Adam Goldstien, principal of financial advice group Skeggs Goldstien, says many Australians are not aware of the biggest super reform affecting them.
“Probably the biggest change that does affect people, which sort of goes under the radar, are the changes to the transition pensions, which start from 1 July,” Mr Goldstien said during an episode of the soon-to-be-released Nestegg podcast.
“So all those people that have started a transition pension, i.e. the ones who aren’t quite retired yet but have started a temporary pension, those pensions were tax-free, and from 1 July on, they’re no longer going to be tax-free.
“That, I think, is the biggest change that will affect most people as far as numbers are concerned.”
Mr Goldstien said that particular reform has been largely neglected in the media due to the furore surrounding concessional and non-concessional caps.
“We talk about $1.6 million transfer caps and half-million contribution limits, but they affect a very small percentage of people in reality,” he said.
“What’s quite deceptive is the way the government put this forward to the population insofar as it does affect more than they actually planned [for] it to affect.”
While Mr Goldstien urged Australians to review their situation, he cautioned against a knee-jerk reaction.
“Have a re-evaluation of your objectives [and ask yourself] ‘Why did you start those types of pensions in the first place and have they necessarily changed?’” he said.
“If you’ve done a transition pension because you’re genuinely transitioning into your retirement, then there’s probably no need to do anything.”
However, Australians who moved into a transitionary pension for tax purposes should review their decision, Mr Goldstien said.
“The biggest benefit of these transition pensions was that you could have a situation where you could do what’s called an income swap [where] you could actually reduce your salary and wages down and increase your super contributions and still leave on the same net after-tax cash flow,” he said.
When the reforms are implemented on 1 July, this will no longer be the case, potentially removing many Australians’ attraction to the transitionary arrangement.
“If tax had an effect on your objectives and outcome, you should take a look at this, most definitely,” Mr Goldstien said.
“Use an adviser when you need to and collaborate with them. You should get onto this early as the next six months has huge consequences so you need to have a look at getting these things right, right away.”