When it comes to excess concessional and non-concessional contributions the opportunity that is not being understood is the impact advisers can make in helping people make a decision on whether they should withdraw from super, according to Heffron.
Heffron’s managing director, Meg Heffron, said the first option to consider was whether to take the excess contributions out of super or not. The second was if they were to take it out of super and had multiple accounts which one should they take it out of – whether it be their pension or accumulation account.
Heffron said most people with excess concessional contributions took money out of super because they thought they might as well, given it did not make a difference on extra tax they paid, and if they had a net amount they could put it back in as a normal non-concessional contribution that created a tax free component.
“But the people who choose not to do that have a good driver and one of those is maybe they’re not able to make non-concessional contributions anymore. So, when they created that excess, they were able to make extra non-concessional [contributions] but they can’t anymore,” she said.
“The idea of taking it out and putting it back in just doesn’t work anymore.”
Heffron said an example of that was somebody that made a contribution in this current year, was over 67 but met the work test and exceeded the concessional cap accidentally. It would then take a while for the member to get notified about it by the tax office until the following year. At that time they could not take the money out and put it back in as non-confessional contribution because they no longer had the right to make non-concessional contributions because they were too old, not meeting the work test, and not eligible for work test exempt contributions.
Here, Heffron said was a way for an adviser to quickly get in and advise their client to not apply to have that excess refunded to the tax office and ultimately returned to you, but to just leave the money in super.
“A slight variation to this is if you have any clients with reserves. Reserve contributions can count towards the concessional contribution cap. You can make sure they don’t by making sure the allocation is less than 5% and that it is fair and equitable,” she said.