Tag Archive: trust deed

  1. What Tax Deductions can your SMSF Make?

    Comments Off on What Tax Deductions can your SMSF Make?

    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!

  2. Oops – divorce on the horizon? What now?

    Comments Off on Oops – divorce on the horizon? What now?

    Divorce is the worst-case scenario for a marriage. Amongst the emotional, legal and financial turmoil – which is only compounded if there are kids or pets involved – it can be easy to forget about your super.

    If you are already within an SMSF, chances are your soon-to-be ex-partner is also a trustee. So what happens when retirement plans, like so many other things, were built with a shared future in mind?

    Superannuation splitting within an SMSF does not differ greatly to super held within a traditional fund structure in the eyes of the law. Any difficulties are mostly commonly caused by the relationship between the trustees and the nature of assets held in the fund. Superannuation splitting laws exist to make sure a settlement is fair however, there are still several things to be aware of to avoid an unfair distribution of super.

    Here are our top 4 things to keep in mind when navigating SMSF and super splitting due to divorce.

    1. If you were married before 1975 make sure that your Deed allows for the requirements set out by the Family Law Act 1975.

    Make sure your SMSF Trust Deed to reflect the requirements set out by the Family Law Act 1975. If your deed hasn’t incorporated the requirements, it won’t stop the law – it will just make things confusing for your Fund’s trustees. We can help you both through the process, set out below:

    • Obtaining information
    • Determining the documentation method
    • Determine the splitting time and calculation
    • Serving the superannuation agreement/order
    • Notifying the parties
    • Implementing the superannuation agreement/order and making payment.

    2.    Use a Family Court Document to request all of the information you will need.  You will need to submit this yourselves, but you can get help from your adviser or accountant (or Greenlight).

    3.    Use your Consent Order (where the parties agree), Court Order (where the parties don’t agree) or a Superannuation Agreement to document how your combined super assets will be split. Just make sure you’re not planning to rely on a Stat Dec as it won’t suffice. Never heard of a Superannuation Agreement?

    If you opt for a superannuation agreement, Greenlight can help you manage the process with your legal representatives or contact a specialist advisor on your behalf.  Together, we will make sure your superannuation agreement is in the correct format, obtain signatures from both yourself and your partner, and organise a legal declaration which states that each party has received independent legal advice.  This legal declaration will be accompanied by a statement from each legal practitioner that advice was provided. Superannuation agreements are a more expensive option across the board because of the added necessary legal expertise than the first two options.

    4.    The hard bit – splitting the assets.  You’ll either be physically separating the assets immediately (Payment Split) or flagging the arrangements until a condition of release (such as Retirement) is met.  This is called Payment Flagging.

    There are two main payment types:

    A payment split – the super payment is made now.
    This payment type is the most consistent with the Family Court’s desire that property settlements represent a clean break.  It involves creating an interest for the non-member spouse, either in the same fund or in a fund of their choice, which cannot be cashed until the non-member spouse meets a condition of release.

    A payment flag – the super payment is deferred until a condition of release is met.
    When the condition of release is met, the trustee notifies the court that a splittable payment will become payable. These may be suitable for defined benefit funds where a retirement benefit significantly larger than the current withdrawal benefit may be payable in the near future. However, they are rarely used in an SMSF.

    The three main methods of calculating the amount of a payment split are:

    • A percentage amount – a percentage of the account balance is payable
    • A base amount – a fixed dollar amount is payable
    • A calculated base amount – a method by which a base amount can be calculated

    The hardest part about this when parties are in dispute is realising asset values, especially if valuations fluctuate considerably.  Don’t make this time any harder on yourself, make sure you’re across all the facts and secure your retirement future.