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How to be superannuation savvy

How to be superannuation savvy

By Nathan Yii

Continuing Legal Education Practice & Procedure 

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Superannuation is an increasingly important area for lawyers to be aware of, given Australia’s ageing population and the government’s policy to encourage self-funded retirement. 

With the growing number of self-managed superannuation funds being established, lawyers will also need to factor in such structures as part of their client’s estate and succession planning.

In my experience, almost all clients have superannuation interests to consider in their structuring and estate and succession planning. It is crucial that lawyers understand the law and get things right to minimise the risk of litigation on an individual’s death, disability, or should the fund’s complying status be jeopardised. This is also particularly the case given the significant changes to superannuation law announced in the 2016 Federal Budget, which came into effect 1 July 2017.  

When it comes to superannuation, lawyers should be aware of the following:

  • The contribution limits: including the new concessional and non-concessional contribution limits, as well as others such as the new downsizer contribution cap that may apply.
  • The new laws: particularly the new $1.6m transfer balance cap, total superannuation balance cap and the application of other laws that came into effect on 1 July 2017.
  • What one can and can’t legally own in the fund: for instance, the prohibition of members or their associates using real estate held within a fund unless the “business real property” exemption applies. Furthermore, limited recourse borrowing arrangements which involve gearing within a self-managed superannuation fund have also been increasingly used.
  • How superannuation can be accessed: through a member satisfying a “condition of release”, most commonly retirement or reaching the age of 65 years where the member can commence a pension or withdraw a lump sum from the fund.
  • What happens to one’s superannuation on death: and how superannuation fits within one’s overall estate and succession plan. For instance, binding death benefit nominations could be used, remembering that a will does not automatically deal with the payment of superannuation death benefits.
  • The taxation benefits of superannuation: particularly the concessionally taxed superannuation environment in the case of complying superannuation fund and penalty tax that could apply if a fund is non-complying. 

Lawyers must also remember that they are not qualified to advise on the appropriateness of a superannuation fund structure (whether it be self-managed or an industry fund). Leave this to the appropriately qualified financial planners, accountants or other advisors and work alongside them to achieve the clients’ objectives. Most importantly, lawyers should not ignore superannuation in a client’s matter, and need to be aware of the issues to appropriately advise. 

Ask yourself this question. How many of your clients don’t have superannuation interests? 

 

Nathan Yii, principal lawyer, Nathan Yii Lawyers

Want to find out more? Register for the LIV's Superannuation Workshop on 22 March where Nathan Yii will provide a comprehensive overview of superannuation with a focus on self-managed superannuation, including the establishment of funds and more. For more information and to register, see here.


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