Comments Off on SuperStream rollovers and release authorities
SuperStream is the electronic system used to transfer data to super funds and is used to process employer contributions and for rollovers between super funds. It can also be used for certain ATO release authorities. The idea behind SuperStream rollovers and release authorities is to make the processing faster, more efficient and with fewer errors.
For the SMSF to be SuperStream ready, it needs:
An electronic Service address (ESA)
An Australian Business Number (ABN)
To ensure that its details are up to date with the tax office, including the SMSF’s bank account.
The super fund paying the rollover also needs to ensure that the receiving super fund has complying or regulated status with the tax office, and that it has received the Tax File Number of the relevant member. Whilst the paying fund has three days to process a payment from when a rollover request is received, incomplete information will cause delays. Note that we are finding that many retail funds are requesting certified copies of bank statements.
As you would be aware the budget was handed down last night here in Federal Parliament. There have been a number of personal tax changes proposed along with some minor changes to superannuation (in comparison to last year). The National Tax & Accountants’ Association (NTAA) has prepared this summary which is available on their website.
Please do not hesitate to contact us here at Greenlight if you have further questions in relation to the changes.
Comments Off on Superannuation, SMSFs and the 2017-18 Federal Budget
Government delivers stability in 2017-18 Federal Budget
Stability and confidence for superannuation is the good news coming out of the 2017-18 Federal Budget. With SMSF members still working through the wide-reaching and complex superannuation changes of the last Budget which take effect from 1 July 2017, this Budget’s minimal changes will result in a period for members to ensure they have the correct strategies in place.
The main change impacting superannuation involves allowing people aged 65 and over to downsize their home and gain exemptions to superannuation caps, a First Home Super Saver Scheme and the rounding up of minor technical changes already announced.
The key changes proposed for superannuation are:
Downsizing exemption to superannuation caps
From 1 July 2018, individuals aged 65 and over will be able to downsize their family home and place proceeds up to $300,000 per member into their superannuation fund without breaching any of the current superannuation caps, work test and age test. The measure will apply to a principal place of residence held for a minimum of 10 years. This means even if an individual has a total superannuation balance of $1.6 million or more they will not be restrained from making an after-tax contribution with their house proceeds. This exemption also extends to the annual after-tax contribution limit which is currently $100,000.
First Home Super Saver Scheme
Individuals can make voluntary contributions of up to $15,000 per year and $30,000 in total to their superannuation to later withdraw to purchase a first home. Voluntary contributions and associated earnings that are withdrawn will be taxed at a person’s marginal tax rate less a 30% offset. The measure will assist first home buyers to save a deposit for their home faster.
Integrity of limited recourse borrowing arrangements
The Government is proceeding with amendments to the transfer balance cap and total superannuation balance rules for limited recourse borrowing arrangements (LRBAs). The outstanding balance of an LRBA will now be included in a member’s annual total superannuation balance for all new LRBAs once this legislation is passed.
Integrity of non-arm’s length arrangements
The Government will amend the non-arm’s length income rules to prevent member’s using related party transactions on non-commercial terms to increase superannuation savings by including expenses that would normally apply in a commercial transaction.
Other changes
The Government will reinstate the Pensioner Concession Card for pensioners who were no longer entitled to the pension following changes to the pension assets test from 1 January 2017.
The Government will introduce a major bank levy which will raise $6.2 billion in the next four years.
The Government will introduce a new single body external dispute resolution scheme for financial services from 1 July 2018.
The Medicare Levy will be increased from 2% to 2.5% from 1 July 2019.
You can read more about the Federal Budget handed down on 9 May 2017 on the Australia Government’s official budget website – http://budget.gov.au/.
How can we help?
If you have any questions or would like further clarification in regards to any of the above measures outlined in the 2017-18 Federal Budget, please contact us to discuss your particular requirements in more detail.
Comments Off on 2016 Superannuation Reforms passed both houses
Superannuation legislation proposed end of September 2016 have passed through both houses of parliament today. These make significant changes to the superannuation laws and do differ from the original changes announced in the Federal Budget in May 2016.
The below changes will apply from 1 July 2017 so it might be sensible to for you to start thinking about how your superannuation and retirement planning will be impacted by the changes now and whether you need to change any of your super arrangements.
Changes in the legislation which you might need to consider include:
The new $1.6 million transfer balance cap, which places a limit on the amount an individual can hold in the tax-free retirement phase from 1 July 2017.
Note – this includes defined benefit funds in the assessment eg CSS/PSS pensions
Contributions
The lower contribution caps for all taxpayers applying from 1 July 2017. The new caps will be:
Concessional contributions (pre-tax contributions) — $25,000 per year.
Non-concessional contributions (after-tax contributions) — $100,000 per year
Revised limit of $300,000 on the bring forward provision of 3 years’ worth of contributions to a single year. However to note:
If you have triggered but not utilised the whole amount of the $540,000 limit in 2015-2016 or 2016-2017, the balance left to contribute needs to be reviewed carefully as a reduced limit may apply.
If you have super balances exceeding $1.6 million you will no longer be able to make non-concessional contributions post 1 July 2017.
Reducing the income threshold at which individuals are required to pay an additional 15 per cent contributions tax, from $300,000 per year to $250,000.
Removing the tax-free treatment of assets that support a transition to retirement income stream.
From 1 July 2018 the following change will apply:
Individuals with balances of less than $500,000 will be able to ‘carry forward’ unused concessional cap space for up to five years. This will provide greater flexibility for those with broken work patterns.
How can we help?
The above legislative changes will most likely have an impact on your circumstances if you have a superannuation balance close to or over $1.6 million, were planning on making significant contributions to superannuation in the next few years, are a high income earner or have a transition to retirement pension in place now.
If you would like to discuss your particular circumstances in more detail as a result of the above please do not hesitate to contact us to arrange a meeting.
Aside from the emotional turmoil that a divorce brings to a family situation, there are an enormous range of financial issues to be worked through. Here we breakdown the key issues from an SMSF perspective:
1. Despite the extent of breakdown in the marriage, the law is very explicit about the expectations of all Trustees to continue to “act in the best interests of all members at all times”. Specifically it spells out that Trustees cannot:
exclude another trustee from the decision-making process;
ignore requests to redeem assets and roll money over to another regulated complying super fund;
take any action that is not allowed by the Superannuation Industry Supervision (SIS) Act 1993 or the SMSF’s trust deed.
2. A recent case highlighted the ongoing compliance responsibilities that any Trustee continues to carry, particularly if established as individual trustees, despite a marriage breakdown. When the Shail’s divorced, Mr Shail withdrew $3.46m of the SMSF assets and took off overseas. Despite appealing the original decision, it was upheld that Mrs Shail was jointly responsible for the missing assets, with the ATO issuing a penalty for non-compliance of nearly $1.5m and a devastating tax bill to boot of over $1.5m, both of which the individuals, not the super fund itself, were liable for! (Check out a recent blog for more about the new ATO penalty regime.)
3. When it comes to the divvying up of financial assets, you need to consider all of the assets before applying any super splitting, taking into account any tax or access implications. Often lawyers and advisers can overlook the ages and personal situations of each of the members, missing opportunities to provide earlier access to an older member, or consider the future contribution opportunities of a younger member, for example.
4. Payment flags can be applied to unlisted assets until they have been properly valued, preventing those assets from being liquidated before agreement has been met.
5.If an asset needs to be sold down in order to split the superannuation (in the case of property for example), consider whether it is possible or feasible for the super fund to borrow money (either from a related party or bank) to meet the cash requirements. This would only be possible however if the asset was originally set up to be held within a unit trust which was owned by the super fund.
6. If the fund has not initially been set up with a Corporate Trustee and the split leaves a single member running the Fund, a new Trustee will need to be added or a new Corporate Trustee put in place. This isn’t a costly exercise, but it will require all assets to be transferred to the new name.
7. Liquidating assets to then “rollover” to another fund will create a Capital Gains Tax event that the Fund will need to pay before the proceeds can be rolled over. In the case of divorce, CGT rollover relief is available where assets can be transferred to another SMSF set up by the exiting member. In this case, the new fund takes on the original cost base of the asset.
Extreme care in the strategy and record keeping needs to be taken to avoid costly mistakes, which is often challenging when communication breakdowns occur. Make sure a trusted source of advice is guiding you every step of the way. Better yet, avoid it completely if you can!