Estate planning opportunities highlighted with work test changes
With the work test changes for over-65s opening up opportunities for recontribution strategies, clients may be able to even up balances and adopt tax strategies for estate planning, particularly once the bring-forward measure is passed, says a technical expert.
At the end of June, regulations came into force allowing people aged 65 and 66 to make voluntary concessional and non-concessional contributions without meeting the work test, and allow people up to age 75 to receive spouse contributions.
The other measure to allow people aged 65 and 66 to make up to three years of non-concessional contributions under the bring-forward rule is yet to be passed by the Senate.
SuperConcepts SMSF technical specialist Anthony Cullen explained that while the age at which the work test starts to apply has increased to 67, the conditions of release have remained at age 65 which opens up opportunities for recontribution strategies, particularly if the bring-forward measure is passed.
Speaking in a SuperConcepts podcast, Mr Cullen said this may enable clients to even out balances between members which could help them to maximise their transfer balance cap.
“[For example], if you’ve got a couple and let’s say the wife has $2 million and the husband only has $1 million, potentially there’s an opportunity for the wife who reaches age 65 to draw money out of her fund, after meeting that condition of release, and potentially make a contribution to her spouse,” he said.
“By the time they get to the point where they want to start a pension, hopefully both of them are closer to that $1.6 million transfer balance cap.”
Recontribution strategies could also be effective, he said, as an estate planning and “future-proofing” tool.
“The government is always tinkering with superannuation, so we never know what’s going to happen with the law, so if we have an opportunity to take out predominantly taxable components from our fund and then recontribute them as tax-free components, that may provide some future-proofing against legislative changes,” he said.
“From an estate planning point of view, when your money gets to the point where it’s flowing through to your adult children, your adult children will be paying a death tax on the taxable components, and so, if we can change those taxable components while we’re alive to tax-free components that your children will not be paying tax on, then that provides some estate planning opportunities.”
Miranda Brownlee
25 September 2020
smsfadviser.com
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
October - December 2020 archive
- 2020 is coming to an end. Phew!!
- ATO flags key deadlines for early release of super
- Retirement costs rising despite COVID impacts
- Government targets fund expenditure, best interests in new super reforms
- Small SMSFs develop rapidly
- Investing basics for first timers
- Behind the dash in new market listings
- Super, death, and taxes
- What millennials are thinking about investing and retirement
- Capital preservation front of mind for SMSF returns
- Comprehensive list of COVID-19 initiatives and packages.
- Most SMSFs are still poorly diversified
- Related party purchases must be clean
- How your coming tax cut could pay off
- Majority of retirees expected to fall short on retirement savings
- Monitoring super performance critical in light of new measures
- Budget 2020 - A very comprehensive break down.
- Budget 2020 - Fact Sheets
- Budget 2020 - At a Glance, Overview, Outlook
- JobKeeper extension – changes implemented
- Temporary home office expenses shortcut extended again
- Investment preferences of the young
- How to construct an effective portfolio
- Estate planning opportunities highlighted with work test changes
- Lenders are getting tougher on older borrowers