Tag Archive: administration

  1. New ATO Penalties mean more likely cash fines!

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    Historically, the ATO only had extremely harsh penalties in the form of Trustee Disqualification, or rendering a Fund Non-Compliant and imposing the loss of all tax benefits.  Because the “time” far outweighed most crimes, the ATO rarely took these courses of action.

    However from 1 July, the ATO will be providing either “education” or “rectification” directions along with fines for tardy responses, as well as raft of explicit Administrative Penalties carrying significant cash fines to be met by the Trustees themselves, rather than the Fund.

    An “Education Direction”, as the name suggests, will likely be used for first time offenders and requires the Trustee to better understand their obligations via the completion of an ATO designated course or program. The Trustee must then complete the course and notify the ATO appropriately (via a SMSF Trustee Declaration Form), or incur a fine of $1,700 and an $850 administrative penalty.

    A “Rectification Direction” refers to an ATO instruction to remedy the breach.  Where the Trustee cannot or does not provide evidence of the rectification, the fine is $1,700 for each breach.

    Further Administrative Penalties are also on offer ranging from $850 up to $10,200 for each contravention!  The proposed table of penalties are detailed as follows:

    Section and Rule

    Proposed Penalty

    s35B – failure to prepare Financial Statements


    s65 – prohibition on lending or providing financial assistance to members and their relatives


    s67 – prohibition on super fund borrowing, except as permitted (LRBA)


    s84 – contravention of In-House Asset rules


    s103(1) & (2) – failing to keep trustee minutes for at least 10 years


    s103(2A) – failure to maintain a s71E election, where applicable, in relation to a fund with an investment in a pre-11/8/99 related unit trust


    s104 – failing to keep records of change of trustees for at least 10 years


    s104A – failing to sign Trustee Declaration within 21 days of appointment and keeping for at least 10 years


    s105 – failing to keep member reports for 10 years


    s106 – failing to notify ATO of an event that has significant adverse effect on the fund’s financial position


    s106A – failing to notify ATO of change of status of SMSF, eg. fund ceasing to be a SMSF


    S124 – where an Investment Manager is appointed, failing to make the appointment in writing


    s160 – failing to comply with ATO Education directive


    s254(1) – failing to provide the Regulator with information on the approved form within the prescribed time upon establishment of the fund


    S347A(5) – failing to complete a form with requested information provided by the Regulator as part of the Regulator’s Statistical Program


     The way the legislation is written penalty amounts will be issued to each trustee of an SMSF.  For Corporate Trustees, this will mean that one penalty will be issued, with all directors jointly and severally liable.  Where Individual Members exist, technically the penalty may be imposed on each trustee.

    The bottom line

    With ASIC now monitoring Auditor capability and compliance, the pressure is on all Auditors to report any imperfections with financial reporting and fund activities.  These penalties now also mean that Auditor calls cannot be ignored.

    It all makes for more reasons to make the most of Greenlight’s expertise and technological innovation.  Ask us for a Greenlight Online demonstration today or talk to us about how our specialists can help you steer clear of any ATO penalties!

  2. Last Minute Tax Savings Before 30 June

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    June 30 falls on a Monday this year, which given bank timings, really means that Friday 27th should be what you consider the deadline for this year…  If you’re keen on saving some tax just before the deadline, here’s some Super ways to do it!

    Pre-Tax Contributions (Personal Deductions and Salary Sacrificing)

    If cashflow permits, the most tax effective means of saving for most people in higher income brackets is to reduce total taxable income AND pay the lower 15% contributions tax on the way into the Super environment.

    Of course, given the age at which you can then access Super is somewhere between 55 and 60, the closer you are to this number, the more attractive an option it seems.

    But the government does limit how much of a good thing you can have by imposing “Contribution Caps”.  So to work out how much you can contribute this year, do these 2 things:

    – You’ll need to know what your employer has already contributed on your behalf.  If they are paying standard Superannuation Guarantee Contributions (SGC), it should be 9.25% of your total salary including bonuses, up to a maximum of $17,774.80. But it is best to check your latest Pay Slip or Superannuation Online portal if you have one. Once you know this amount, subtract it from the below “Caps” and that is how much you can still contribute up to. Note the age thresholds and caps change for next year, so for more details see our Post Budget Ready Reckoner

    Year Aged under 59 @ 1/7/13 Aged 59 and over @ 1/7/13
    2013-14 (now) $25,000 $35,000

    – You can also use this calculator provided by the Australian Securities & Investment Commission (ASIC) to work out how best to allocate any excess cashflow that you have, and what tax the additional contributions will save you.


    If you are self employed, June is the most common time to assess cashflow and make the contribution, bearing in mind that in order to claim the contribution (to be tax deductible) any income received as an employee (being “overall assessable income PLUS super contributions (ex SGC) PLUS reportable fringe benefits”) needs to be less than 10% of your total assessable income for the year.

    If you’re employed, you may find it difficult to forego a large amount of salary, or get your employer to help you out at this late stage, but you should consider monthly amounts for 2015 while you’re thinking about it!

    After-Tax Contributions (Non-Concessional Contributions)

    The government also limits how much Super you can contribute after tax, which has meant that the days of leaving savings outside of super until the last minute are all but gone.  For 2013/14, the caps are the same:

    Year Limit per year* Over 3 years (referred to as “bring forward rule”)**
    2013-14 $150,000 $450,000

    The 3 year “bring forward rule” means that you can effectively contribute 3 years’ worth of contributions today, and then not contribute any more for 3 years.  This can be done anytime, but many people leave it until the last minute before retirement and then realise just how good the tax savings are!  If you’re near 65 and/or retiring, timing becomes critical and somewhat complicated:

    1. Once you get to age 65, you need to meet a work test of 40 hours or more in a 30 day period in order to make a contribution and can only contribute the annual amount each year ie $150,000
    2. Therefore if you’re under 65 and no longer working you may want to contribute $150,000 per year and then use the 3 year rule opportunity as close to age 65 as possible
    3. Once you reach age 75 no further contributions can be accepted by a super fund unless they are the super guarantee amounts ie 9.25% of salary

    Here’s is an illustration of how to get as much into super before age 65 to maximise tax free income in retirement.  It’s all about not using the “3 year bring forward rule” too early.



    To complicate matters further, next year the Non-Concessional Caps actually increase, and so where possible, you would hold off using the “3 year bring forward rule” until the 2014-15 tax year to take advantage of the extra $90,000.

    Year Limit per year* Over 3 years (referred to as “bring forward rule”)**
    2013-14 $150,000 $450,000
    2014-15 $180,000 $540,000

     Use next year’s Caps to offset this year’s Tax Liabilities

    Although not commonly understood individuals or employers can actually contribute beyond this year’s concessional cap, claim a tax deduction this year, but have the super fund allocate the second contribution (which must be made in June as a separate deposit) to next year’s cap prior to 28 July.  It’s done by holding the portion to be allocated to the next financial year in a contribution reserve account on the basis it has not been allocated to a specific member.  If the contribution is a “member concessional contribution” they need to complete a Notice of Intent to Claim a Tax Deduction in order to claim this second contribution in the year it was actually funded.  This strategy can be used to offset significant tax liabilities that fall this year, such as the capital gains tax on a business or property investment.


    The above case assumes the client is aged over 59 this financial year, therefore accessing the $35,000 Cap for both years.  See the Post Budget Ready Reckoner for the increases next year for those aged over 49.

    Off Market Transactions

    Contributions can also be made using “in-specie contributions” or transfers of physical assets without selling down.  Although the transaction still triggers Capital Gains Tax, you may be able to avoid a tax liability if your Marginal Tax Rate is nil (because you are in pension phase), or you are able to claim a personal tax deduction on contributions (because you are self employed).

    Tips and Traps:

    – There are restrictions on which assets you can transfer in this way (for example, Listed Shares but not Unlisted Shares, Business Real Property but not Residential Property)

    – You’ll need to be able to determine a market value of the asset being transferred to ensure that it fits within the contribution caps

    – The paperwork trail needs to be implemented correctly as the auditor will likely need to check for dates of the asset transfers matching valuations

    Exempt Current Pension Income Deduction

    Income derived from SMSFs in Pension phase are exempt from paying income tax.  However to ensure the SMSF is entitled to the exemption you must:

    • Check that you’ve met the required minimum pension payments for the year
    • Re-value all assets to their appropriate market value at year end

    If cashflow is an issue in meeting minimum pension requirements, consider whether a “lump sum in-specie payment” of an asset might work.  Even though you can’t actually call the transaction a pension payment itself, new rules now allow a lump sum to be counted towards the minimum pension payments for the year.  Although it is a “workaround”, this can be helpful if you have artwork or other collectibles you want to remove from the super fund and the pension you draw is more than you need. You will need to get an independent valuation of the asset.

    If you need any help getting organised for 27th June, contact Danielle or Vanessa as soon as possible.  It’s all better in your pocket than the tax offices’!

  3. What Tax Deductions can your SMSF Make?

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    Whether or not expenses are deductible is largely about common sense.  If the investment is allowable under the Superannuation Industry Supervision (SIS) Act, or the cost is genuine in running your fund, then chances are, it is a deductible expense.  It’s actually as much about remembering to record such expenses so that you can make the claim.

    You can get a comprehensive list from the ATO, but here’s a list of the most common that you should be ensuring that you are retaining records for and claiming, that is assuming you are in Accumulation phase and therefore paying tax!

    • Bank Charges
    • Valuation and storage costs of collectible assets (as long as income producing)
    • Depreciation on plant and equipment
    • Interest on investment loans
    • Actuarial costs (relating to pension funds)
    • Accountancy/Greenlight Fees
    • Audit Fees
    • Trust Deed Updates
    • Insurance Premiums
    • Investment adviser fees
    • Subscriptions for membership that assist you to run your fund such as Research Fees, Education Programs
    • Fines
    • Costs in connection with the calculation and payment of benefits to members, eg some Greenlight Consultancy Fees, medical costs in assessing invalidity claims
    • A range of other Property related deductions – see below

    Tips and Traps:

    1. Make sure the invoice is made out to the Super Fund
    2. Wherever possible, pay the expense directly from the Super Fund bank account
    3. Watch paying expenses from your own bank account or company bank account as they could be deemed a loan to your fund, or a contribution.

    Property Related Deductions

    First up, you need to consider whether an expense is in fact a deductible expense against the taxable income of the fund, or a capital cost.  Capital costs include things like:

    • In-ground swimming poos, saunas, spas
    • Major work renovations
    • Replacement of plumbing and gas fittings
    • Garage doors, skylights

    These things won’t be tax deductions per se, but need to be added to the cost base for valuation purposes, and can be depreciated.

    However where costs are incurred in the process of earning an income, these expenses should be recorded and claimed as per above.  Examples include:

    • Advertising
    • Body Corporate Fees, Rates,
    • Energy and Water Bills (only if paid by you rather than the tenant)
    • Land tax
    • Cleaning, mowing, gardening, repairs and maintenance
    • Insurances
    • Property Management Fees
    • Security patrol fees
    • Travel expenses when inspecting the property (though you need to apportion any personal travel costs)
    • Stationery, postage, telephone

    Additionally, items that are furniture, fixture or fittings (not part of the building) that are part of the income production, these can be depreciated over 1-20 years.

    For information about how to make the administration of your fund and its expenses more streamlined throughout the year, keep an eye out for some upcoming Administration Tips on the website or chat to Danielle or Vanessa today!

  4. Government Postpones SuperStream Rollout

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    It’s been one of those regulatory requirements that has been a low priority, if even understood by employer groups.  From 1 July this year, large employer groups (defined by having more than 20 employees) were due to start remitting employer superannuation contributions to SMSFs using the Government’s “SuperStream Data and Payment Standard”.  It is all part of the Government’s Stronger Super initiative and introduces a streamlined method of sending superannuation payments and associated information electronically.

    We and our software providers have been working to this deadline, however the government has just announced a postponement until 1 July 2015.

    Most people will need do nothing at this point, however if an employer wants to contribute to your SMSF in this way and asks you to provide an Electronic Service Address (ESA), call us to discuss, or simply provide them with the attached form (existing clients only).

    If you require any further information about this new regulation or how this may impact on you as an employer or employee, please contact us.