FPA calls 2016-17 Federal Budget changes “Super Spaghetti”

From

De-Gori-Dante-250The Financial Planning Association of Australia (FPA) welcomed fairness measures in the Federal Budget but cited concerns with increased complexity, changes to the “transition to retirement” (TTR) strategy in tonight’s 2016-17 Federal Budget announcement and called on FPA members to carefully consider the effect on clients.

FPA CEO Dante De Gori CFP® said: “The TTR strategy that helped thousands of middle to low income earners has effectively been killed off by the Government, meaning almost all financial planners and clients will need to carefully review the circumstances of those approaching retirement.

“The FPA believes that the ‘effective’ abolition of TTR is a net negative for low to middle income earners. The tax exemption for earnings on assets supporting TTR income streams will be removed, and concessional contribution caps reduced.

“These changes mean financial planners must help clients navigate an increasing number of rules and consider the retrospective nature of these changes particularly around tax and super.”

In particular, there will be a:

  • $1.6 million superannuation transfer balance cap, limiting the amount that can be transferred to retirement phase
  • Reduction in the threshold from which an extra 15% tax applies on contribution to super, from $300,000 to $250,000
  • Lowering of the concessional contributions cap to $25,000
  • Limiting of the non-concessional contributions through a lifetime cap for non-concessional contributions of $500,0000

Mr De Gori said the FPA welcomes measures to improve fairness in the superannuation system. “There are measures in tonight’s 2016-17 Federal Budget to help low-income earners and those with low superannuation balances, such as the introduction of a Low Income Superannuation Tax Offset (LISTO) to reduce the effective tax rates on concessional contributions to super for individuals with incomes under $37,000.

“The FPA also welcomes measures to encourage catch-up contributions. Individuals, especially women, with superannuation balances under $500,000 will be able to rollover their unused concessional contributions cap from previous years.

“Individuals will also be able to claim a deduction for personal contributions to superannuation, regardless of their employment status. Currently, the deduction is limited to self-employed or ‘substantially self-employed.

“As a result of tonight’s announcement, the FPA encourages planners to plan client reviews carefully, giving priority to those affected immediately or very soon, versus those where the potential impact is very significant.

“From a consumer point of view, we encourage consumers, particularly those most affected to seek professional advice in order to navigate the various potential effects of tonight’s announcement,” concluded Mr De Gori.

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