As EOFY approaches, what’s top of mind for advisers?

Tim Howard

Tim Howard,
Technical Consultant

With the end of the current financial year fast approaching, BT is sharing the top questions advisers are asking its technical team.

“This year-end, there is a mixed bag of topics advisers are discussing with clients, as there are upcoming changes relevant to just about everyone – from clients with high incomes and superannuation balances, to those who are eligible for social security,” said Tim Howard, Technical Consultant, BT.

“Impending tax cuts, changes to superannuation thresholds and the recent Budget announcements on social security are top of mind for advisers.”

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Financial advisers regularly contact BT’s Technical Services team on technical topics regarding superannuation, tax and social security. The team fields over 8,000 queries from advisers each year. BT’s EOFY tips, based on the most popular advice themes raised by advisers in the June 2023 quarter, are outlined below.

1. Bear in mind FY2025 tax cuts when planning additional super contributions

Clients earning an annual income of more than $45,000 will benefit from tax cuts from July 2024.

The impending reduction to personal income tax rates means that, for some clients who earn more than $120,000 per annum, putting money into super can prove to be a more attractive tax effective strategy in the current financial year or FY2024, compared to waiting until FY2025.

The current tax rates are 32.5% for those with annual incomes between $45,001 - $120,000; and 37% for $120,001 - $180,000. In FY2025, an individual who has an annual income between $45,001 and $200,000 will be taxed at the flat rate of 30%.

Currently, the top tax rate of 45% applies to those on annual incomes of over $180,000. In FY2025, the top tax rate of 45% will apply to incomes over $200,000.

Mr Howard explained: “At the current marginal tax rates, and bearing in mind the 15% concessional tax rate within superannuation, the tax saving resulting from putting money into super in FY2023 or FY2024 is greater, compared to FY2025 when the reduced marginal tax rates take effect. To make the most of this benefit, clients may consider maximising their concessional contributions cap space, including any carry forward cap space they might have available.”

2. Remind clients about their cap space and forthcoming increase to the superannuation guarantee

Advisers generally remind clients about their available cap space as part of their year-end advice. ‘Cap’ refers to the maximum amount you can contribute to your super each financial year before paying additional tax. Clients should be made aware if they are at risk of going over their cap.

When discussing cap space, it’s worth mentioning that the superannuation guarantee is set to increase to 11% in the new financial year. Notably, the concessional contributions cap is not increasing, so the mandatory employer contributions into an employee’s super can eat into more of a client’s cap space.

If your client is a small business and has employees, they should adjust their SG payments accordingly.

3. Indexation may benefit those on the cusp of retirement

If your client is approaching retirement, and has around $1.7m to $1.9m in super, they may benefit from waiting until July to commence their pension.

This is because, on 1 July 2023, the general transfer balance cap will increase by $200,000 to $1.9m, due to indexation. The transfer balance cap is the amount of superannuation that can be transferred to a tax-free retirement income stream such as an account-based pension.

In addition, the maximum total super balance – which can limit the amount of non-concessional contributions you can make – is increasing to $1.9m from July.

4. Check if the social security measures announced in the Federal Budget are relevant

The legislation supporting the proposed increases to certain social security payments was introduced into Parliament in May, and is expected to become law and be implemented by 20 September 2023.

The base rate of working age payments will be increased, including Jobseeker and Youth Allowance. In recognition of the challenges that seniors face with finding employment, the higher rate of Jobseeker will be extended; currently those over age 60 are eligible, from September the age threshold will be reduced to age 55.

To help address cost of living increases, especially housing, rent assistance will increase by 15% – and this is in addition to the normal increase that occurs due to the rise in the Consumer Price Index. Mr Howard said: “This significant increase benefits more people than what some might expect; for example, clients who are living in retirement villages may qualify for rent assistance.”

Some parenting payments will also increase.

5. Two-year lead time to plan for increased tax relating to super balances exceeding $3m

As has been widely discussed, the government has proposed to reduce the superannuation tax concessions for those with total superannuation balances that exceed $3 million. Under the proposal, from 1 July 2025, these clients will pay an additional 15% in tax on earnings corresponding to the portion of their superannuation balance above $3 million. “While still only an announcement, this does mean advisers have two years to consider any changes for impacted clients,”
Mr Howard said.

In addition to the above tips, it’s worth remembering that the preservation age for super will increase to 60 from 1 July for those born after 30 June 1964. Previously, the preservation age that applied was lower, depending on the year you were born.

Advisers may also wish to remind their clients that, from 1 July, the eligibility age for receiving the age pension from the government increases from 66.5 to 67. 

Finally, it’s possible that the government will confirm whether the temporary reduction in minimum pension payments will continue into the new financial year. Mr Howard said: “These amounts were reduced during COVID, and it’s expected that we may return to full minimums from next financial year.”

The threat of cybercrime has never loomed larger over the finance industry. A series of high-profile cyber-attacks on major companies in the past year has compromised tens of millions of data records — so many Australians have had their data accessed. Most Australians have either been directly impacted or know a close family member or friend who has fallen victim to these data breaches.
Keeping client data safe from hackers, verifying identification, whether to use password managers and the risks of using public Wi-Fi are among the cyber security topics that financial advisers should be mindful of.
It’s a quiet week for domestic data this week, providing a moment of calm before the March quarter inflation report is dropped next week. This release has the potential to cause some disruption in markets as the inflation print will likely be the deciding factor in the Reserve Bank’s (RBA) May policy decision. Markets are currently pricing little chance of another hike in May, meaning an upside surprise to inflation could prompt some outsized moves in market pricing.


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