Q&As: Answers to some common financial questions

Here are the answers to some common questions our LifePath advisers have recently been asked. Is your question here, too?

Q: I have two employers who are both paying superannuation guarantee contributions. I am worried that these contributions will push me over the $25,000 concessional cap this financial year. Is there anything I can do to avoid that situation? 

A: Luckily there is some relief on the horizon. The Government is currently forming legislation which, if made law, will allow a person who is likely to exceed their concessional cap to apply to the ATO to have one of their employers cease contributing super guarantee for a quarter (this will only be an option 

for someone who has more than one employer). By getting permission for one of your employers to cease contributing to your super you may be able to avoid exceeding your concessional contributions cap. These new rules are expected to be operative before the end of 2018. 

Q: I am a full-time carer for my husband – what are the upcoming changes to the Carer Allowance? 

A: From 20 September 2018, a new income test will be introduced for Carer Allowance (a fortnightly income supplement paid to qualifying carers who provide additional daily care and attention to an adult or dependent child). Currently, Carer Allowance is not means tested. The new income test will be $250,000 and is based on your household Adjusted Taxable Income and includes deemed income from account based pensions if you are over the age of 60. It is expected that this will affect approximately 7,000 Carer Allowance recipients. 

Q: I was just reviewing my pension statement. I commenced an account-based pension in July 2017 with $1,550,000 and on 30 June 2018 it has grown to $1,605,000. I don’t have any other superannuation. Do I have to do anything now that the balance exceeds $1.6 million? 

A: Since you started your account based pension with $1,550,000 after 1 July 2017, this is the amount that is reported to the ATO for your ‘transfer balance account’. Different income streams are valued in different ways, so it is always best to check with a financial adviser. The ATO tracks the amount of money you transfer from accumulation into retirement phase, and limits this to $1.6 million. Since your transfer balance account is $1,550,000 you are still within the $1.6 million transfer balance cap and you don’t have to take any action. 

On the other hand, your ‘total superannuation balance’ is measured each 30 June. Your total superannuation balance includes all your superannuation, whether it is in accumulation or pension phase. Different income streams are valued differently for this purpose. In your case, the 30 June account balance of your account based pension represents your total superannuation balance. Since your total superannuation balance is more than $1.6 million at 30 June 2018, during the 2018-19 financial year: 

• Your non-concessional contributions cap is zero (any non-concessional contributions you make this financial year will be excessive) 
• You are not eligible to receive any Government co-contributions 
• If a spouse contributes to super on your behalf they will not be able to claim a superannuation tax offset, and 
• If you have a self-managed superannuation fund it may have to change its method of accounting for the tax-free earnings within the fund. 

Transfer balance caps and total superannuation balance can get complicated – so it’s a good idea to get in touch with your adviser if you have any questions.