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What does the election result mean for our super?

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With the return of a Coalition government, we can expect to see some of the super initiatives announced in the 2019 Budget, and in legislation that lapsed when the election was called, being reintroduced to the Parliament.

So, we can expect to see:

Increase in contribution age limits

The 2019 Budget included a proposal for people aged 65 and 66 to be able to make super contributions without having to meet the current “work test”. This proposal is now expected to be introduced to Parliament in the near future. It is due to take effect from 1 July 2020.

 

Extending the age limit for the three-year bring forward

Under current law, an eligible person may bring forward up to three year’s non-concessional contributions and contribute up to $300,000 in one year, provided they were aged 64 or younger at the start of the financial year in which they make their contribution. This age limit is to be extended to 66 from 1 July 2020.

 

Extending the age limit for spouse contributions from 69 to 74

People who make contributions for an eligible spouse up to 74 years of age will be able to claim a tax offset of up to $540. The age limit is being increased from the current 69 years. This will apply from 1 July 2020, however, a receiving spouse aged 67 or older will need to have met the work test.

 

Insurance opt-in

While legislation affecting insurance held inside super for people with an inactive account (haven’t made contributions for 16 months) has already been enacted. We can expect to see the measures extended to those with account balances less than $6,000 and for members under 25 years of age.

In each case, members will need to opt-in if they wish to have insurance cover through super.

 

SMSF membership to extend to 6 members

The legislation relating to the increase of SMSF membership to 6 people (up from 4) lapsed when the election was called. We can expect to see this legislation being re-introduced into the new Parliament.

 

Opting out of Superannuation Guarantee

Where high-income earners work for more than one employer, their superannuation guarantee contributions often result in a breach of the concessional contribution cap. The Government has plans to allow affected employees to opt-out of superannuation guarantee for all but one employer so as to avoid breaching the concessional contribution cap of $25,000.

 

Salary sacrifice arrangements

Integrity measures covering aspects of salary sacrifice contributions to super and their potential impact on superannuation guarantee contributions lapsed when the election was called. We can expect to see these measures reintroduced by the new Coalition government.

 

If you have questions about these proposed measures, and opportunities they present, you should consider meeting with a qualified financial planner.

 

Source:  Peter Kelly | Centrepoint Alliance

‘The Donald’ – from the Trump Train to the White House

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I expect you would have seen the news regarding Donald Trump’s seemingly ‘improbable’ victory in the U.S. Presidential election. Love him or hate him, Trump’s victory is effectively middle America’s retribution against the political establishment.

You may be wondering what on earth happened to financial markets overnight. For example, the U.S. share market looked like it was going to tank, but in the end, closed the day higher. You wouldn’t want to be the person who hit the sell button based on the news at the time.

Trying to ‘time’ such volatile markets only highlights that having an investment strategy based on reacting to news headlines probably isn’t going to help in building long term wealth.

The reaction in markets (and even more so, the media) reminds me of the Brexit vote by the British people to leave the European Union in late June. While there are fundamental differences between the two (i.e. that a presidency is not permanent), some parallels can be drawn – a divisive campaign, an unexpected result and palpable fear about what the future holds.

Like Brexit, it is near impossible to measure what the outcome immediately means for the country’s citizens, let alone for the economy and financial markets. What we can measure however, are valuations in investment markets. Your portfolio is driven by long-term valuation-driven investing, which means we’re not peering into a crystal ball and trying to predict the outcome and implications of elections.

Summary

While it may feel uncomfortable to read the headlines when you pick up the newspaper, the rollercoaster ride in financial markets is nothing new. On this occasion (as in the past), I encourage you to look through the market noise and panic and remain focused on the bigger picture.

As long term, valuation driven investors, with a focus on the preservation of capital, it is my belief that under or overvalued markets will return to their fair value, or what they are really worth, over time.

Negative sentiment and heavy selling, often driven by fears of what might happen, have historically created the best opportunities for value investors. From your current conservative positioning we’ll continue to monitor markets and look to buy quality assets that are ‘on sale’ using your higher levels of cash that are held for times like these.

Your portfolio is well positioned to take advantage of any investment opportunities that may arise from irrational investor behaviour in this period of uncertainty. While we should never wish for markets to crumble, we stand ready to profit from any such opportunities that present themselves.

 

Source:  Morningstar