The more favourable taxation treatment of superannuation stemming from the Federal Budget, combined with an alternative approach to home equity and mortgage repayments, could present new opportunities for planners and selected clients.
The standard advice of paying out the mortgage before focusing on superannuation and investments is in some cases defunct, according to the technical manager of ColonialFirstState, Craig Day, speaking at the Total Asset Planning conference in Sydney.
Promoting an approach that turns conventional planning advice on its head, Day and other speakers at the conference suggested that individuals with a relatively high-value property and strong equity could be better off channelling money into their superannuation via personal contributions rather than concentrating on their mortgage.
But Day said this approach will not work for everyone and is not without risks.
It requires careful planning, and is more feasible for clients aged 50 years old and over, who are only around 10 years from retirement.
The view of Day and many planners in attendance was that while it had merit for many, the approach presented considerable legislative risk for those who were 20 years and further from retirement.
This was because there was a strong chance that successive Governments would rollback current superannuation legislation, as had happened in the past, or that the Goods and Services Tax would be increased to offset the favourable superannuation system.
As a hypothetical example, Day suggested that this approach could be appropriate advice for someone aged 50 who owns a home valued at $1 million, with only $200,000 or $300,000 left to pay on their mortgage.
