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  • Writer's pictureOwen

Superannuation changes for 2024 you need to know.

For Australians, superannuation is the one of the best tools available to build wealth.


Things get a little trickier for Australians living overseas, yet it can still be a useful tool. You do need to keep abreast of the changes which have been made in recent times.


To get the latest we spoke to a friend of ours, Jettie Fan, who is an expert on superannuation.


Here is an edited transcript of our conversation on superannuation.


Owen Caterer: Hi Jettie, thanks for taking the time to have a chat. We really appreciate your insight.


Jettie Fan: No problem at all. Always happy to catch up with you Owen.


Owen: For Australian expats, is a self-managed super fund (SMSF) a good idea? If you will allow a very leading question, we tell people to avoid a SMSF if they are going to be an expat. Can you explain this further?


Jettie: For Australians living overseas, a SMSF is generally difficult.  Trustees must ensure to comply with the Residency rules. SMSFs that breach the rules are taxed at the highest marginal rate of 45% instead of the concessional rate of 15%. The rules are listed below :

  1. The SMSF was established in Australia, or at least one of the SMSF’s assets must be located in Australia.

  2. The central management and control of the SMSF is ordinarily undertaken in Australia; and

  3. At least 50% of the SMSF Membership must be in Australia, measured by market value .


Owen: So if you want to have a say in your super, is there another way to manage your superannuation without a SMSF?


Jettie: Yup, you can manage your superannuation with a wrap account.


Essentially, if I oversimplify, there are three types of superannuation accounts.


  • An industry superannuation account where you pick a risk profile, and the fund manages all the asset allocations and investments. Your super money is mixed with other members in the fund and the fund managers make the investment decisions on behalf of the members.  The service and communication of these funds are generally poor and there is no personalization of investment approach.

  • A wrap account, which is like a share account and your super still sits on a super platform, however, you can have a separate super account which is just yours. And you can buy a range of stocks and ETFs to build your own portfolio, there might be some limitations on what stocks or ETF you can buy, but it is already flexible.

  • A SMSF where you can invest in a large range of assets classes including real property, ETF, international stocks, gold etc.  But it does bring extra responsibilities as trustees of your own super fund, including lodging annual tax returns, signing of on minutes of meetings and making sure the fund is always in compliance with the super regulations.

 

Owen: So which is better?


Jettie: It depends on the client!


Owen: Haha, it always does.


Jettie: It can depend on the size of the assets, the level of control the client wants to have, their  financial sophistication as well as costs. I work with clients who have both Wraps and SMSF funds.


But a wrap account is very popular amongst my clients, which brings enough flexibility and without the extra paperwork people have to worry about with a SMSF.


Generally speaking for your overseas clients who want to be involved in their assets, then a wrap accounts is the way to go.


Compliance costs for SMSF and the penalties if you get it wrong when living overseas are catastrophic.

Compliance costs for SMSF and the penalties if you get it wrong when living overseas are catastrophic. There are exceptions to this rule of course, but those are pretty rare.


Owen: When it comes to contributing to Superannuation, there have been a few recent changes.


Jettie: Do you mean the rise in the Super guaranteed rate? That’s now 11% of all salary and is due to be 12% by 1 July 2025.


Owen: Actually, I was more referring to the contribution cap.


Jettie: Ah, OK. There are two types of contributions we can make:   Concessional and Non-concessional contributions.


Concessional contributions are pre-tax contributions which include employer contribution,  salary sacrificed contribution, as well as contribution you can claim a tax deduction in your personal tax return.  


Non-concessional contributions are funds you put into super after-tax.

There are contribution caps which means we can only make a certain amount into super each year.


From 1 July 2024, the contributions caps are expected to increase:

  • The concessional contribution cap will be raised from $27,500 to $30,000

  • The non-concessional contribution cap will increase from $110,000 to $120,000


The maximum amount available under the non-concessional contribution bring forward provisions will increase from $330,000 to $360,000, which means you can make 3 years of non-concessional contributions in one year , and you have to wait for another 2 years to make any further non-concessional contributions. 

 

Owen: Because of the housing crisis, we’ve recently heard a lot about a downsizer contribution. What is that? Who is eligible?


Jettie: It’s always been here, but the change here is around the age of eligibility.


As 2023, you're now eligible to make a downsizer contribution if you're 55.  That’s a change from 60 and before that 65.


You can contribute $300K individually or $600K as a couple to super if it is from the proceeds of selling your property (provided you owned it for 10+years). This can apply even if you aren’t otherwise eligible to contribute. But the contribution needs to be made within 90 days of settlement.


We are only talking about it here generally and at a high level. I strongly encourage people seek independent financial advice before making any extra contributions to super.


And also clearly the government is trying to encourage the release of properties to younger property buyers.

 

Owen: The cost of housing really is a huge challenge for many people these days.


Jettie: It sure is.


The price gap between Brisbane and southern capitals isn’t what it used to be, and it looks like the Olympics might keep that pressure on.


Owen: Thanks so much for your time today. It’s always lovely to catch up when I come to Brisbane. I’m glad the weather is a little better today. It’s been such a humid summer.


Jettie: This is the most humidity I can remember for a long time, and I’ve been in Brisbane for a couple of decades now. But, yes, let’s talk again soon!

 

 

About Jettie Fan


Jettie is a Chartered Accountant and SMSF Specialist Advisor™. She joined Morgans in 2009. Jettie provides her clients with a wide range of advice including stockbroking, financial planning and superannuation. She takes particular care in the initial analysis of a client's situation, so that correct strategies are put in place. She also encourages clients to build a sustainable investment portfolio with their superannuation.


About Morgans Financial


Morgans is Australia’s largest full-service stockbroking and wealth management company, helping clients accumulate a large amount of wealth in its 40- year history.


Caterer Goodman Partners relationship with Morgans.


Caterer Goodman Partners (CGP) does not have any kind of relationship with Morgans Financial. This information is purely general and does not constitute investment advice. This article should not be seen as an endorsement of a particular advisor or guarantee of Morgans or other associated companies. Investors should consider all advice and disclosure documents before making any investment decisions.

 

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