changes and CGT Relief arrangement must be made on or as soon after 30-Jun-17 as possible.
Unless this is done and the new cost base of the investments in your portfolio correctly recorded, how are you going to manage between 30-Jun-17 and 31-Mar-18?
Even before the latest ATO guidelines were finalised, First Samuel's Wealth Strategy Team of personal financial advisers had already analysed our client base to carefully consider all clients affected.
We then began discussions with our clients’ accountants. And to get clarity on the best manner to approach the changes we also had a number of meetings and discussions with one of the larger accounting groups we deal with (by client number). Almost every possible combination of client SMSF circumstance exists in our mutual clients.
So we were well placed not only to strategise the best course of action for mutual clients with that accounting firm, but also to consider and apply relevant insights to other clients.
We have since contacted over 90% of affected clients; and have provided advice or had discussions on these changes.
We will have advised 100% of affected clients well before the 30-Jun-17 deadline, allowing plenty of time for consideration and implementation of recommendations.
Critically important is the ability of any portfolio accounting system to effectively manage the CGT Relief arrangement (where necessary). First Samuel is fortunate to have a system that will allow this.
Consequences of the new regime
The new regime means that for many clients previously in the tax-free pension phase, some (and possibly much) of their portfolio will now be taxable. And this will be the case for other clients in the future.
Active tax management is again critical. Only by individual and direct investment management can this be achieved.
And the use of non-superannuation structures (e.g. family trust, individual portfolios) for a portion of investments in excess of $1.6m is often sensible.
Only a manager that manages both superannuation and non-superannuation investments can efficaciously manage the total wealth solution. It is worth repeating (and has been reinforced by these changes) that First Samuel is uniquely placed to capture the broadest opportunities from the new regime.
But there is more...
An unintended outworking of the new regime is the change to estate planning rules.
Very little attention has been paid to this. Different rules will apply after 30-Jun-17 to death benefits from assets below the $1.6m pension cap to those above it.
But it's another reason to have a wealth manager that can consider all of your structures and circumstances and integrate them with a sensible investment strategy.
For First Samuel clients: Nikki, Simon, Jack, Jenny and I look forward to answering any questions or providing any clarity.
For others wishing a meeting about a long-term relationship with First Samuel, please contact Susanne Retallick. Please note that we will not provide personal financial advice just about the new superannuation regime. Our relationship with our clients is about long-term integrated wealth management:
- personal financial advice;
- individual investment management; and
- comprehensive reporting and administration; overlain with
- highest ethical standards
And since 1999 this has been the basis of the manner in which we have successfully served our clients needs.
- Chris Tsatrafilis, Senior Client Strategist