Downsizing requires holistic tax planning
For many it's more than just issues to do with Superannuation.
Advisers and their SMSF clients need to be mindful of some of the wider tax planning implications of the federal government’s downsizing measure, according to a specialist industry lawyer.
DBA Lawyers director Daniel Butler said the measure will require advisers to consider tax planning measures outside of superannuation, including the impact of the potential loss of franking credits.
In addition, Butler revealed he had noticed a reduction in clients opting for structures outside of super.
“Everything went into super because that was where everything was destined to go and was more efficient,” he said at the law firm’s recent SMSF Strategy Seminar in Sydney.
“But now with all these caps, we’ll be back to some of the old planning.
“Clients again will have that family trust or they’ll have the corporate beneficiary, and there’s more tax advice to that.”
He again reminded advisers the major downside to contributing the proceeds of the downsizing measure to super would be the impact on members’ Centrelink entitlements, mainly the age pension.
Regardless of the value of the member’s family home, it remains outside of the assets test, he warned.
“Once you attain pension age, super is assets tested and has the deemed rate of return. So it [the downsizing measure] really isn’t that wise for some people because they’re going to burn their Centrelink entitlement,” he said.
“But for people who have never had the opportunity of getting Centrelink, it’s one of those opportunities you may want to think about.”
The measure presented an opportunity for clients with low superannuation balances to boost their super by selling the family home, however, the initiative may not be permanent as Butler believes Labor does not support it and will likely scrap it if it wins the next election.
By Malavika Santhebennur
22 March 2018
www.smsmagazine.com.au
Latest Newsletters
Hot Issues
- SMSF assets reach record levels amid share market rally
- Many Australians have a fear of running out
- How to get into the retirement comfort zone
- NALE bill passed by parliament
- Compliance focus impacts wind-ups
- LRBA interest rates increase for 2025
- Income-free areas set to increase from 1 July
- Most Spoken Languages in the World
- Middle-to-higher incomes boosting SMSF growth
- Investment and economic outlook, May 2024
- Transitioning into retirement: What you should know
- Plan now to take advantage of stage 3 tax cuts
- Deeming freeze a win for Age Pensioners
- Downsizer contributions can be time critical
- The superannuation changes from 1 July
- The Deadliest pandemics in History
- Winners & Losers
- Budget breakdown – Federal Government Analysis
- Federal Budget 2024
- Getting to a higher level of financial literacy in Australia
- What is the future of advice and how far off is superannuation 2.0?
- Investment and economic outlook, April 2024
- Australia’s debt service ratio ‘extraordinary’: CBA
- Connecting an adviser with your children
- ACCC scam report
- The Shortest-reigning Monarchs in History
- ATO warns trustees about increasing crypto scams
- Aged care report goes to the heart of Australia’s tax debate
- Removed super no longer protected from creditors: court
- ATO investigating 16.5k SMSFs over valuation compliance
- The 2025 Financial Year Tax & Super Changes You Need to Know!
- Investment and economic outlook, March 2024
Article archive
- April - June 2024
- January - March 2024
- October - December 2023
- July - September 2023
- April - June 2023
- January - March 2023
- October - December 2022
- July - September 2022
- April - June 2022
- January - March 2022
- October - December 2021
- July - September 2021
- April - June 2021
- January - March 2021
- October - December 2020
- July - September 2020
- April - June 2020
- January - March 2020
- October - December 2019
- July - September 2019
- April - June 2019
- January - March 2019
- October - December 2018
- July - September 2018
- April - June 2018
- January - March 2018
- October - December 2017
- July - September 2017
- April - June 2017
- January - March 2017
- October - December 2016
- July - September 2016
- April - June 2016
- January - March 2016
- October - December 2015
- July - September 2015
- April - June 2015
April - June 2018 archive
- Assess your retirement financial resources
- Cryptocurrency audits tipped to increase this EOFY
- Time to check your risk exposure?
- Some general interest stats on SMSFs
- Survey reveals strong opposition to retirement system changes
- Check trust deed to protect super in estate planning
- Australia by numbers – Update
- Federal Budget 2018 – Overview
- Your Budget
- 4 components of our 2018 Federal Budget
- Tools to help you manage your financial position are available on our site.
- New rules capture SMSFs trading big with cryptocurrency
- Common EOFY slip-ups flagged for SMSFs
- Beware residency rules if moving overseas
- 99 pct of SMSFs missing global opportunities
- How to plan for a better retirement
- Australia by numbers - Update
- Determine your retirement goals
- ATO issues update on cryptocurrency compliance traps
- How likely is a global trade war?
- Gig economy spike prompts calls for super policy changes
- Australia's vital statistics
- What your age should say about your super
- Downsizing requires holistic tax planning
- Millions of multiple super accounts erode savings