We summarise the changes to help you navigate the new rules, as well as highlight key advice opportunities to maximise client outcomes in 2022 and beyond.

The changes provide significant strategic advice opportunities from 1 July 2022, particularly in relation
to older clients and super contribution strategies. The legislated changes include:
removal of the work-test requirement for non-concessional contributions (NCCs) and salary sacrifice
contributions, for individuals aged between 67 and 752
extending eligibility to make NCCs under the bring-forward rule to individuals aged under 75 at the
beginning of the financial year
extending eligibility to make downsizer contributions to those age 60 or over, and
an increase to the maximum amount of voluntary contributions made to super that can be released
under the First Home Super Saver Scheme (FHSSS).
The amendments may provide a range of new advice opportunities for clients who thought the super door was permanently closed to them. The strategic opportunities surpass simply boosting an individual’s super balance. 

Check out my latest Retirement & Money podcast episode for more details around potential opportunities for you.  These changes have been coming since Budget Night 2021, but now we can act on them from July 1st 2022.

 Rob Laurie.

Financial Adviser

Wealth Factory

This is Rob Laurie and welcome to retirement and money where we aim to improve the quality of your retirement. Legislation has finally been passed to give effect to several of the key super changes proposed in the 21 federal budget. The changes provide significant strategic advice opportunities from one July 2022, particularly in relation to older clients and super contribution strategies. The legislative changes include removal of the work test requirement for non concessional contributions and salary sacrifice contributions for individuals aged between 67 and 75. Extending eligibility to make non concessional contributions under the bring forward rule to individuals aged under 75. At the beginning of the financial year, extending eligibility to make downsizer contributions to those age 60 or over instead of a 65 as it currently is, and an increase to the maximum amount of voluntary contributions made to super that can be released under the first home supersaver scheme. The amendments may provide a range of new opportunities for clients who thought the super door was permanently close to them. Because of age basically, if you weren’t making the work test, until recently, it was 65. Now at 67, you couldn’t put any extra money into super want to over that age. Now that opens that door back up for a period of time depending on your age. So the removal of the work test. So this means that the work tests will no longer need to be met by individuals aged between 67 and 75. When making salary sacrifice contributions and personal contributions, the work tests will still need to be met to claim a tax deduction for personal contributions. Changes to the bring forward, non concessional cap eligibility so individuals aged less than 75. At the prior one July, will be eligible to access the non concessional cap bring forward arrangement, subject to meeting all relevant eligible eligibility criteria. individual’s age less than 75 at the prior first July, will be eligible to access the non concessional cap bring forward arrangement, subject to meeting all relevant eligibility criteria. So the opportunity here is cashing out and re contributing for one of two main reasons. The first one is to cash out and contribute to a younger spouse’s account to maximise the age pension. This is if the younger spouse’s account is still in Super accumulation phase, and they are not of age pension eligibility age. The second reason would be to withdraw and re contribute to your own funds to change the taxable component and the tax free component of your superannuation or retirement accounts for estate planning purposes. When your retirement accounts transferred to the beneficiaries as a result of your death. If the beneficiary is a non dependent under taxation law, which an adult child who’s not financially dependent on you usually would book they do pay tax on the amount of proceeds as mentioned in the previous podcast. So by taking money out of the Superfund and re contributing, it can reduce the taxable component and save some tax for your beneficiaries. The extension of the downsizer contribution to age 60, this used to be age 65, which meant if you were over 65, and you chose to downsize your home for retirement, you didn’t need such a large home, you were eligible contribute a lump sum of $300,000 in superannuation, and that is an addition to the non concessional cap. So potentially as a result, if you downsize your home and you hadn’t used up any of your non concessional cap before, you can potentially from the first July contribute up to $630,000 per fund. So if it’s a couple each fund subject to other caps

in one go. Now the first home Super Saver scheme. So they’ve increased the release amount on this. This is generally for first least for first time buyers dealing for younger people. Currently, they allowed up to $30,000 of voluntary super contributions to be released and used as a deposit for the first time. So basically, it meant that younger people could contribute into a super fund and get access to that money when they wanted to buy a house, which does have its merits. What they’ve changed on this is the amount will increase up to $50,000. The limit on the contributions that can be made annually will remain at $15,000 per year. So there’s a way to make access to buying first home, I guess, a little bit easier. In theory, it is subject to the volatility of their super funds, most young people will have a higher risk or asset allocation, more bias towards growth assets, then, an older Superfund. And as a result, depending on when they choose to buy their house, it may have a bigger impact on their super balance, but generally increasing it because housing prices are increasing, particularly since COVID. The more that they can pull out the bigger deposit they have, will probably keep fueling the housing price rise, I guess. That’s most of the changes that have been passed. These were passed on the 10th of February 2022. And they are coming into effect from the first of July. So for some older clients which are large, taxable component and sober, you may benefit from getting some advice on that. If you have the intention of passing on some superannuation assets as an inheritance, certainly some advantages around it. If you’re thinking of downsizing a home, but we’re waiting to age 65 If you’re aged between 60 and 64, and you’re looking at doing it from later in the year is potentially going to be open to you looking at selling and eligible property or can even be an investment property, it doesn’t necessarily have to be downsized. It doesn’t need to be your own home that you’ve lived in for the downsizer contribution. But if you’re over 67 and want to sell my investment property, now you can potentially do that and contribute some funds into the beneficial tax environment that super superannuation provides. Thanks for listening and I hope you enjoyed this episode. And remember, you can’t go back and change the beginning, but you can start where you are and change the ending. retirement money is brought to you by wealth factory. Wealth factory provides specialist financial advice to traders and business owners to ensure their retirement dreams are delivered. For more information go to wealth factory.com.au wealth factory is an authorised representative of lifespan financial planning limited AFSL 229892. The purpose of this podcast is provide factual information only. It is not intended to be financial advice. However any advice provided is general in nature and does not take into account your objectives, financial situation or needs. You should consider what the advice is suitable for you and your personal circumstances. Please speak to your financial advisor before making any financial decisions.

This is Rob Laurie, and welcome to retirement and money where we aim to improve the quality of your retirement. Death and taxes, as many common versions of the saying go, there is nothing certain in life, but death and taxes. But what about death taxes? Is there a death tax in Australia? What is not so commonly known is that Australia actually introduced death duties around 1914, and that legislation was only abolished in 1979. So Australia doesn’t have a death tax right now. Well, not exactly, but let’s talk about taxation on superannuation death benefits, particularly for non-dependents – an exciting topic, no doubt.

Now, according to the ATO website, when a person dies, in most cases, their supervisor pays the remaining super to their nominated beneficiary. A super paid after a person’s death is called a super death benefit. So we spoke about beneficiaries in previous episodes. But what we need to understand as well is that superannuation law sets out who a death benefit is payable to, so it’s one set of rules and taxation law sets out how the benefits will be taxed. As is the way with multiple pieces of legislation, they’re not always exactly the same. In this case, they aren’t. So who’s dependent on the superannuation law is different to who is a dependent under taxation law. Now, the biggest difference is in regards to children. Under superannuation law, children of the deceased of any age can be dependents. On the taxation law, children of the deceased are under 18 years old. So what a difference, which has far reaching consequences.

So there are other factors at play there with regards to dependency relationships and so forth, which can mean that children can fall into that, particularly if they are disabled children, for example. But generally speaking, adult children are not under taxation law, considered dependents. Now, the way that superannuation death benefits are taxed depends on whether the recipient is considered a dependent or a non-dependent. Now, if the recipient is considered a dependent of the deceased and they receive it as a lump sum, it’s that they don’t pay tax on it is tax free. Now, if they receive it in an income stream and depending on the age of the person deceased, the age of the person receiving it then can be partially taxable in a similar way to super death benefit received by a non-dependent in different tax rates, but going through the taxable, taxed and taxable untaxed elements. If you are not a a dependent of the deceased, work out how the super payment you will be taxed, you need to know how much of the money in the super account is in a tax-free component, taxable component that has the super provider has paid tax on super paid tax on and how much is in the taxable component that the super provider has not paid tax on. So the tax-free component is taxable tax and taxable untaxed.

This information can be provided via the super fund. They know it. It’s not printed out in any statements or anything like that generally, but it’s a common question that will get particularly from financial advisers when we’re doing a plan like that to understand what the holdings of a particular client are.

So on tax-free super, you don’t need to pay tax on the tax free component of the death benefit. So if, for example, if this example here will say that it’s been left to adult children who are not financially dependent, which is frequently the case on the tax free component, they don’t pay any tax on it. Now, how to get a tax free component in super would generally come as a result of making non-concessional contributions, so bringing lump sums in there they’ve already had tax paid on it will build up the tax free component of the super fund. If somebody’s never done that, generally, all the super funds are going to be taxable. Ok, now, how much tax will the beneficiary be paying on the proceeds on this superannuation death benefit.

On the taxable taxed element, they pay either marginal tax rate of 17%, including Medicare levy whichever is lower. This is according to the website, as at February 2022. On the taxable untaxed element, they pay the marginal tax rate of 32% whichever is lower. So depending on the marginal tax rate of the beneficiary depends on how much tax they pay. Now, Non-dependent cannot receive the proceeds as an income stream, they must take a lump sum there as well. Ok, now, when taking money out of super in pension or superannuation accumulation phase, when it’s in the pension phase, you can take it tax-free when you’re over 60 as well.

So if you’ve retired permanently under 60, you can access your superannuation in the pension phase tax-free. But you can’t draw it out, just the taxable component first, for example, if you had a fund that was 80% taxable, 20% tax-free, you can’t choose to take that 80% first, it comes out proportionately. Now, where this might be a consideration is if you’re expecting to have some proceeds left for your time after you die. So, for example, if you had an investment property and $500000 in super, so you were drawing that down and projections are showing you’re likely to have $250000 left by the time you raise your life expectancy. Now, what you might choose to do is if you sold that investment property and you’ve got 500000 cash, you could choose to add that to your super fund. Now what that would do is if you use another super fund of $500000 was like 80% like mentioned before. So you’ve got about $100000 tax-free, 400000 taxable and then you put 500000 into it, which you can’t do, you can put 250000 to up to 330000 bring bring forward rules, split it for two people you put 250000 into it. Okay, so that 250000 will go onto the tax-free component. So now you’ve got 350000 tax-free, 400000 taxable. Yeah, but you still can’t change where you’re drawing it from. As that fund grows, investment returns will make up the taxable component.They don’t increase the tax-free component. One strategy that can be employed is sometimes you can have a second super fund, for example, and you would add that $250000 to it. So yes, you’re paying additional fees for having another fund open or admin fee and all that sort of stuff. Then you have to work out what’s going to be better for you.

Generally, it’s not a huge amount of money. By having that $250000 in a separate fund, you could choose to not draw down money on that fund. As far as you do, if you have turned into a pension, you do have to take a minimum pension unless sort of stuff, but could choose to take the bulk of your proceeds from a taxable component. By keeping that separate, it gives you a little bit more control over that. So you have the five hundred thousand you draw most of your money out of that. And then when you pass away, if you happen to have $250000 left over in this super fund, any growth that’s had form a taxable component about that 250000 you’ve managed to keep it a little bit separate, so it will have a bit of an impact on your statement.

Now there is some new superannuation laws which have been passed just recently in February 2022, and some of that is in regards to opening up some re contribution strategies so things like you can do downsizing contributions, but also increasing the age until you have to make the work test it used to be 65 recently increased 67. Now it looks like it’s gone to 74 once a year under 75, effectively from July. So that means there is potentially time to take money out of superannuation and really contribute it as a way to reduce the taxable and nontaxable component of the fund. So as an example of that, if we didn’t contribute at $250000 and trigger bring forward rules and that sort of stuff, you only get one crack at that every three years. Or let’s say it’s been three years and we’ve opened up and we’ve got the non-concessional cap available to use again could potentially take out of that $500000 fund, let’s say $330000, you’re using it down to 170, 80% of 170s – I don’t know. We’ll call it 27 grand, something like that I’m guessing. That amount is going to be the tax free component with the rest of it taxable. So you’ve got, you say, left 150000 that’s taxable in the fund. Take that 3.38 where you contribute it because it’s non-concessional that pay tax or anything like that on it. You do have issues with regards to buy, sell spreads and time out of the market, that sort of stuff, but that would reduce the taxable component on that fund from 400000 down to 150000. If we’re talking, say, 17% tax rate on the difference, which is about, what, 250000. It’s gonna be $45000 better off for you. Adult children receiving the funds.

Once again, this is complex. Seek financial advice. Everyone’s circumstances are different. I’m just giving examples of some things that could possibly be beneficial under certain circumstances and not taking into account your personal circumstances. Now, just getting rid of the common perception that you need to have only one super and you should never have more than one Superfund. That’s not always true. Now, another strategy of reducing tax on superannuation death benefit proceeds is what we call the death bed strategy. So that’s cashing out super funds on your deathbed. It does have holes in it, especially if you’re under 60 and haven’t met condition of release, you can’t pull it out as you haven’t meet the conditions of release. Let’s say you meet a condition of release, for example, likely to pass away from a terminal illness, you pull your money out. Yet you’ve got limits on how much money you can put back in and all that sort of stuff. And then there’s also timing. You may not get time, so a lot of times people will die in an accident. That strategy is not going to work if it’s an instant death.

Ok, so that rounds off death and taxes just once again. Seek advice from a qualified estate planning lawyer and seek financial advice before implementing any of these strategies. Thanks for listening, and I hope you enjoyed this episode. And remember, you can’t go back and change the beginning, but you can start where you are and change the ending. Retirement and Money is brought to you by Wealth Factory. Wealth Factory provides specialist financial advice to tradies and business owners to ensure their retirement dreams are delivered. For more information, go to wealthfactory.com.au. Wealth Factory is an authorised representative of Lifespan Financial Planning Limited AFSL 229892. The purpose of this podcast is (to) provide factual information only. It is not intended to be financial advice. However, any advice provided is general in nature and does not take into account your objectives, financial situation or needs. You should consider what advice is suitable for you and your personal circumstances. Please speak to your financial advisor before making any financial decisions.

The purpose of this podcast is to provide general information only and the contents of this podcast do not purport to provide personal financial advice. We strongly recommend that investors consult a financial adviser prior to making any investment decision.

The contents of the podcast episode do not take into account the investment objectives, financial situation or particular needs of any person and should not be used as the basis for making any financial or other decisions.

The information is selective and may not be complete or accurate for your particular purposes and should not be construed as a recommendation to invest in any particular product, investment or security. The information provided on this podcast is given in good faith and is believed to be accurate at the time of compilation.

This is Rob Laurie and welcome to retirement and money where we aim to improve the quality of your retirement. First of all, very, very sorry for the long wait between episodes. I got super busy in my main job being a financial advisor looking after clients, starting in about August, meetings, catching up on client reviews and making lots of changes. Lots of people want to invest money, a lot of people
and changing circumstances selling investment properties, lots and lots and lots on the go. But anyway, we’re back. So in this episode, I wanted to talk about beneficiary nominations on superannuation. And that’s to set the groundwork for the next episode, where we’re going to talk about Superannuation death benefit taxation.
Okay, so what is a Superannuation death benefit nomination? So, as you may or may not be aware, Superannuation is not an estate asset. So if you do a will, and you say, leave all my assets to my wife, and when they pass away, leave them to my children in equal amounts. Seems like it’s taking care of your estate planning. Unfortunately, estate planning is not that simple. So you may have a will and the will can divide up assets like that, and that’s fine. However, your Superannuation is not an estate asset. And on death, it does not automatically flow to the estate of the deceased.
I think it’s probably a time to give my legal advice. Warning, I’m not qualified to give legal advice. This is not intended to be legal advice. We’re simply discussing, the Superannuation death benefit nominations, seek legal advice from a qualified estate planning lawyer.
Okay, so the trustee of the super fund will generally pay a death benefit in accordance with the governing rules of the fund and relevant laws. Now, a binding death benefit nomination is a way to override this trustee discretion. So I’ll put simply a binding death benefit nomination is a legally binding nomination that allows you to advise the trustee who was responsible, sorry, who was to receive your superannuation benefit and event of your death. In order for the nomination to be binding, it must be considered valid. One, the requirements of validity is that only dependents can be nominated. So over the years, I have seen some death benefit nomination forms, sent them out to clients and they come back and they’ve done some interesting things, I’ve drawn boxes, and added on somebody who cannot be a valid nomination. Not usually it’s like younger people. And because they don’t have any dependents.
They nominate their parents. So that might be you know, somebody that’s 25 years old, and they say, oh, I want to go to my parents. So there’s no box there that says apparently can be a spouse, children of any age, any persons financially dependent on the member any persons in inter dependency relationship with a member or a legal personal representative,
which is basically your estate, which gives you directed by your will. So what they would do is draw a box and put you know, their parents name and because it can’t take one of those boxes, I’ll draw another one, I say parents and ticket. And that’s a death benefit nomination has to go back a long time when we used to look after corporate super funds and that sort of stuff. But it’s not considered a valid nomination.
Okay, so if you make a non binding deathbed nomination or don’t make a death benefit nomination at all, the trustee of the Super Fund may use their discretion to pay in accordance with either the non binding nomination or make a payment to the deceased legal personal representative executor of the deceased estate for distribution according to the instructions in the deceased well, so if you don’t make a nomination, it can end up going to the estate and they will.
But it may take a whole lot longer to get there.
The whole point of a binding nomination is to provide certainty. It’s one of the biggest benefits you can receive from having the binding death benefit nomination is peace of mind for having that certainty. If something happens. I know this is what’s going to happen, not leaving it up to the trustees discretion.
Usually the trustee would do what’s expected but not always I have heard of some examples where it hasn’t gone as expected. Now it’s particularly important to have a binding death benefit nomination. In the case you have multiple beneficiaries or blended families where things can get a little bit complicated, and the trustee may not make the right decision if there’s not a binding nomination in place.
Okay, now the benefit
is the ease and speed in which benefits can be paid. So if the beneficiary needs quick access to your benefit, because there’s going to be expenses, funerals, things along those lines I need to pay for sometimes people who’ve got enough cash flow to bear sort those things out from savings. Sometimes they need the fund’s project. To make a valid nomination, you must follow the following procedures. So nomination must be made to the trustee in writing, which is why there’s always a written form for a death benefit nomination for superannuation funds. And it must be signed by the member in the presence of two witnesses over 18 years of age, who are not nominated as beneficiaries, and must contain the signed witness declaration and be sent to the trustee.
Most of the time, these need to be sent by post, I think some farms are accepting digital ones out a little bit at their sort of discretion.
Now a common error people can make when filling out a death benefit nomination form is they sign it, and then they take it to somebody get witnessed their neighbours for example. And it might be the next day and the neighbours put the date one day after the date that they’ve signed and the dates don’t match. It’s not about the nomination, I’ve got to do it again.
Okay, once you’ve made the nomination, it’ll be valid for three years once the date it was signed. Now some funds also offer a non lapsing binding nomination as well, that’s come around in the last few years. So it’s dependent on the superannuation trust deed. Now you can renew, change, update or revoke a nomination at any time. If the nomination is valid, the trustee must follow it. If it’s not valid, it becomes up to the discretion of the trustee, to why it’s important to make sure you have a valid nomination.
Now, if you have circumstances on the go like you have not yet obtained a divorce, for example, the nomination remains valid and binds the trustee unless the nomination has been amended. So if you’re in a separation period, for example, divorce hasn’t been finalised, you haven’t got a button death benefit nomination, guess who’s likely to receive the funds.
So sometimes a by nomination may not be appropriate. As binding nominations require a formal nomination much like a will and must be renewed every three years or whenever circumstances change. So there may not be suitable for everyone if certainly already exists. For example, there’s only one sole dependent that binding death benefit may be of little value. Additionally, unless the person you nominate receive your super death benefit is dependent or your legal personal representative, upon death, a binding death benefit nomination will not be valid. When a person does not meet the requirements, alternative estate planning arrangements will need to be made. So what about the non-binding nomination? So if someone makes a non by nomination, the trustee has the discretion to protect the interests of your beneficiaries if your circumstances change. So for example, one of your beneficiaries is bankrupt, the trustee can take this into account and avoid putting your super benefit into the hands of creditors instead of your beneficiaries. So that’s another disadvantage there potentially. That pretty much wraps up what beneficiary nominations are. Once again, seek legal advice regarding your estate planning and your estate planning lawyer will be able to make recommendations for your circumstances regarding what may be more appropriate. And then you can implement or have your financial advisor implement these recommendations. Thanks for listening and I hope you enjoyed this episode. And remember, you can’t go back and change the beginning, but you can start where you are and change the ending. retirement money is brought to you by Wealth Factory. Wealth Factory provides specialist financial advice to traders and business owners to ensure their retirement dreams are delivered. For more information go to wealth factory.com.au wealth factory is an authorised repurpose of lifespan financial planning limited AFSL 229892.
The purpose of this podcast is to provide factual information only. It is not intended to be financial advice. However, any advice provided is general in nature and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances. Please speak to your financial advisor before making any financial decisions.