There is plenty of discussion about the new rules limiting tax-free superannuation caps.
Omniwealth thought a real-life case study that was actioned in client’s SOA in April-May would be useful.
Scenario
- Husband is a 65 year-old highly paid professional and his wife is age 60, not working
- Husband has $1.6M in super and his wife has $200,000
- Husband’s taxable/tax free components are 80/20
- Wife’s taxable/tax free components are 93/7
Strategy
Husband to withdraw a lump sum of $540,000 from his super account. This lump sum should then be contributed to the wife’s super account as a non-concessional contribution – taking full advantage of the current bring forward rules before the 30th June 2017.
Benefits of this strategy
- Husband still has room to move up to the $1.6M tax free pension threshold, which he will more than likely achieve by the time he retires in 5 years’ time.
- Wife now has a larger balance of $740K
- Combined tax-free component has increased from 19% to 43% – this means that from an estate planning perspective, if the worst happens and husband and wife are no longer with us, their adult children will pay less tax on their inherited combined superannuation balances.
- There is still opportunity to repeat this strategy in 3 years’ time with the new bring forward amount of $300,000.