Contribution options for clients to offset COVID losses

BT head of financial literacy and advocacy Brian Ashenden told ifa that following the introduction of regulations last week, clients up to 67 years old would be eligible after 1 July to make contributions to super without meeting the work test.

“The regulations were made on Friday last week, so the law has changed from 1 July and the the work test will move from age 65 to age 67 from next [financial] year,” Mr Ashenden said.

X

Continue to Website

“Being regulation, it is technically subject to a 15-day disallowance period, which will take it beyond 1 July, but there haven’t been any indications that there will be objections to these [regulations].”

SMSF Association chief executive John Maroney also pointed to the new regulations as a key way for retirees to start to make up for some of the portfolio losses they may have experienced as a result of the COVID-19 crisis.

“These changes, which apply to contributions made from the 2020-21 financial year, are extremely timely considering the market and economic fallout from the COVID-19 pandemic,” Mr Maroney said.

“It’s imperative that SMSF specialist advisers and trustees are alert to these amendments and incorporate them in their end-of-year planning.”

Mr Ashenden said contribution strategies could also be an important tool for clients who needed to start planning for life after the removal of government support measures such as JobKeeper.

“When JobKeeper disappears, there won’t be an impact for clients who are earning more than $1,500 a fortnight because it was the employer getting the subsidy in that case, but for clients who pre-JobKeeper were earning less than that, their income is going to drop back to where it was,” he said.

“The issue for advisers to talk to clients about is if you are going to suffer that drop of income, let’s start that discussion around realistically to what extent can we go back and live within the income we were receiving without JobKeeper, and anything additional that’s coming in now, how can we save some of that.

“Can they put it into a bank account to spread the benefit out over time, or for some people who drew down the $10,000 out of super, is there a bit of JobKeeper left over they can put back into super to help them start to recover some of that back?”