Downsizing requires holistic tax planning

For many it's more than just issues to do with Superannuation.

 

 

Advisers and their SMSF clients need to be mindful of some of the wider tax planning implications of the federal government’s downsizing measure, according to a specialist industry lawyer.

DBA Lawyers director Daniel Butler said the measure will require advisers to consider tax planning measures outside of superannuation, including the impact of the potential loss of franking credits. 

In addition, Butler revealed he had noticed a reduction in clients opting for structures outside of super.

“Everything went into super because that was where everything was destined to go and was more efficient,” he said at the law firm’s recent SMSF Strategy Seminar in Sydney.

“But now with all these caps, we’ll be back to some of the old planning. 

“Clients again will have that family trust or they’ll have the corporate beneficiary, and there’s more tax advice to that.”

He again reminded advisers the major downside to contributing the proceeds of the downsizing measure to super would be the impact on members’ Centrelink entitlements, mainly the age pension.

Regardless of the value of the member’s family home, it remains outside of the assets test, he warned.

“Once you attain pension age, super is assets tested and has the deemed rate of return. So it [the downsizing measure] really isn’t that wise for some people because they’re going to burn their Centrelink entitlement,” he said.

“But for people who have never had the opportunity of getting Centrelink, it’s one of those opportunities you may want to think about.”

The measure presented an opportunity for clients with low superannuation balances to boost their super by selling the family home, however, the initiative may not be permanent as Butler believes Labor does not support it and will likely scrap it if it wins the next election.

 

 


By Malavika Santhebennur
​22 March 2018
www.smsmagazine.com.au

IT Financial Services, ABN 48 097 884 976, is an Authorised Representative of Apogee Financial Planning. Apogee Financial Planning Limited ABN 28 056 426 932 is an Australian Financial Services Licensee and has its registered office at 105 - 153 Miller Street North Sydney NSW 2060. A member of the National group of companies.