Financial planners must rethink super strategies: Neil Kendall
Contributing to superannuation is looking less attractive for high income earners following the changes in last week's Federal Budget, according to Tupicoffs adviser Neil Kendall.
For the 2012-13 financial year, clients earning over $300,000 will see the tax payable on their super contributions doubled from 15 to 30 per cent; and the concessional contributions cap has been halved to $25,000 for those aged over 50.
Effectively, the maximum benefit for contributing to super will be reduced from $15,000 to $3,750 for 50-year-olds earning over $300,000, said Kendall.
"Superannuation will become less important and less significant for very high income earners," he said.
"Clients will ask: 'Is it worth putting money in this controlled environment where the Government has changed the rules for a $3,750 benefit?'," Kendall said.
While employed clients earning over $300,000 will be forced to contribute to super through the superannuation guarantee, self-employed professionals - such as doctors, dentists and lawyers - "may choose to end, or drastically reduce, their participation in super," Kendall said.
Negative gearing strategies are looking more attractive following the announcements in last week's Budget, he added.
"The relativity between super and negative gearing has been such that you would take the super option even at 15 per cent. At 30 per cent, I think for every client you'd have to be reassessing what the appropriate strategy looks like," Kendall said.
Paying down debt may also start to look more attractive than putting money in super - particularly for older clients, he added.
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