Indexation and thresholds top of mind this EOFY

The indexation of superannuation caps and thresholds can have significant impacts on retirement plans from 1 July, 2021, according to BT. 

BT said with the end of the financial year coming up that financial advisers needed to have indexation, the downsizer contribution, bring-forward contributions, Pension Loans Scheme eligibility, and opt-in fees top of mind.  

BT technical consultant, Tim Howard, said indexation from 1 July, 2021, applied to a range of thresholds and advisers needed to be prepared for questions on how clients might be impacted. 

“Watch out, in particular, for some tricky figures when calculating your client’s eligibility to make a bring-forward contribution,” Howard said. 

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“For instance, from 1 July, 2021, clients will need a total super balance of less than $1.48 million to make a full $330,000 bring-forward contribution, and less than $1.59 million to make a two-year, 

$220,000 bring-forward contribution.” 

Howard also said clients would be looking to use the downsizer contribution as a way to boost their retirement savings. The contribution would not count towards a client’s non-concessional contributions cap and could still be made if they had a total super balance over $1.6 million ($1.7 million from 1 July, 2021). However, the contribution was limited to $300,000 or the proceeds of the sale, whichever was the lower amount. 

“Going forward, eligible individuals could be continuing to work through their early sixties – although there is no requirement to be working – and also capitalise on the booming property markets across the country,” he said. 

He noted that clients needed to make the contribution within 90 days of receiving the sales proceeds. 

Also, eligibility for bring-forward contributions was set to increase to under 67 today under the draft legislation in the Senate. 

“Keep in mind there is a somewhat related measure from the 2021 Federal Budget that may benefit clients in this difficult position,” Howard said.  

“It has been proposed that the work test won’t apply to non-concessional contributions from 1 July 2022 for those ages 67 to 74. Should this become law, a non-working retiree who has missed their bring-forward window could potentially contribute up to the general non-concessional cap of $110,000 each and every year, up to age 74.” 

The Pension Loans Scheme, Howard said, could be an effective way for retirees to access the equity in their homes to create a meaningful cashflow boost. 

Howard also pointed to the requirement for advisers to obtain annual client consent for ongoing fee arrangements for all clients and that administrative processes needed to be in place to meet the requirement.