Archive for the ‘Superannuation’ Category

SMSF compliance: don’t slip up

Thursday, July 5th, 2018

With the self managed superannuation fund (SMSF) annual return lodgment deadline upon us, minds should have already turned to meeting compliance requirements. The 2016–2017 financial year includes a few twists and turns which trustees should factor in to avoid late lodgment.
The major super changes from 1 July 2017 mean that SMSFs members with a pension balance of more than $1.6 million may need to consider reducing any excess, resetting CGT cost bases and getting actuarial certificates. This is in addition to the usual issues such as calculating taxable income and what expenses are deductible for the SMSF.
With all of these changes to be considered, the ATO has allowed an extension to lodge returns by 2 July.

Recordkeeping reminders
Good SMSF compliance hinges substantially on good recordkeeping. Some SMSFs have resolutions and minutes for every investment transaction while others don’t go into much detail at all. But what level of detail is really necessary? The answer lies in the fund’s trust deed, investment strategy and what is required by the tax and superannuation legislation.
For example, a fund with a single balanced option is unlikely to have to meet each time a contribution is made to decide where the money should go. In contrast, if the fund’s investment strategy is couched in broad terms and a member wishes to select specific investments as permitted by the fund’s trust deed, then documents indicating whether the selection is consistent with the overall investment strategy of the fund are likely to be worthwhile.
The superannuation law requires that some records must be retained for various periods. For example, the fund’s accounting records, annual returns and other statements must be kept for at least five years. Minutes of meetings for purposes such as reviewing the fund’s investment strategy, changes of trustees, member reports and storage of collectables and personal use assets need to be kept for at least
10 years. The fund’s trust deed and other essential documents should be retained if the trustees consider the fund may be subject to challenge.
Keeping records for an SMSF serves many purposes to provide a “corporate memory” for the fund, which may be required for compliance purposes as well as to protect trustees from any unfounded challenges.

Superannuation system: Productivity Commission draft report

Thursday, July 5th, 2018

The Productivity Commission has released a draft report that recommends a range of changes to improve Australia’s superannuation system.
With default funds being tied to the employer and nsot the employee, many people end up with another super account every time they change jobs. Currently, a third of accounts (about 10 million) are unintended multiples, meaning that Australians pay excess fees and insurance premiums totalling $2.6 billion every year. According to the Commission, fixing these problems would lift retirement balances for members across the board – for example, a new workforce entrant today could earn around $407,000 more by the time they retire in 2064.
TIP: The end of the financial year is a good time to take a closer look at your super arrangements. Do you need to roll together accounts or change funds? Could you make salary sacrifices to reduce your tax payments and boost your retirement balance? Let us know if you’re considering these super questions.

Issues for individuals

Thursday, July 5th, 2018

No more Budget repair levy
The Budget repair levy (2% of the part of your taxable income over $180,000) no longer applies in 2018. This means that the top marginal rate for 2018 (including the 2% Medicare levy) is 47%, as opposed to 49% in 2017. The FBT rate is also 47% for the 2018 FBT year.

Deduct work-related expenses
People overclaiming deductions for work-related expenses like vehicles, travel, internet and mobile phones and self-education are on the ATO’s hitlist this year. There are three main rules when it comes to work-related claims:
• You can only claim a deduction for money you have actually spent (and that your employer hasn’t reimbursed).
• The expense must be directly related to earning your work income.
• You must have a record to prove the expense.
Deductions are not allowed for private expenses (eg travel from home to work that’s not required to transport bulky equipment) or reimbursed expenses (eg for the cost of meals, accommodation and travel). And although you don’t need to include records like receipts with your tax return, the ATO can deny your claim – and penalties may apply – if you can’t produce the evidence when asked.
TIP: The ATO now uses real-time data to compare deductions across similar occupations and income brackets, so it can quickly identify higher-than-expected or unusual claims.

Superannuation contributions and changes
There have been a number of fundamental changes to the superannuation landscape for the 2018 income tax year, including changes to the caps for concessional contributions (now $25,000 for all taxpayers) and non-concessional contributions ($100,000, or $300,000 under the three-year bring forward rule) and the introduction of the general transfer balance cap and total super balance threshold (each currently $1.6 million).
Also from 2018, both employees and self-employed individuals can claim a tax deduction annually (maximum $25,000) for personal superannuation contributions, provided the superannuation fund has physically received the contribution by 30 June 2018 and the individual provides their superannuation fund with a “notice of intention to claim” document.

ATO assessments issued for excess super pension balances

Friday, May 11th, 2018

The ATO has started issuing excess transfer balance (ETB) tax assessments to self managed super fund (SMSF) members, or their agents, who had previously received an ETB determination and rectified the excess. These ETB tax assessments are sent to SMSF members (or their professionals), and not to the fund. It’s then up to the member to decide how to cover the ETB liability for exceeding their $1.6 million pension transfer balance cap.
The ATO warns that SMSF members may receive an ETB assessment even if they didn’t receive an ETB determination. If they rectified the excess before they were assessed for a determination, they are still liable for the ETB tax. However, SMSF members who were covered by the transitional rules for excesses not exceeding $100,000 and rectified in full by 31 December 2017, will not receive an ETB tax assessment.

Banking Royal Commission wraps up evidence on financial advice

Friday, May 11th, 2018

The Banking Royal Commission has wrapped up its two weeks of hearings focused on financial advice.
The hearings have included gruelling evidence of misconduct in financial services entities’ provision of financial advice, occurring in the context of fees being charged for no service, platform fees, inappropriate advice, improper conduct and the disciplinary regime.
The Royal Commission has adjourned until 21 May 2018, when it will begin its third round of hearings with a focus on small and medium enterprises (SMEs). The Commission’s final report is due by 1 February 2019.

Financial Complaints Authority takes shape

Friday, May 11th, 2018

Minister for Revenue and Financial Services Kelly O’Dwyer has announced the authorisation of the new financial dispute resolution scheme, the Australian Financial Complaints Authority (AFCA), which will start accepting complaints from 1 November 2018. AFCA is intended to be a “one-stop shop”, having the expertise to deal with all financial disputes, including superannuation and small business lending disputes, with higher monetary limits and compensation caps.
All Australian financial services (AFS) licensees, Australian credit licensees, superannuation trustees and other financial firms legally required to join AFCA will need to do so by 21 September 2018.

Superannuation rates and thresholds for 2018–2019

Tuesday, April 10th, 2018

We summarise some of the key superannuation rates and thresholds for the upcoming financial year:
Contributions
Concessional contributions cap: $25,000
Non-concessional contributions cap: $100,000*
CGT cap amount: $1,480,000
Super guarantee percentage: 9.5%
Maximum contribution base (per quarter): $54,030

* 300,000 for a “bring forward” arrangement

Government co-contributions
Lower income threshold: $37,697
Higher income threshold : $52,697

Superannuation payments
Lump sum low rate cap: $205,000
Untaxed plan cap: $1,480,000

ETP cap amount: $205,000
Genuine redundancy and early retirement payments – tax-free amounts:
• base amount: $10,399
• service amount: $5,200

Pension cap
General transfer balance cap: $1,600,000
Defined benefit income cap: $100,000
“Total superannuation balance” threshold: $1,600,000

“Transition to retirement” pensions to become simpler

Tuesday, April 10th, 2018

In welcome news for superannuation members, the government has announced plans to simplify the payment of transition to retirement income streams (TRISs) so that they will always be permitted to automatically revert to a dependant upon the death of the original pensioner. This is designed to address a trap in the current legislation that is causing some administrative difficulties for funds when a TRIS recipient passes away.
TIP: With greater certainty about the payment of TRISs on death, now is a good time for superannuation members to review their estate plans.

ATO now issuing excess transfer balance determinations

Tuesday, February 27th, 2018

The ATO has advised that is now sending out excess transfer balance (ETB) determinations to individuals who have exceeded their superannuation transfer balance cap and not taken steps to remove the excess amount.
TIP: The transfer balance cap, currently set at $1.6 million, is a limit on the total amount of super that can be transferred into retirement phase. You can make multiple transfers as long as the total amount transferred remains below the cap.
Self managed superannuation fund (SMSF) members that had exceeded their transfer balance cap by $100,000 or less on 1 July 2017 had until 31 December 2017 to remove the excess capital from retirement phase. If they didn’t do so, they will now have to remove the excess capital and ETB earnings, and also pay ETB tax.

Social security means testing of lifetime retirement income streams

Tuesday, February 27th, 2018

The Department of Social Services (DSS) has released its proposed means testing rules for pooled lifetime retirement income streams.
The pension standards were amended from 1 July 2017 to allow for more tax-exempt lifetime superannuation income stream products that enable pooling risk to manage longevity risk. Lifetime pensions and annuities that meet these new standards qualify for tax concessions tax treatment.
The DSS proposes to consider the following amounts when assessing such pooled lifetime income streams as part of social security means testing:
• income test: 70% of all income paid from the income stream product; and
• assets test: 70% of the purchase price of the product until the person reaches the age of their life expectancy at the time they made the purchase, and 35% from then on.
TIP: Under the new rules, deferred super income stream products would receive the same asset test assessment as products where payments begin immediately.


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