Downsizer contribution top of advisers' query list
Downsizer contributions to superannuation has been the top query from advisers during September to December 2020 with the COVID-19 pandemic mostly under control in Australia.
BT technical consultant, Tim Howard, said advisers had been asking about the details of the downsizer contribution.
The downsizer contribution would not count towards a client’s non-concessional contributions cap, so it could be made even if members had a total super balance greater than $1.6 million. The contribution was however limited to $300,000 or the proceeds of sale, whichever was the lower amount.
Howard said advisers should keep in mind that clients need to make the contribution within 90 days of receiving the sale proceeds as the process of buying meant that taking advantage of this contribution strategy was often placed on the backburner.
The second most popular query was exempting proceeds from the sale of the principal home as a result from downsizing.
If a client had sold their principal home and was intending to use the sale proceeds to buy, build, or renovate a new principal home, then the proceeds could be exempted under the assets test for 12 months. This meant that the sale might not adversely affect their Age Pension entitlement during that time.
The third most asked topics from advisers was about the one-off superannuation guarantee (SG) amnesty that ended on 7 September, 2020.
Advisers could apply to the Australian Taxation Office (ATO) to disregard or re-allocate the payment/s to the financial year in which the contribution should have been made, for cap purposes.
“Importantly, if a client receives an excess contribution notice this year, they need to respond within the time prescribed,” Howard said.
“If they know they are going to go over the cap, it’s best to make an application for an excess contributions determination ahead of time, and not wait for the notice.”
Bright-forward contribution changes was the next most popular query as advisers questions whether the start date would be amended and whether a grace period would be put in place, and whether the proposed legislation was still expected to become law.
“The legislative process has been delayed, however there is still a high level of confidence that the critical component, regarding the bring-forward non-concessional contribution to super, will pass, as it’s not contentious,” Howard said. “It’s more a matter of when.”
Parliament is currently due to reconvene in February 2021.
The last most popular query was the treatment of foreign assets, pensions, and income streams.
Due to travel restrictions during COVID-19, some Australians might have left their income streams while others were looking to sell their assets. BT said advisers were being asked how these would be treated by Centrelink in relation to clients’ eligibility for the Age Pension.
It said broadly, foreign assets and income streams were captured in Centrelink’s assessment for eligibility, however the treatment can be different depending on the country so it was best to thoroughly check each client’s situation.
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