Archive for SMSFs (Self Managed Super Funds)
New regulations concerning collectables and personal use assets held by SMSFs
Posted by: | CommentsNew regulations concerning collectables and personal use assets held by self managed super funds came into affect 1st July 2011. In order to avoid committing an offence under the new regulations, SMSF trustees should ensure for all new acquisitions of collectables & personal use assets that they:
- Do not store the asset/s at the private residence of a member or related party;
- Keep a record of the reasons for the decision on where to appropriately store the asset/s
- Insure the asset/s in the fund’s name within 7 days of acquisition;
- Do not dispose of the asset to a related party at a price other than market value (as determined by a qualified independent valuer);
- Do not enter into a lease arrangement with a related party in relation to the asset/s
In relation to collectables or personal use assets acquired prior to 1 July 2011, the new regulations will not apply until 1 July 2016. All existing holdings of collectables or personal use assets must comply with the new regulations or be disposed of by 1 July 2016.
David Hunt, a Partner of Peter H. Hunt & Associates, has published a special report concerning Leverage within Superannuation.
Used correctly, leverage and the use of borrowing can significantly boost the returns from investments in super funds. For many years, the authorities discouraged the use leverage in super funds which was only allowed in highly restricted circumstances. This all changed in September 2007 when borrowing by super funds was explicitly permitted in a change to the SIS Act.
A number of issues arose, however, in the operation of the new provisions and there was a further change to the legislation in July 2010. This special report takes a look at the new legislation and the opportunities it offers to super fund investors.
If you would like to read David’s special report “Leverage within Superannuation – What you must know before using borrowing in your super fund” please email us at phhunt@phhunt.com.au and include your name and contact details or call us on (02) 9221 6699 and we will send you a complimentary copy.
SMSFs – collectibles and personal use assets
Posted by: | CommentsThe Government has announced that Self Managed Superannuation Funds will continue to be allowed to invest in collectibles and personal use assets, like artwork or stamps, as long as they are held in accordance with stricter legislative standards.
The tighter legislative standards are intended to ensure that trustees of SMSFs do not gain a personal benefit from these types of investments and that they be held for the sole purpose of providing a retirement benefit.
Bill Shorten, Assistant Treasurer and Minister for Financial Services and Superannuation, has released draft legislation which allow the Government to make regulations about how SMSFs can make, hold and realise investments in collectibles and personal use assets.
Newly registered SMSF returns due
Posted by: | CommentsThe ATO has issued a reminder to trustees of newly registered Self Managed Super Funds that their fund’s 2010 tax return must be lodged by 28 February 2011. A Self Managed Super Fund must hold assets and Trustees of SMSFs which do not hold any assets must notify the ATO that the fund has been wound up or it’s registration may need to be cancelled. Only SMSFs which have been wound up can report “zero assets”.
NSW Stamp reduction for SMSF Trustee on transfer of property
Posted by: | CommentsAn Amendment to NSW Stamp Duty Laws has extended the $50 nominal duty concession for certain transfers of dutiable property to a trustee of a self managed superannuation fund (SMSF) made as a consequence of the retirement of a trustee or the appointment of a new trustee. Under the amendment, nominal duty of $50 will be charged on such a transfer that is made to a trustee of a SMSF (instead of ad valorem duty), if the Chief Commissioner is satisfied that the transfer is not part of a scheme for conferring an interest on a new trustee or other person to the detriment of the beneficial interest or potential beneficial interest of any person.
Therefore, the amendment should ensure that only nominal duty will apply on transfers of dutiable property to a trustee of a SMSF following the retirement or death of an existing trustee and/or the appointment of a new trustee to a SMSF holding “dutiable property” (eg land, unit in a unit trust scheme etc)
This amendment is deemed to commence on 1 July 2010. However the amendment does not apply in respect of a dutiable transaction for which liability for duty arose before 1 July 2010
Insurance Via A SMSF – Advantages And Points To Note
Posted by: | CommentsUsing a SMSF to put in place life and disability cover can be advantageous financially because you can use super savings rather than current cash to pay the premiums.
On the other hand, using a SMSF for trauma insurance is not recommended because that action is likely to breach the sole purpose test.
(Trauma insurance provides financial help in the event of a life-threatening disease.)
To avoid falling foul of the sole purpose test, any benefits from a trauma insurance policy would need to become part of the assets of the fund until the member can legally access them.
Of course, this could be many years in the future and would largely defeat the purpose of taking out trauma cover.
SMSFs For Employees Now Easier – Super Choice And Portability
Posted by: | CommentsHaving a self managed super fund (“SMSF”) is not just for the self employed. Employees can also take advantage of the benefits of a SMSF and two important rules changes in recent years have made this easier than ever.
- Super choice legislation means that many employees have the option of having their employer’s compulsory 9% super contributions paid into their own SMSF
- Improved portability provisions have made it a lot easier to transfer accumulated super savings held in an employer or equivalent fund to a SMSF
The vast majority of employees can have their employer’s future compulsory super contributions paid to a SMSF (or any other fund of their choice) under the super choice legislation.
The legislation doesn’t cover future salary sacrifice contributions. Employees need to negotiate an arrangement with their employer if they wish to pay those contributions into their SMSF.
To pay the compulsory 9% contributions into a SMSF, an employee needs to obtain from their employer the Standard Choice Form (reference NAT 13080), which has to be provided within 28 days. This is easy to complete. It requires the personal tax file number and the SMSF’s Australian Business Number (ABN).
Also required is:
SMSF Rule Change Extension – Account Based Pensions
Posted by: | CommentsThe concession halving the minimum amount an account-based pension has to pay has been extended to financial year 2010-11.
The annual minimum is set as a percentage of the pension account balance at the start of the financial year.
What this concession means is that those under 65 once again only have to draw out 2% of their pension balance, not the regular 4%.
The other minimums (under the concession) are…
- 2.5% for those age 65-74
- 3% for those age 75-79
- 3.5% for those age 80-84
- 4.5% for those age 85-89
- 5.5% for those age 90-94
- 7% for those aged 95 or over
The extension of the concession is good news for those who have no immediate need for income and prefer to continue to strengthen their financial position.
Cooper Review Of Superannuation – Implications For SMSFs
Posted by: | CommentsThe final report of the Cooper Review into the governance, efficiency, structure and operation of Australia’s superannuation system was released on Monday, 5 July 2010.
The Cooper Review found that the Self Managed Super Fund (SMSF) sector is largely successful and well-functioning and should form an integral part of the choice architecture. However, while not seeing the need for significant changes, the report did make a number of recommendations in relation to service providers and the regulatory framework applying to SMSFs.
Following are the key recommendations:
Regulation
- ATO to have power to issue administrative penalties on a sliding scale to reflect the seriousness of the breach
- ATO to have power to issue enforceable undertakings to require trustees to rectify breaches in reasonable time
- The ATO to have power to enforce mandatory education for trustees who have contravened SIS legislation
- ATO to have power to issue binding rulings on SMSFs
Service providers
- Develop an SMSF specialist component of RG 146
- Legislate to require advisers to hold an AFSL where they provide advice in relation to the establishment of an SMSF. The accountants’ licence exemption should be removed and not be replaced
- Approved auditors should be required to be registered by ASIC, and meet minimum competency, knowledge and independence standards developed by ASIC
Investments
- The Government should review the borrowing rules within SMSFs within two years to ensure borrowing is not becoming a major focus of SMSFs
- SMSFs should be banned from acquiring any in-house assets or collectible or personal use assets. Funds currently holding in-house, collectible or personal use assets should be required to dispose of them within 5 years
- All transactions between an SMSF and a related party to be conducted through an underlying market, or where that does not exist, require that all transactions must be supported by a valuation from a suitably qualified independent valuer
Asset valuation
- SMSFs to value all assets at market value with the ATO to publish valuation guidelines
Improving integrity
- Proof of identity checks should be required for all people joining an SMSF
- SMSF registration process should capture details of relevant service providers
- Similar naming rules applicable to bodies corporate should be applied to SMSFs
- Government to provide information to large APRA funds to enable them to verify the details of SMSF membership before processing rollover requests to SMSFs
- Criminal and civil sanctions to enable the ATO to penalise and discourage illegal early release scheme promoters
- Amounts illegally withdrawn from super taxed at 45%
Other
- Amend the SIS Act to automatically deem anything permitted by the SIS Act or a tax act to be permitted by SMSF trust deeds
- Amend the rules relating to investment strategies so that SMSF trustees are required to consider life and TPD insurance for members as part of their investment strategy
Future posts will consider the recommendations in more detail.
For advice on any matters concerning your superannuation, contact us at Peter H. Hunt & Associates here.
SMSFs – 5 More Benefits To Having Your Own Superannuation Fund
Posted by: | CommentsIn a previous post (“SMSFs – 5 Big Benefits To Having Your Own Fund”) we looked at some of the benefits of having your own superannuation fund. But there are more than just 5 benefits. Here are another 5 to consider…
6. Flexibility In The Payment Of Death Benefits
The trust deed can give the trustees the power to pay any death benefit as a lump sum, a pension or into a testamentary trust. This means the best course of action can be decided on at the time of death, which can save significant amounts of tax. Death benefits can be paid in any or all of the following ways:
- As a lump sum or pension to someone who is financially dependent on the member
- As a lump sum or pension to someone who has an interdependency relationship with the member
- As a lump sum or pension to the members spouse or dependent children (to age 24)
- As a lump sum to the non dependent beneficiaries or the members estate
If the death benefit is payable to a non dependent, the taxable component would normally be subject to tax between 16.5% and 31.5%.
For a death benefit to be paid to a testamentary trust, it must first be paid to the member’s estate. When paid to the member’s estate the death benefit will be tax free to the extent that a defined dependant is expected to benefit from it.
If the testamentary trust is a discretionary trust and it is possible to distribute to a non dependant, the death benefit inherited by the testamentary trust will be subject to tax.
For the death benefit to be inherited tax free by the testamentary trust, the testamentary trust’s beneficiaries must all be tax dependants of the deceased.