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Super balance down? Might not be so bad……

The coronavirus pandemic has led to declines in investment markets around the world. For many of us that is reflected in our super balance but did you know that many super strategies depend on your total super balance at 30 June of the preceding financial year? Now I know that no one likes to see their account balance has dropped but for some of you this could provide new opportunities for the 2020/21 financial year.

Total Super Balance

What is the total super balance? It is a way to measure the total amount of super (both accumulation and pension phase) that you have across all your accounts at 30 June of the previous financial year.

Transfer Balance Cap

The transfer balance cap applies to the amount of superannuation you can transfer to an income stream (drawdown phase). Currently the transfer balance cap is $1.6m

Note: If someone has exceeded their transfer balance cap, has a defined benefit super interest, other types of super income streams or a self-managed super fund (SMSF) with a limited recourse borrowing arrangement, calculating your total super balance is more complicated and beyond the scope of this article.

So where are we going with all this?

Well, there can be restrictions that apply depending on your total super balance at 30 June in the previous financial year. For example, if your balance as at 30 June 2019 was $1.7m you are no longer able to make non-concessional contributions (of up to $100K) pa to super, including using the bring forward rule. But what if your super balance has now dropped to $1.5m at 30 June 2020? Well, you might not be too happy, however, this may also present an opportunity to be able to contribute more to super again this year (if you have the funds to do so, of course).

Careful planning needs to be considered to ensure you do not go over any of the caps. If you have commenced an income stream, you will also need to consider your Transfer Balance Account value (a little too complicated for this article but please seek advice)

What about Super balances below $500K?

Well, there may also be some good news for you too. The Carry Forward rule allows you to carry forward any unused concessional contributions cap amounts (up to $25K) that accrue from the 2018/2019 year onwards for up to five years. To be eligible you need to have a total super balance of less than $500K as at 30 June and have previously unused concessional cap amounts that have accrued since the 2018/19 year.

As you probably now realise, there are many caps (traps) and considerations to be aware of. Seek advice to see how these strategies apply to you and allow enough time to act.

This information contained in this document has been provided as general advice only. The contents of this document have been prepared without taking account of your personal objectives, financial situation or needs. You should, before making any decision regarding any information, strategies or products mentioned in this document, consult with your GPS Wealth Ltd financial adviser to consider whether it is appropriate having regard to your own objectives, financial situation and needs


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