Advisers busy ahead of EOFY

Yasmine Raso

Senior Journalist, Financial Newswire

9 June 2023

Financial advisers have rarely been busier than in the lead up to the end of financial year (EOFY), discussing several topics and changes with clients ranging from superannuation to tax cuts.

According to BT’s technical team, which fields over 8,000 adviser queries every year, the most asked after themes during the June 2023 quarter included FY2025 tax cuts, superannuation guarantee (SG) increases, super transfer balance cap increases, Budget social security measures, and super balance tax increases.

Tim Howard, Technical Consultant at BT, said it is important for advisers to keep in mind that their clients with an annual income over $45,000 are set to benefit from tax cuts from July 2024. This can also benefits clients who earn more than $120,000 a year, as the personal income tax rate reductions can allow for more personal super contributions to be made in FY2024 as a tax-effective strategy.

The current tax rates of 32.5 per cent for incomes between $45,001 and $120,000 and 37 per cent for $120,001 to $180,000 will be abolished ahead of FY2025 in favour of a flat rate of 30 per cent for incomes between $45,001 and $200,000. The highest tax rate of 45 per cent that currently applies to incomes over $180,000 will only apply to incomes over $200,000.

“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,” Howard said.

“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.”

Advisers were also recommended to remind their clients about the amount remaining before reaching their contribution caps as normal, but to also ensure they are aware the SG will increase to 11 per cent in the new financial year; the concessional contributions cap is not increasing, however.

BT also told advisers to consider telling clients soon to be entering their retirement to wait until July to commence their pension due to the general transfer balance cap increasing by $200,000 to $1.9 million and the maximum total super balance also increasing to $1.9 million.

Parliament is also expected to pass into law increases to several social security payments, including Jobseeker and Youth Allowance, which can affect seniors. From September, the age threshold to claim Jobseeker payments will be reduced from 60 to 55 years and rent assistance will also grow by 15 per cent.

“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,” Howard said.

Howard also recommended advisers keep in mind the proposal made by the government to increase the tax individuals with total superannuation balances over $3 million will pay by 15 per cent. If it passes into law, the changes will come into effect from 1 July 2025.

“While still only an announcement, this does mean advisers have two years to consider any changes for impacted clients,” he said.

The eligibility age for receiving the age pension is also increasing from 1 July from 66.5 to 67 years.