Episode 14

Words on Super Strategies in a Market Dip

Presented By Ishara Rupasinghe
01 May 2025 Listen time 13mins
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Now Listening: Words on Super Strategies in a Market Dip

In this episode of Words on Wealth, Senior Strategy Advisers Ishara Rupasinghe and Daniel Gumley unpack how market dips can create opportunities to contribute more to super. From using concessional caps, to rebalancing between spouses and reducing tax, they explore strategies to turn short-term volatility into long-term gains. With 30 June fast approaching, now’s the time to fine-tune your super plan. Tune in to learn more.

This episode is also available on Apple Podcast. 

Ishara Rupasinghe

Hello and welcome to Words on Wealth. Now we’ve focused a lot on trade tariffs and market volatility lately and as unsettling as this might feel, it’s not all bad news, especially if you’re looking to make the most of your super. I’m Shara Rupasinghe, Executive Director and Senior Strategy Advisor at Evans and Partners in Canberra. Today we’re diving into how a market dip can actually create opportunities for superannuation members. Now our guest today is Daniel Gumley, a director in our Melbourne office and also a senior strategy and investment advisor. Before we dive into what these opportunities are, let’s have a look just quickly at what’s happened with super fund returns lately. There’s no doubt concerns around trade tariffs and US recession have taken a toll on super fund returns. If we look at the month of March, the median growth super fund fell almost 2%. But if we put it into perspective, Since the start of the financial year, the median growth fund is still up about five and a half percent. Now, generally, the more exposure you have to growth assets like shares and property, we know there tends to be more volatility in your portfolio. Now, today, we’re not going to be focusing specifically on investments, but what I will say quickly is that when it comes to your super, it’s important to focus on the long term. There’s no need to panic and certainly not to make rushed investment decisions. Instead, we want to consider the long-term goals for your super fund. If you’re a retiree, making sure you have enough cash to pay pensions is important. But otherwise, for most people, it’s best to wait it out. What we do want to focus on today is what this volatility means in terms of someone’s total super balance. And I think this is a good opportunity to bring Daniel into the conversation. Daniel, why is someone’s total super balance significant?

Daniel Gumley

Thanks Ishara, your total super balance is really important because it’s used to determine how much you can contribute to super. It’s measured on 30 June each year so a market correction like what we’ve seen can actually temporarily lower your total super balance which might open up some opportunities for concessional and non-concessional contributions to super.

Ishara Rupasinghe

Okay, so just to recap then, would you mind briefly reminding us what the rules are around concessional contributions?

Daniel Gumley

Yeah, so there’s a couple of different types of contributions that you can make to superannuation. First of all, concessional contributions. Now these are the type of contributions that can help save you tax. So these are pre-tax contributions, salary sacrifice from your employer, or you can actually use your own savings to make a contribution and claim it as a tax deduction in your personal tax return. Now the annual limit for concessional contributions is $30,000 and for non-concessional contributions is $120,000.

Ishara Rupasinghe

Okay, so where in that case is the opportunity when it comes to say concessional contributions?

Daniel Gumley

So for concessional contributions, if your total super balance was under $500,000 at the start of the financial year, you might be able to use the unused concessional contribution caps from prior years up to the last five years, which would allow you to make more than just the $30,000 and therefore to get a bigger tax deduction this financial year. Now, if you’re in this situation, Now might be the time to log in to myGov to check your carry forward caps and to check with your super fund as well to cross check that data. The other thing to note is that you can only carry forward unused amounts for up to five financial years. So this year, any unused amounts for the 2019-20 financial year, if not used before 30 June, 2025 will actually expire. Now, for those who might have a total super balance hovering near that $500,000 mark, it’s worth keeping an eye on your balance as 30 June approaches. If it does end up falling below this level at 30 June 2025, then next financial year might be a good opportunity for you to take advantage of using any carry forward capacity that you may not have used in the past. Now, I thought it might be worth just running through a quick example of someone earning $160,000 a year. Now they might contribute $20,000. As a concessional contribution, might be using a combination of the current year’s cap and a bit of their unused carry forward amount from prior years. Now this $20,000 contribution, that gets taxed at 15 % on the way into super, but they claim that the $20,000 is a tax deduction. So that’s where you get that tax benefit. And overall, you’d actually save around $4,800 in tax once we factor in that super contributions tax. Now at the end of the day, the bigger the contribution or the higher the salary, the greater the potential tax saving. And there are still good tax savings available for those higher income earners who are also hit by that extra 15 % division 293 tax.

Ishara Rupasinghe

That’s a good point, Daniel. And if you’re retired or not eligible to make concessional contributions, I think it still could be a great conversation to have with your kids if they fit into this category. But I know younger people might not have this kind of savings sitting around, but this is where retired parents with excess pension income could jump in to help sort of like an early inheritance. But look, if you are a retiree or close to retirement, you can still contribute in other ways and probably the most significant way to boost your super is through non-concessional contributions. Because the good news is with this type of contribution, you don’t have to be working to do this. As long as you’re under 75 and your total super balance was below 1.9 million as of 30 June 2024, you can contribute up to 120,000 this financial year or even $360,000 using the three-year bring forward rule if your total super balance was low enough. Now because of how CPI has been tracking this $1.9 million dollar limit is set to be indexed to $2 million from 1 July 2025.

Daniel Gumley

And Ashara, this is definitely an area that we’re finding opportunities with clients, even if your balance previously was above the cap when it was 1.6 or $1.7 million, or if you’ve maximized what you can hold in the tax-free pension phase environment. If at 30 June, your total super balance ends up being below $2 million, that indexed threshold, you do then have another opportunity in the new financial year to top up your super using non-concessional contributions. So it’s definitely worth keeping an eye on where your balance is at 30 June 2025.

Ishara Rupasinghe

That’s a good point, but will everyone know exactly what their 30 June balance is on 30 June?

Daniel Gumley

Yeah, look for industry and retail super funds, it’s somewhat simple when you receive your annual 30 June member statement, you’ll know what your final balance is. But for self-managed super fund investors, it’s really important to wait until your 2025 financial year tax returns are completed so that we know what your final audited member balances are to be 100 % sure what your total super balance is it’s also important to ensure that you take into account any other super funds account balances that you might have out there and that includes industry and retail funds but also defined benefit pensions or defined benefit interests that you may have as well.

Ishara Rupasinghe

That’s a good point as well, Daniel, because you’ve got to remember the defined benefit pension, there is a lump sum value that’s assigned to it, which is called the special value, and that counts towards that total super balance cap. And you can find this information through myGov. Otherwise, sometimes your pension statements might also show what this value is. Now, even if you don’t have spare cash to contribute in the new financial year, there are some strategies to take advantage of that we’ve been helping a lot of clients with, particularly around rebalancing accounts between spouses or using a withdrawal and recontribution strategy to reduce tax for beneficiaries. Daniel, when and why would you look at these strategies for your clients?

Daniel Gumley

Well typically the first priority is getting as much as possible into super but for those who have been able to maximise their contribution limits in the past or may no longer have any assets available to contribute to super, the next step for those who have the ability to access their super after age 60 is to look at using your contribution limits to be able to reduce the taxable components of your super account to ultimately save tax for adult children beneficiaries and also to look at rebalancing member accounts to be able to better equalise super balances between members of a couple. So the way that we do that is known as a withdrawal and re-contribution strategy. It can help to achieve both of the benefits I mentioned around reducing tax for beneficiaries and rebalancing member accounts. And it involves taking a tax-free lump sum withdrawal from your superfund and re-contributing the funds within available non-concessional contribution caps. Now, alongside this, the other interesting opportunity that we’re seeing with market volatility, now, you may not have any cash available to contribute to super, but if you do have a personal share portfolio, it’s worth looking at what capital gains position your shares are in and whether any share price movements that we may see over the coming months give you a better opportunity to actually restructure your investments and transfer personal shareholdings into a more tax-effective structure. Now commonly that might be superannuation, but it could also be transferring shares into a family trust or another investment structure that’s more tax effective.

Ishara Rupasinghe

Yeah, look, think that’s, you highlight a really interesting strategy there. And just to remind people, the capital gains tax is an issue even when you’re transferring shares, because it is a change of ownership. Now, even though you’re not selling shares, it still triggers a capital gains tax event because of that change of ownership. look, if you can try and reduce that capital gains tax, obviously it’s gonna make that strategy much more appealing.

 

And as you said, we’ve seen markets bounce back pretty quickly. So if you do want to transfer shares when markets dip, I think it’s possible that you’re going to have to act quickly. But if you’ve planned out this strategy ahead of time, it could be really effective long term, as you said, Daniel, because once these shares are held in super or even a trust, the future income, so future dividends and potential capital gains, are hopefully going to be taxed at a lower rate. And if it’s in super, that’s 15 % or possibly even tax free if you can transfer your super to a retirement pension. So a very effective strategy and certainly a good time to keep an eye on your share portfolio and what the market movements mean for this sort of strategy.

Daniel Gumley

Definitely, and we typically look at ensuring those transfers are conducted off market. So importantly, there’s no time out of the market. You remain invested and it’s really just a way to get your investments into the best tax environment for the longer term.

Ishara Rupasinghe

Yeah, perfect. Now look, obviously these are some complex strategies that take a bit of working through. The good news is there’s still time this financial year to plan ahead. We’re almost in May, but that leaves another couple of months to work through it. The key takeaway though is to keep an eye on your total super balance as we approach 30 June. With some careful planning, that short-term volatility could translate into some long-term gains for your super funds. Look, thank you Daniel for sharing your insights. It’s been great having you. Thanks everyone for tuning in. If you’d like more personal advice on any of the issues we’ve talked about today, reach out to your financial advisor and don’t forget to subscribe for more insights.

 

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Ishara Rupasinghe
Executive Director, Senior Strategy Adviser

Disclaimer

This podcast was prepared by Evans and Partners Pty Limited AFSL 318075.
Any advice is general advice only and was prepared without taking into account your objectives, financial situation or needs. Before acting on any advice, you should consider whether the advice is appropriate to you. Seeking professional personal advice is always highly recommended. Where this presentation refers to a particular financial product, you should obtain a copy of the relevant PDS, TMD or offer document before making any investment decisions. Past performance is not a reliable indicator of future performance.
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