Time to get in touch with super

Carly O'Keefe

It is probably ironic that something labelled ‘simple super’ comes with over 900 pages of legislation and regulation. But that is the end result of last year’s Budget announcement by the Federal Government.

Yet, despite the sheer weight of information contained, life insurance advisers need not be apprehensive of the new ‘simple super’ regime, but should, in fact, be looking to take advantage of it.

But they’ll need to move quickly as a couple of the valuable opportunities available to their clients could be missed unless action is taken before June 30, 2007.

In short, the simple super regime, which mainly takes effect from July 1, 2007, provides the perfect opportunity for life insurance advisers who may have kept away from super in the past to take another look at it.

It gives those advisers who have some historical clients with super investments the chance to knock on their door and perhaps re-energise a near-dormant business opportunity.

For superannuation advisers, there has been plenty of information put out since last year’s Budget and, in the lead up to July 1, there is likely to be a lot more.

But for life insurance advisers with clients holding some super investments and who may not be on top of the changes, here are some opportunities to get back in touch.

Clearly, there is the key advantage, which has been widely promoted everywhere. From May 10, 2006, until June 30, 2007, people can put up to $1 million of non-concessional contributions into their super.

Time is running out for those who want to sell an investment property or other assets to ensure they make the cut-off date. If selling property, then the transaction needs to be well underway by early May for a chance to meet the deadline.

But make sure the sums add up. There may be capital gains tax implications when the asset is sold.

From July 1, 2007, the numbers change. Non-concessional contributions (generally after-tax contributions) of up to $150,000 per annum can be made if the client is eligible to contribute to super. For those under 65, this can be averaged over three years for a total contribution of $450,000 in that period.

Super consolidation should also be given a very close look, especially for those long-standing clients with some pre-July 1983 component. Consolidation can result in a higher pre-July 1983 component, which will translate into a higher tax-free component under the new July 1, 2007, system.

Increasing the tax-free component can flow through to other areas.

For the life insurance adviser, this is especially applicable when it comes to death benefits paid to non-dependants for tax purposes.

Again, a June 30, 2007, deadline applies, as the pre-July 1983 component will be crystallised and a thing of the past from July 1, 2007.

For advisers of corporate super funds, it is a good idea to start talking to employees now and bring them up to speed with the new rules and opportunities available.

You should have records to help you identify and prioritise these activities.

For the life insurance adviser, the other big issue to pick up on is the abolition of Reasonable Benefits Limits from July 1, 2007. Again, when a death benefit is paid to a dependant for tax purposes, the benefit will be paid tax free.

For the client, there are upfront advantages in structuring insurance through super, such as receiving tax deductions, reducing costs if packaged through salary sacrifice, as well as spouse contribution tax offsets and maybe even being eligible for co-contribution payments.

Time is running short, but the advantages to both the client and adviser are worth the time and effort necessary for getting all the processes into place.

There is no doubt that many life insurance advisers in the past have steered clear of superannuation advice, and the reason for that is obvious: complexity.

But with the new rules, the opportunities exist for advisers to renew old contacts.

You may be surprised at the response and how many clients suddenly become much bigger going forward, and how the value of your business can also increase at the same time.

To use the old management phrase, it could be a win-win result for both of you.

Carly O’Keefe is marketing manager of superannuation at TowerAustralia .