By now many people will be aware the Federal Government brought in some significant changes to the rules around superannuation. If you missed it you can read about them in some of our recent blog posts.
But for Queensland Government employees - including anyone who works for Queensland Health - there was one more big change at the beginning of the financial year. For the first time it is no longer compulsory for Queensland Health employees to use QSuper as their superannuation fund. Queensland Health staff are now free to use any fund on the market or even a self-managed fund.
The big question of course, is should you switch?
It's an understandable reaction when given a choice for the first time to want to exercise that choice. Many may assume that QSuper's performance might not stack up given they had a completely captive market.
But the reality is that despite tens of thousands of people having no choice but use QSuper, their performance as a super fund has been quite consistent.
In 2017 and 2016 they were named Super Fund of the Year by Choice Magazine. They have had consistently low fees and strong investment performance. For younger medical professionals, they have a good choice of funds that are well suited to the accumulation phase. It's a solid record.
Having said all that, there are some good reasons you might want to move away from QSuper:
The simple - if slightly unromantic - answer for the majority of Queensland Health employees is that there may be good reason to stay with QSuper. That certainly doesn't mean you shouldn't explore your options - especially if you fit into one of the categories mentioned above.
But the absolute worst reason to make a financial change is simply because you can.
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Once upon a time, the rules governing superannuation didn't change all that often. Year after year they would stay more or less the same, with maybe a little tinkering at the edges. It made sense. After all, superannuation is the longest held investment most of us will ever have. It's hard to plan for forty years down the track when you're not sure what the rules will be forty weeks from now.
Sadly successive governments have become addicted to pulling and prodding at the superannuation rules and the 2017/18 financial year is no different.
A flat and lower concessional cap
Under the previous structure people over the age of 50 had a concessional contributions cap of $35,000 and those under 50 had a cap of $30,000. Now the cap for everyone is $25,000 regardless of age.
That doesn't mean that it might not still be a smart financial strategy to put more than $25,000 extra into super, but you need to be aware of the extra tax you'll be exposed to.
Div 293 is a tax applied to the concessional contributions of people on high incomes. In simple terms, it levies an additional 15% on concessional contributions up to the cap (which is now $25,000 for everyone).
This threshold used to be triggered once an individual earned $300,000 in any financial year, but now kicks in at $250,000. Again, this isn't to say that making those extra contributions isn't worthwhile, but the additional tax liability needs to be factored in.
The other thing to consider is that it's not just income that contributes to the threshold - investment losses like a negatively geared rental, and salary packaged fringe benefits and super are also included.
The reason it's so important to know how these changes will affect you, is that any contributions in excess of the cap will attract 46.5% tax - the highest marginal rate.
Of course, if you're earning over $250,000 that's already the tax rate for a fair percentage of your income, but if you've been planning with the expectation of a different tax environment, it could significantly impact on the end result.
The other thing to watch out for is salary packaging. Many Queensland Health employees can salary package up to 2% additional super, with the government matching that contribution. If you're already close to your cap that might push you over the edge.
As with any change in financial circumstances whether they're personal or regulatory it's important to sit down with your advisor and find out how they will specifically affect you.
The good news is that these changes will affect the returns that will be lodged next year, so it's the perfect time to seek advice.
And if you happen to find yourself sitting next to the Federal Treasurer at dinner, you might want to politely ask if he can please leave super alone in next year's budget.
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I had a friend at university who always left assignments to the night before they were due. He would literally never start anything until the very last minute. Somehow he would always pass, but I never understood why he would put himself through such a ridiculous amount of stress.
These days I see the same approach from a lot of people to their tax planning. They spend 11 and a half months ignoring their taxes and then two weeks with their hair on fire trying to pull it all together. Like my old uni mate, they usually make it, but it's far from a pleasant experience.
Look, I get it. Tax Accounts are a weird bunch. We actually enjoy poring over people's books and get excited when we zero in on a clever deduction.
Most people (that is, "normal" people) don't get quite as much joy from the process. The thing is, whether we like it or not there's no getting away from our taxes. But there are ways to make the experience a little less painful.
When you're tackling a big assignment it always pays to map out a good structure before you start writing. Same goes for your taxes.
If you set up a good structure for keep track of transactions and reporting you're already halfway there. Organised filing, clear processes and accurate records will save you a heap of angst come tax time.
As my uni mate proved over and over, it is possible to write a whole assignment in one night - it just takes a lot of Red Bull and sleep deprivation, and what you produce at the end is generally rubbish (even if it ends up being passable rubbish).
A better way to go is create a plan to keep on top of things throughout the process. For your taxes, that might mean setting aside a couple of hours each month to accurately reconcile expenses and make notes about questions you need to ask your accountant.
If you're organised and disciplined, by the time June rolls around you'll already be mostly done.
Okay, I know that's not really a thing - but it should be. In a few days it will be 30 June, so if you're not already organised it's far too late to avoid the big tax cram this financial year.
But the day after that is 1 July. Just like on New Year's Day, the new financial year brings new possibilities. And the best time to make a resolution about the year ahead is when you're still suffering from a hangover from the year before!
So if you've spent the last couple of weeks frantically going through faded receipts and wracking your brain to interpret strange scribbles on scraps of paper, make yourself a promise: next financial year I'll get organised. Then make sure you don't break it!
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After years of watching the Federal Government tinker with superannuation rules, most professionals in the industry have been pleading for the system to finally be left alone. By its very nature super is a long-term investment - it's hard to plan for the distant future when every year the government shifts the goalposts.
Unfortunately we're going to need to put a good bend on the ball again because in 2017/18 those posts are moving once more.
Without doubt the biggest concern for most medical professionals is the reduction in the cap on before-tax concessional contributions. This is a particular issue for professionals who are mid-career and still very much in wealth accumulation mode.
At the moment the cap is $30,000 if you're under 49 and $35,000 if you're over 49. From July 1, everyone's cap will be $25,000. Anyone who makes extra contributions through salary sacrificing for example, should speak to an adviser and take a look at how the changes will affect them.
This is a particularly urgent issue for anyone who hasn't used all of this year's cap as there's still time to put additional money in your account before the rules change.
Probably the biggest change for those near retirement is that there will now be a limit of $1.6 million that can be placed in income stream accounts.
If you have more than $1.6 million you can transfer the balance into an accumulation account or you might want to consider making a contribution to your spouse's account. There are a number of options available, but again it's important to speak to an expert who can provide advice on the best strategy for your individual circumstances.
Yes! If there's a small ray of light in the midst of all this gloom it's that from 1 July anyone can make a deductible super contribution - not just the self-employed. This will make it much easier for everyone to fully utilise concessional contribution allowances and get maximum tax benefits.
The unfortunate reality is that the changes to super that will begin next month are so wide-reaching that almost everyone will be affected in some way. The most important thing to do is take a holistic view of your investment strategy and what role super needs to play in it from 1 July.
It is absolutely still worth maximising your superannuation, but many people will also benefit from some strategic changes to their investment mix.
In short - get some professional advice and do it quickly.
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Far from the bitter pill of previous years, the 2017 budget has more in common with children's cough syrup - pleasant enough (if a little sickly sweet), but with an unmistakeable strangeness that's hard to identify.
So what does it all mean for medical professionals? It's a mixed bag, but on balance the news is mostly good. In fact, Chartered Accountants have even described it as a budget that positions the government for a possible early election.
So let's start with the bad news.
Funding certainty for the NDIS is certainly admirable, but using a 0.5 percent increase to the Medicare Levy is fairly blunt way to do it. For higher incomes earners the removal of the Temporary Budget Repair Levy from 1 July will offer some tax relief.
Groundhog Day is over! After a four year freeze the government is finally increasing Medicare rebates. That means more money back to patients and more money flowing through to doctors. Win win.
In an unexpected bonus the government has extended the $20,000 capital assets write off for small businesses for another year. That means if you didn't get around to upgrading your computer system or replacing surgery equipment, there's still time. There's no guarantee Mr Morrison will be quite so generous next year so it's a good time to assess your practice's needs.
The ability to salary sacrifice to save for a first home deposit is a real boon for many early career medical professionals. The housing market might still be hotter than a Colourbond roof in January, but this measure at least makes scraping together a down payment a little easier.
Under pressure from many to reform negative gearing, the government has chosen to the give the system a slight trim, rather than a haircut. The deductions that will no longer be available to property investors aren't anything to get too worried about (as far as expenses go, nothing comes close to rivalling bank interest) however, it is still prudent to make sure you're not counting on a now-banned deduction.
If you're looking for more detail on the winners and losers from this year's budget the ABC have produced an outstanding infographic you can view online here.But of course, if you're looking for specific advice about your personal circumstances, please don't hesitate to get in touch with us.
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