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5th June 2020 - Private Wealth
This year has thrown grey clouds over a lot of well planned futures. But if you peer through the gloom and focus on what’s possible, it soon becomes clear that there may be some opportunities out there.
For those drawing super pensions, the reduced minimum amount that applied for 2019/20 will apply again in 2020/21. This means that if you don’t require everything you are currently drawing, this could be an opportunity to reduce pension payments (by up to 50%) and help preserve your super balance during the downturn.
The government is getting ready to pay a second $750 economic support payment to some Centrelink recipients and concession card holders. This payment will be based on eligibility as at 10 July. Included in the payment are people with the Commonwealth Seniors Health Card (CSHC). So, even if you don’t qualify for a pension, you may be eligible for the cash bonus. In particular, self-funded retirees that have reached pension age should ensure they have assessed if they are eligible for the CSHC. Unlike the age pension, it is not asset tested and has a very generous income test.
Personal tax deductible super contributions (known as concessional contributions) should be considered. The maximum limit for the year is $25,000, and this includes employer contributions, salary sacrifice and personal deductible contributions.
The 2019/20 year is also the first year where catch-up concessional contributions are available. As an example, if you contributed $15,000 last year, then you have an extra $10,000 that you can catch-up on top of the normal $25,000 limit.
Please note however, this option is only available for those that had total amounts in super of less than $500,000 as at 1 July 2019.
Although the decline in investment values can be distressing, they also can create opportunities to make extra super contributions. There are several types of contributions that are limited, based upon your total super balance. This is measured on 30 June each year, so a lower balance at the end of the 19/20 year could create extra contribution opportunities for 20/21. Please note, non concessional contributions are only available to people who have less than $1.6 million in super.
Under the transfer balance cap rules, the government now limits how much super monies people can use to start pensions to $1.6 million. For those people who haven’t previously used all their limit, a downturn can actually be a good time to start pensions. This is because more of your super can go into pensions without breaching this cap.
Ceasing an employment arrangement after age 60 is a condition of release for super, so if you have lost your job there could be a chance to start a pension, even if you are hoping to return to work in the future.
The transition to a new financial year and the decline in markets can present many strategic opportunities, so please contact your Elston adviser with any queries.
If you would like more information please call 1300 ELSTON or contact us to speak to one of our advisers.
This material has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in this material is General Advice and does not take into account any person’s individual investment objectives, financial situation or needs. Before making an investment decision based on this advice you should consider whether it is appropriate to your particular circumstances, alternatively seek professional advice. Where the General Advice relates to the acquisition or possible acquisition of a financial product, you should obtain a Product Disclosure Statement (“PDS”) relating to the product and consider the PDS before making any decision about whether to acquire the product. You will find further details of the service we provide and any cost to you within the Financial Services Guide. Any references to past investment performance are not an indication of future investment returns. Prepared by EP Financial Service Pty Ltd ABN 52 130 772 495 AFSL 325 252 (“Elston”). Although every effort has been made to verify the accuracy of the information contained in this material, Elston, its officers, representatives, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this material or any loss or damage suffered by any person directly or indirectly through relying on this information.
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