A million dollar opportunity
“With the proposal for no tax payable on lump sums and pensions from super after age 60, parking money in super could save you a lot of tax on investment income,” says Ian.
“It may be worthwhile to consider getting it into super now before most of the proposed changes to the super rules come into effect from 1 July 2007."
While income and taxable capital gains from investments outside super are taxed at your marginal tax rate, from 1 July lump sums and pensions paid from super will be tax-free, as long as you are at least age 60.
Until 30 June 2007, a $1 million window for after-tax super contributions will be open for anyone under 65, whether working or not, and anyone between 65 and 74 who works 40 hours in any 30 day period. But from 1 July, there will be a restriction on after-tax contributions of $150,000 pa, or $450,000 over a three-year period for people under 65.
“The caps on after-tax contributions to super were bad news for people planning to sell assets and make a last minute dash into super before retiring,” says Ian.
“In announcing the $1 million contributions window, the Government recognised that this has been a legitimate financial planning strategy, especially for business owners."
Business owners of 15 years have also been offered a separate once in a lifetime opportunity to contribute an additional $1 million from the sale of their business into super.
“This means a couple running a small business could potentially contribute up to $4 million into super next year,” says Ian.
The changes present a major retirement planning opportunity for everyone.
“You may want to discuss some possibilities with your financial adviser such as cashing in assets, investment properties and direct shares up to $1 million and contributing funds into super,” says Ian.
“Another strategy might be to transfer assets into a self-managed super fund via an in-specie transfer."
Of course, you will need to take into account any tax implications and pay special attention to your super fund.
“Most importantly, you will need to make sure your super fund is well diversified - $1 million is a lot of money to put into one basket."
For further information, contact Ian Siemon from RetireInvest Alderley.
This editorial does not consider your personal circumstances and is general advice only. You should not act on any recommendation without considering your personal needs, circumstances and objectives. RetireInvest recommends you obtain professional financial advice specific to your circumstances.