Superannuation and Estate Planning

New changes to superannuation laws are set to take effect from 1 July 2017.   The changes are complex and significant and will affect the way Australians plan for their future.

The major change from an estate planning perspective is the introduction of the $1.6 million balance cap on pension accounts, known as a “transfer cap”.   More detailed information about the balance cap is contained under the header “transfer caps” below.

The most effective way to deal with the implementation of the balance cap will depend on a number of circumstances, including the tax free and taxable components of each superannuation account, the amounts in question and associated taxation issues. The time to speak to your accounting advisers about this is now, before the changes commence, to ensure your estate strategy can be implemented in this changing environment.   You should:

  1. Review your existing pensions and balances to determine if you are likely to exceed the new caps during your lifetime and upon the death of your partner.
  2. Seek advice about your options and implications of those options on tax, asset protection, estate planning and Centrelink.
  3. If you have a self-managed super fund, consider whether it needs updating.
  4. With your accountant, consider the cost base of assets that might need to be commuted back to accumulation phase as they may become subject to CGT.

Estate planning will need a careful consideration of what assets will be funding the pension account, how death benefits might be paid and to whom.   While many problems can arise from the pending changes, many problems can be avoided if you take the time to obtain expert financial advice now.

The majority of these changes will significantly reduce the taxation benefits in the superannuation environment. Testamentary discretionary trusts are expected to continue to be important vehicles to preserve family wealth for future generations. They are contained in Wills and commence when the Will maker passes away. They provide some opportunities for asset protection and maintain flexibility for minimising the tax rates payable through income streaming and other mechanism.

Lennon Mazzeo Lawyers work with your accountants and financial advisers to ensure that your estate planning goals are achieved, through creation of testamentary discretionary trusts or other vehicles.

If you would like more information about your estate planning or changes to the superannuation rules, please contact Lennon Mazzeo to discuss on (03) 9670 5999.

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