1. Impact & opportunities
super reforms
Impact & opportunities
A presentation to
Client Name
DATE
Presented by
First name Surname
Job title/Position
Hello and Welcome to the ‘Super reforms – impact and opportunities’ presentation. My name is <insert name> from <insert organisation’s details>. Today I am going to explain the key changes to superannuation that will take effect from 1 July 2017, what they could mean for you and possible issues to consider before that date.

2. Important information and disclaimer
This presentation has been prepared by <include appropriate adviser and licensee details from template table> This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial and tax and/or legal advice prior to acting on this information. Information in this presentation is accurate as at February In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, the accuracy of that information is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither the Licensee nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Any case studies in this presentation are for illustration purposes only. The investment returns shown in any case studies in this presentation are hypothetical examples only and do not reflect the historical or future returns of any specific financial products. Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns. Any tax information provided in this presentation is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or a complete assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.
But before I go any further, I’m required to run through some important legal information. It explains that this presentation is GENERAL information only and is not specifically tailored for you. That part comes later if you meet with me or one of our other financial advisers.

3. Agenda Before 1/7/2017 Opportunities Key advice issues
Maximise concessional contributions
Maximise non-concessional contributions
Transition to Retirement strategies
Pension balances
From 1/7/2017
Opportunities
Make deductible super contributions
Make spouse contributions
Make catch-up concessional contributions (from 1/7/2018 and 1/7/2019)
Key advice issues
Additional contributions tax for higher earners
Insurances
Estate planning
Here’s the agenda.
<Note: the second half of the slide, dealing with ‘from 1/7/2017’ will not appear initially and reveals as a build>
First I will run through the opportunities created and the key issues that will need to be addressed before the super reforms start taking effect.
These include <read from slide and avoid going into any detail at this point>
<build>
Then I will outline the opportunities and issues from 1 July 2017.

4. Pre 1/7/2017 opportunities
Let’s start by looking at the opportunities available before the reforms take effect on 1 July 2017.

5. Maximise concessional contributions
Key examples include:
Superannuation Guarantee contributions
Salary sacrifice contributions
Personal deductible contributions
And the first opportunity I want to cover is maximising concessionally taxed super contributions.
These include Superannuation Guarantee contributions, other employer contributions (such as salary sacrifice), personal contributions claimed as a tax deduction and certain other amounts.

6. Maximise concessional contributions
Cap changes
Age
Annual cap amount
In 2015/16 and 2016/17
From 2017/18
48 or under
$30,000
$25,000
49 or over
$35,000
From 1 July 2017, the annual cap on these contributions will reduce from $30,000 or $35,000 (depending on your age) to $25,000.
If your cashflow allows, you may want to take advantage of the higher cap that currently applies by making larger concessional contributions before 30 June 2017.
DON’T EXCEED CAP – PENALTIES CAN APPLY

7. Maximise concessional contributions
Key issues
Need a salary sacrifice agreement
Can only contribute salary not yet earned
Take action ASAP
Employed
Can make personal deductible contributions any time before 30 June
But don’t leave it to last minute
Self-employed
If you want to maximise your concessional contributions this financial year, there are some key issues you need to consider.
If you are an employee, you need a salary sacrifice agreement with your employer. Also, you can only sacrifice salary, wages or a bonus you have not yet earned. So to maximise salary sacrifice contributions this financial year, you will need to take action ASAP. But you need to ensure you still have enough cashflow to meet your needs.
If you are self-employed, you can make the contribution any time before 30 June. But don’t leave it to the last minute. Also, you will need to complete a valid notice of intent to claim the deduction and have the notice acknowledged by the fund.

8. Maximise non-concessional contributions
Key examples include
Personal contributions made from after tax pay or savings
Contributions made into your super account by your spouse
The next opportunity I want to cover is maximising non-concessional super contributions.
These include personal contributions made to super from your after-tax pay or savings and super contributions made into your super account by your spouse.

9. Maximise non-concessional contributions
Cap changes
Cap
In 2016/17
From 2017/18
Annual cap
$180,000
$100,000
Bring forward rule (available if < 65)
$540,000
$300,000
From 1/7/2017, NCCs can’t be made if have > $1.6 million in super
Transitional rules apply if contribute between $180,000 and $540,000 in 2015/16 or 2016/17
In the current financial year, non-concessional contributions are capped at $180,000 pa or $540,000 if you bring forward up to two years’ worth of contributions.
From 1 July 2017, the maximum non-concessional contributions you can make is $100,000 or up to $300,000 by bringing forward two years’ worth of contributions.
However, non-concessional contributions cannot be made if you have a total superannuation balance over $1.6 million on 30 June Included in total super balance is all accumulation interests, all pension interests and ‘in-transit’ rollovers.
Also, some transitional rules will apply if you contribute between $180,000 and $540,000 in 2015/16 or 2016/17.
DON’T EXCEED CAP – PENALTIES CAN APPLY

10. Maximise non-concessional contributions
Potential strategies
Contribute up to $540,000 before 30 June
Contribute up to $180,000 in 2016/17 and $300,000 in 2017/18
Cash out and re-contribute into own super account
Cash out and contribute into spouse’s super account
Some key strategies that could be considered are:
If $540,000 is available to be contributed prior to 30 June 2017, it is possible to do so minus any previous contributions within the bring forward period.
If a windfall is expected to be received in 2017/18, it may be best to contribute $180,000 in 2016/17 (if possible) and then up to $300,000 in 2017/18.
It may be worthwhile cashing out all or a portion of the taxable component of your super benefit and re-contributing the amount back into your super account as an non-concessional contribution, where it will form part of the tax-free component. The benefits of implementing this strategy may include:
generating a more tax-effective income by increasing the tax-free component of superannuation pension payments received under age 60, and
reducing (or eliminating) the tax to be paid by non-tax dependants (usually financially independent adult children) on the death benefit amount after you pass away.
Before using this strategy, you need to consider any tax implications that may arise.
If you have (or are likely to have) more than $1.6 million in super, you may want to withdraw some of your super and contribute into your spouse’s account so you can take greater advantage of the $1.6 million transfer balance cap for each member of the couple. I will talk more about this opportunity later in this presentation.
DON’T EXCEED CAP – PENALTIES CAN APPLY

11. Key pre 1/7/2017 advice issues
Let’s now look at some key advice issues to be considered before the reforms take effect on 1 July 2017.

12. Review transition to retirement strategy
‘Transition to retirement’ (TTR) strategy
Make salary sacrifice or personal deductible super contributions
Invest super in TTR pension
Use TTR income to replace cashflow used to make extra super contributions
Available to people who have:
Reached preservation age
Not yet retired
The first key advice issue is for people who are using the transition to retirement strategy.
This is where you:
arrange with your employer to contribute part of your pre-tax salary directly into super (via salary sacrifice) or make personal deductible super contributions
invest some of your existing super in a TTR pension, and
use the regular payments from the TTR pension to replace the cashflow used to make the extra super contributions.
It is available to people who have reached their preservation age, but have not yet retired.
Preservation ages are:
Born before 1/7/1960 – 55
Born between 1/7/1960 and 30/6/61 – 56
Born between 1/7/1961 and 30/6/62 – 57
Born between 1/7/1962 and 30/6/63 – 58
Born between 1/7/1963 and 30/6/64 – 59
Born from 1/7/

13. Review transition to retirement strategy
1/7/2017 changes and implications
Removal of earnings exemption +
Reduction in contribution caps +
Additional tax on contributions (for higher earners)
Key changes taking effect on 1 July 2017 that will impact this strategy include:
The removal of the earnings exemption for TTR pensions, where earnings from investments held in the pension will be taxed at 15%, not 0%.
The reduction in the concessional and non-concessional contribution caps, outlined earlier in this presentation.
The additional tax on concessional contributions that will be payable by people earning more than $250,000 (currently $300,000). I will talk more about this change later in the presentation.
These changes have the potential to reduce the value to be derived from the TTR strategy, particularly for people between preservation age and 59. =
Reduction in potential value of TTR strategy

14. Review transition to retirement strategy
Possible responses
TTR strategy
Continue
Convert to ‘account based pension’
Stop
If you have implemented the TTR strategy it’s crucial that we review the impact the super reforms could have and consider your alternatives.
These may include:
Continuing with the strategy if it is still suitable, where capital gains tax relief may be available (ie only future gains will be taxable),
Stopping the strategy by transferring the money back to the accumulation phase of super, where earnings will also be taxed at the maximum rate of 15%, or
If eligible, converting the TTR pension to an account based pension, where earnings will continue to be taxed at 0%. To be eligible to do this, you will need to have met a full condition of release (such as having retired permanently). But you will need to consider the transfer balance cap, which I will discuss shortly.

15. Review transition to retirement strategy
Alternative TTR strategy
Cut back work
Start TTR pension
Replace reduced income
Despite the super reforms, a TTR pension can still be effectively used to replace reduced income if you plan to scale back your working hours.
For example, if you plan to cut back your working week from five to three days, you may be able to start a TTR pension and draw enough income to compensate for the two days you won’t be working.
By doing this, you’re likely to pay less tax on the income you receive from the TTR pension than you do on your salary or business income. This is because the taxable income payments from a TTR pension attract a 15% tax offset between preservation age and 59, and the income payments are tax-free at age 60 or over.

16. EXCESS TRANSFER BALANCE TAX MAY APPLY
Review pension balances
1/7/2017 changes and implications
Transfer balance cap
Amount is $1.6 million
Applies to total pension transfers
The other key advice issue to consider is that, from 1 July 2017, a $1.6 million lifetime ‘transfer balance cap’ will be introduced in relation to superannuation income streams. The cap:
will limit the total amount that a person can use to commence income streams in their lifetime, and
applies to all pension interests, including death benefit pensions.
Earnings on the amount in pension phase within the cap will continue to be taxed at 0%.
If you will exceed the transfer balance cap on 1 July 2017, you will need to reduce your total pension interests below $1.6 million prior to this date, otherwise you may be required to pay excess transfer balance tax. 
EXCESS TRANSFER BALANCE TAX MAY APPLY

17. Excess pension balance
Review pension balances
Possible responses
Excess pension balance
Commute to super
Withdraw and invest in spouse’s super
Withdraw and invest outside super
Some options to consider include:
Commuting and rolling over the excess amount to the accumulation phase, where earnings on investments will be taxed at a maximum rate of 15%, not 0%.
Commuting and cashing out the excess amount and investing outside super, where earnings would be taxed at your marginal rate, or
Commuting and cashing out the excess amount and arranging for your spouse to contribute the proceeds into their super account as a non-concessional contribution, subject to the contribution cap
Note: The transfer balance cap is a per person limit. Therefore, up to $3.2 million may be transferred to pensions by a couple, where 0% tax will be payable on investment earnings.
SUBJECT TO CONTRIBUTION CAPS

18. Review pension balances
CGT relief
Available where commute back to super
Cost base reset to market value
Specific tax advice required if pension in SMSF
CGT relief is available when assets are transferred from the pension phase back to the accumulation phase for the purpose of meeting the requirements of the $1.6m transfer balance cap.
The effect of the relief is that the cost base is reset so that only future gains are taxable.
If the pension is run through an SMSF, your clients may need specific tax advice to determine which assets should be reallocated, based on the type of accounting method being used by the fund.

19. Post 1/7/2017 opportunities
Let’s now look at some of the opportunities available when the reforms take effect on 1 July 2017.

20. Must earn < 10% of income from employment
Personal deductible contributions
1/7/2017 changes and implications
Before 1/7/2017
From 1/7/2017
The first opportunity I want to talk about relates to personal deductible super contributions.
Currently, only those earning less than 10% of their income from employment (the ‘10% test’) are eligible to claim super contributions as a tax deduction.
From 1 July 2017, all individuals who are eligible to contribute can make deductible super contributions, regardless of their employment status.
This change will enable more people to be able to:
make personal deductible contributions, and
make greater use of the cap that applies to personal deductible and other concessionally taxed super contributions.
Key examples include people who:
are employed and receive superannuation guarantee contributions that are within the concessional contribution cap, but their employer doesn’t offer salary sacrifice arrangements
switch from being self-employed to an employee during the course of a year and fail the 10% test due to employment income, and
are residents for tax purposes who are working overseas for a foreign employer and their employer can’t or won’t contribute to an Australian super fund.
Must earn < 10% of income from employment
All individuals who are eligible to contribute can make deductible contributions 20

21. Personal deductible contributions
1/7/2017 changes and implications
Mary has a part time job and earns $10,000 pa
SG is $950
her employer does not offer salary sacrifice
She runs her own business as a sole trader and has income of $70,000
This year her maximum super contributions will be $950 (10% test works against her)
Next year she could claim up to $24,050 personally
Reduction in net tax $4,850
Here we describe how an employee under the current rules in 2016/17 has employer deductible contributions only and cannot make either salary sacrifice contributions (her employer does not offer) nor make personal deductible contributions, as more than 10% of her income will be derived from employment sources.
Under the super reforms from 1 July 2017, Mary will be eligible to claim both employer and personal deductible contributions up to the concessional cap of $25,000 ($950 from SG and $24,050 from personal deductible contributions).
Note: the tax saved incorporates the additional $3,607 contributions tax on the additional $24,050 contributed. 21

22. Spouse contributions
Maximum tax offset up to $540 for contribution of $3,000
Spouse income limits increasing on 1/7/2017
Year
Spouse income limits
For full tax offset
Cut-out limit
2016/17
$10,800
$13,800
From 2017/18
$37,000
$40,000
Another opportunity will be available as a result of the extension of the eligibility rules for claiming the tax offset of up to $540 when making superannuation contributions into a low income spouse’s super account of up to $3,000.
Currently, the full tax offset is available for individuals who make superannuation contributions to their spouse’s account if their spouse earns up to $10,800 pa and the cut-out income limit is $13,800.
From 1 July 2017, the Government will allow more people to access the offset by extending eligibility to those whose spouses earn up to $37,000 pa (for the full offset) and the cut-out income limit will increase to $40,000.

23. ‘Catch-up’ concessional contributions
From 1/7/2018
From 1/7/2019
Unused concessional contribution cap amounts may be ‘carried forward’ for up to 5 years
Can start accumulating unused amounts
Can start using accumulated amounts
Another opportunity is the ability to make what are known as ‘catch-up’ concessional contributions.
From 1 July 2018, if you don’t use up all of the concessional contribution cap, you will be able to accrue the unused amounts for use in subsequent years.
Unused amounts can be carried forward on a five year rolling basis.
2019/20 is the first financial year it will be possible to use the carried forward amounts.
To be eligible, your super balance cannot exceed $500,000 on 30 June of the previous financial year.
If eligible, this new opportunity will help those unable to utilise the concessional contribution cap due to broken work patterns and competing financial commitments.
It could also help to manage tax and get more money into super when selling assets that result in a capital gain.
Must have < $500,000 in super

24. ‘Catch-up’ concessional contributions
Example
Year
Cap available^
Example of CCs made
Unused amount
2018/19
$25,000
$20,000
$5,000
2019/20
$30,000
$10,000
2020/21
$45,000
$15,000
2021/22
$40,000
Nil
2022/23
$65,000
Here’s an example of how ‘catch-up’ concessional contributions could work.
<run through numbers on slide>
Some general considerations regarding making deductible contributions include:
having assessable income which is reduced by the tax deduction, and
15% contributions tax is payable, so you want to ensure you don’t pay more tax overall, particularly when you have a tax-free threshold.
^ Ignores indexation of the cap

25. Key post 1/7/2017 advice issues
Let’s now look at some key advice issues to be considered when the reforms take effect on 1 July 2017.

26. Tax on concessional contributions
Additional contributions tax for higher earners
Adjusted taxable Income
Tax on concessional contributions
Marginal tax rate
In 2016/17
From 2017/18
<$250,000
15%
47%
$250,000 to $300,000
30%
$300,000+
The first issue to consider is that an additional 15% tax on concessional contributions will be payable if you earn $250,000 pa or more.
Currently this additional tax, which is payable on top of the standard maximum tax rate of 15% on concessional contributions, only applies if you earn $300,000 pa or more.
This change will make concessional contributions less tax-effective for more higher earners.
But the key point to keep in mind is that concessional contributions will still be more attractive than paying tax on income at personal marginal tax rates which, from 2017/18 will be 47%, including the 2% Medicare levy.

27. Effective up-front tax
Insurances – from 1/7/2017
Insurance
Effective up-front tax
Income < $250,000
Income $250,000 +
Inside super
Outside super
Life 0%
MTR
15%
47%
Total and Permanent Disability
Income Protection
The next issue is insurances and the effective tax rate payable when funding cover within and outside super.
The key points to note are that:
holding life and total and permanent disability insurance in super can be more tax-effective for all income earners
the tax implications are the same, when income protection insurance is held within or outside super for people who earn less than $250,000
with the additional 15% tax payable on super contributions by people who earn over $250,000, it can be more tax-effective to hold income protection insurance outside super.
MTR = Marginal Tax Rate

28. Estate planning Anti-detriment payments to be abolished
Review beneficiary nominations
Consider testamentary trusts
Finally, there are some key estate planning issues that may need to be addressed.
From 1 July 2017, anti-detriment payments will be abolished. This will usually mean more tax will be payable on death benefits by adult children and certain other beneficiaries.
Ways to address this include:
the re-contribution strategy, which was outlined earlier, and
withdrawing benefits tax-free over age 60 while you are alive, where a key decision will be whether you pass the money onto your children as an early inheritance (which could impact Centrelink entitlements) or retain the money outside super to be passed on via your estate.
It may be advisable to review beneficiary nominations, especially where the $1.6 million transfer balance cap is going to restrict how much your beneficiaries can receive as a pension. This would include establishing nominations for some of the super to be passed to beneficiaries as a pension and some to be paid to the estate.
Where money is to be paid to the estate, consideration should be given to establishing a Testamentary Trust (or Trusts) via your Will. Key benefits may include asset protection and taxation savings.
A thorough review of your estate plans may therefore be warranted. 28

29. Session recap Before 1/7/2017 Opportunities Key advice issues
Maximise concessional contributions
Maximise non-concessional contributions
Transition to Retirement strategies
Pension balances
From 1/7/2017
Opportunities
Make deductible super contributions
Make spouse contributions
Make catch-up concessional contributions (from 1/7/2018 and 1/7/2019)
Key advice issues
Additional contributions tax for higher earners
Insurances
Estate planning
To recap today’s presentation, let’s look at the key opportunities and issues before and after the super reforms start taking effect from 1 July this year.
But regardless of the changes, superannuation will continue to be a tax-effective vehicle to accumulate retirement savings and drawdown once you reach retirement.
Finally, please keep in mind that this presentation is GENERAL information only and is not specifically tailored for you.
If you would like advice tailored to your specific needs and circumstances, please <insert your call to action details>.

30. QUESTIONS
<no notes required>

31. THANK YOU
<no notes required>