Sam Morris bounces into the interview with a huge smile. “I bet you were expecting a white male when you read my name,” she says. I have to confess I wasn’t expecting this ebullient Indian woman, exuding good humour like a physical force.
“No one can pronounce my real name (Samidha), and Morris is my married name,” she explains. A journalist in India, Morris switched careers after arriving in Australia in 2003 when her lack of local experience proved insurmountable in landing a journalism job. Optimism undaunted, Morris began working in a call centre in Melbourne, trained for a special project on phone-based insurance advising, kept studying and became a financial adviser.
Thanks to her agility with figures and desire to understand “how things work”, she found she particularly enjoyed the compliance and technical aspects of the financial advice industry, and now – via a stint in paraplanning – she is Prime’s compliance, technical and training manager.
For the next few months, massive changes to superannuation regulations after a period of uncertainty will take much of her attention. There’s a lot of information to decipher and apply, she says.
Many changes to super rules were announced in the May 2016 budget but failed to pass both houses of Parliament, which put the industry into limbo. The picture became clear in November, but that has allowed only a few months for the advisers to get on top of what these changes are, understand how their clients are impacted, make appropriate recommendations to them and implement these strategies before July 1.
People under 65 have the last opportunity before 30 June 2017 to contribute up to $540,000 using the bring forward rule into their super as a non-concessional contribution, irrespective of how much they already have in super. From July 1, not only will the cap reduce to a maximum of $300,000 using the three year bring forward option, but anyone with over $1.6 million in their super will not be able to make any further non-concessional contribution.
The introduction of the $1.6 million cap in pension phase is also a noteworthy change. Until June 30, all earnings inside a pension are tax free. From July 1, only $1.6 million can be in the pension phase with no tax – any extra funds must be withdrawn from pension and either moved to accumulation phase or withdrawn from super all together. Earnings from assets in accumulation phase will be taxed at 15% or if held in your personal name, at your marginal tax rate.
Morris states “It could be a fine line balancing tax payable, having flexibility in options available now and later, and understanding how any changes to personal circumstances in the future could impact the outcome.” Similarly, changes to the transition to retirement (TTR) pensions will impact many clients. TTRs were originally introduced to assist people who were gradually moving into retirement via part-time work. You didn’t have to retire to withdraw your super benefits.
However many people used the strategy for boosting super savings and tax management. Well, the zero tax environment ends on July 1. The income generated from the investments supporting the TTR pensions will now be taxed at 15%, which means many clients may need to review this strategy.
The super changes are too broad and complex to deal with in a short article, and Morris recommends that clients talk to their advisers regarding their personal situation. “An adviser can simplify things by removing the technical jargon and recommend some strategies after analysing how they would impact a client now and in the future.
There is no one size fits all solution. Not getting the right advice could be costly, both now and later for their estate.” That reflects the biggest lesson Morris has learned in finance:
“Every client is different, everyone’s situation is different, and we have to respect that.
SAM MORRIS HEAD OF COMPLIANCE AND TRAINING AT PRIME FINANCIAL
I always follow the ‘mum rule’: would you do this for your mum if she was in this situation? If not, don’t do it for the client.”