Archive for 'Super'
The Australian Tax Office (ATO) is reminding self-managed super fund (SMSF) trustees to beware of allowing members to access their super early.
A self-managed super fund (SMSF) trustee must meet a condition of release before any funds can legally be released.
The ATO can issue severe penalties if you or a SMSF member access your super before you are legally entitled to do so.
Some consequences of getting caught up in an illegal super scheme include the disqualification of trustees, imposition of administrative penalties, the fund being made non-complying and prosecution.
The Tax Office encourages those members who have been involved in an illegal super scheme to contact them immediately. The ATO will review your voluntary disclosure and take your circumstances into account when determining any penalties.
The Australian Securities Investment Commission (ASIC) has released a new report highlighting its view on the setup of SMSFs for property investments using ‘one-stop shop’ models.
‘One-stop shop models’ tend to promote the purchase of residential property through SMSF borrowing. They are usually arranged by groups of real estate agents, developers, mortgage brokers, financial advisers and so forth.
This model creates conflicts of interest that may affect the advice given to set up an SMSF. For example, these businesses take advantage of customers with limited or no knowledge of SMSFs or super and have the potential to cause major financial detriment, including:
– Receiving inappropriate or misleading advice to set up an SMSF which may result in members being financially worse off
– The obligations of a SMSF trustee are not clearly explained by the advice provider
– Members may be encouraged into a property purchase at an inflated value, or unaware of undisclosed high commissions.
The Australian Tax Office (ATO) are encouraging individuals to seek independent professional advice from a licensed adviser before establishing an SMSF and undertaking an new investment in an SMSF.
SMSF trustees who make a mistake are also encouraged to make a voluntary disclosure to the ATO. The ATO aim to help SMSF trustees in these circumstances to get their SMSF back on track.
The Australian Tax Office (ATO) has recently been made aware of circumstances where a member of a SMSF commences a new market-linked pension and unintentionally exceeds their transfer balance cap.
An individual may have exceeded their transfer balance cap if they were receiving a life expectancy or market-linked pension just before 1 July 2017 (which was a capped defined benefit income stream) and then commuted the pension on or after 1 July 2017 and the transfer balance debit is nil under the special value rule in Income Tax Assessment Act 1997 subsection 294-1245(1); and then commenced a new market-linked pension.
The ATO has acknowledged these are unintended consequences associated with the current law and will not take compliance action at this stage provided an individual’s circumstances align with the above situation and:
- if a fund does not report the transfer balance account events of the commutation or the commencement of the new market-linked pension;
- where the fund has reported the transfer balance debit for the commutation as other than nil.
Self-managed super funds (SMSFs) are required to provide an accumulation phase value (APV) on their transfer balance account report for 30 June 2017 in certain circumstances.
SMSFs should note, APV is often different to the account balance of the SMSF member’s accumulation phase assets. This is due to the exit and administration fees and realisation costs that would be taken into account if the SMSF member would voluntarily close their account.
APV is a component of a member’s total super balance which shows the value of the member’s assets in the accumulation phase at 30 June.
Providing a member’s APV is conditional for SMSFs in the 2016-17 financial year. The member’s APV will be calculated as the difference between the closing account balance from the SMSF annual return and the value of the member’s transfer balance account for the SMSF at 1 July 2017 if not provided.
SMSFs need to provide their APV if the SMSF member has interests in the accumulation and retirement phase at 30 June 2017 where the member has a capped defined benefit income stream or a flexi-pension in that SMSF. It is also mandatory to provide the APV where the difference between the APV and the closing account balance is not limited to the value of exit and administration fees, and realisation costs.
If the SMSF member has 100 per cent of their interest in the accumulation phase at 30 June 2017, then providing the APV is conditional and only required when the difference between the APV and the closing account balance is not limited of the value of exit and administration fees, and realisation costs.
Where the SMSF member has 100 per cent of their interest in retirement phase, then the APV is only mandatory where the member has a capped defined benefit income stream or a flexi pension in that SMSF. The APV value to be supplied is zero.
APV reporting for 30 June 2017 is due by 8 September 2018.
There is a number of changes to the 2017-18 Self-managed super fund annual return (SAR) thanks to the super changes which came into effect on 1 July 2017.
Transition to retirement income stream (TRIS) account
The ATO has included a new label for the number of TRIS accounts an SMSF member has in accumulation phase.
A TRIS account is in accumulation phase unless the SMSF member has reached 65 years of age or has met another ‘nil’ cashing restriction condition of release (i.e., permanent incapacity, retirement or a terminal medical condition) and has advised their fund.
Limited recourse borrowing arrangements (LRBA)
New questions focused on the use of LRBAs and extra borrowings have been added to section H, items 15e and 16. SMSFs that hold assets under LRBAs will be required to complete these questions.
Correct calculation of a member’s total superannuation balance (TSB)
New labels to allow the make-up of the ‘closing account balance’ to be reported to support a more efficient calculation of a member’s TSB have been added.
The member’s TSB may affect their non-concessional contributions cap as well as other super caps from 30 June 2017.
Cessation of the temporary budget repair levy
Certain tax rates for superannuation entities have been reduced in line with the cessation of the temporary budget repair levy (payable by some individuals for 2014-15, 2015-16 and 2016-17).
These rates affected those individuals that applied to the taxable income of non-complying superannuation funds (47 per cent to 45 per cent) as well as the non-arm’s length component of the taxable income of a super fund (47 per cent to 45 per cent).
A new label has been added to the capital gains tax (CGT) schedule for the purpose of reporting deferred notional gains where the gain has been realised.
Early stage venture capital limited partnership tax offset
The ATO has added a new label to enable SMSFs to report the amount of unused early stage venture capital tax offset carried forward from the previous year.
In a bid to tackle non-payment of employee superannuation, the Minister for Revenue and Financial Services announced the beginning of a 12-month Superannuation Guarantee Amnesty (the Amnesty) on 24 May 2018.
The Amnesty provides employers with a one-off chance to self-correct past super guarantee (SG) non-compliance without incurring a penalty and is available until 23 May 2019 (subject to the passage of legislation).
Employers who take advantage of the Amnesty will avoid:
- penalties and charges that may apply to late payments;
- and are entitled to deductions for catch-up payments made during the Amnesty period to the employee’s regulated super fund or to the ATO (should employers require a payment plan).
To make use of the Amnesty, employers must:
- voluntarily admit the amounts of prior SG shortfalls including nominal interest during the Amnesty period;
- and not be the subject of an audit for SG for the relevant periods.
The ATO is encouraging employers to pay their SG shortfall amounts in full, including the nominal interest straight into the employee’s super fund.
Failure to either remain current with SG payment duties or declare SG shortfalls in this period could result in higher penalties later on.
The First Home Super Saver (FHSS) is a scheme that enables Australians to save for their first home inside their superannuation fund. The plan allows for faster saving with the before tax (concessional) treatment within super.
The 2017-18 Budget allowed individuals to make voluntary concessional and non-concessional payments into their super to save for their first home as of 1 July 2017. From 1 July 2018, individuals can apply to release their voluntary payments and associated earnings, to buy their first home.
To apply for the release of these funds, individuals must be at least 18 years old and:
– Never owned property in Australia (i.e., commercial or investment property, vacant land, a lease of land in Australia or a company title interest in land in Australia).
– Never requested the Commissioner to grant a FHSS release authority in relation to the scheme in the past.
An individual who has previously owned property in Australia may still be eligible if the Commissioner of Taxation finds they have suffered a financial hardship which resulted in losing ownership of a property.
When the Commissioner determines that an individual has suffered a financial hardship, they must also satisfy additional criteria at the same time they requested a FHSS determination.
Prior to saving, individuals should first:
– make sure their nominated fund will release the money, and;
– query their fund about any charges, fees or insurance considerations that may apply.
Any FHSS amounts received will also affect an individual’s tax for the year they request to release the funds. These individuals will receive payment summaries, where they will be required to include the assessable and tax-withheld amounts in their tax returns.
Individuals can also check their balances with their funds whenever they wish to see how much they have saved up. This will assist individuals to keep track of the maximum FHSS amounts they can request to be released.
Those individuals wanting a release of funds can apply to the Commissioner of Taxation for a FHSS determination and a release.
More taxpayers can now claim a personal super contributions deductions this tax time due to the removal of the 10 per cent maximum earnings condition that came into effect from 1 July 2017.
Eligible individuals include those who earn their income from:
- Salary and wages
- A personal business (self-employment)
- Investments such as interest, dividends, rent and capital gains
- Government pensions or allowances
- Partnership or trust distributions
- A foreign source
Those who wish to claim a deduction need to:
- Make personal after-tax super contributions directly to their super fund before 30 June 2018, if they have not already contributed this financial year
- Provide their fund with a ‘notice of intent to claim or vary a deduction for personal super contributions’
- Obtain acknowledgement from their fund of their notice of intent before their 2018 tax return can be lodged.
The Government has introduced new measures to allow SMSF members to access their super for their first home or make contributions to their super from the sale of downsizing their home.
SMSFs should be aware of the following:
From 1 July 2018, SMSF members who are 65 or over and exchange a contract of sale of their main residence may be eligible to make a downsizer contribution of up to $300,000 into their super without affecting their total super balance or contributions cap for the year.
This contribution will count towards the transfer balance cap and be taken into account for determining eligibility for the age pension.
SMSF members do not have to purchase another home to access this measure. However, the contribution can only be made once; it cannot be used for the sale of a second main residence.
The First Home Super Saver Scheme
SMSF members looking to get into the property market can now use some help from their SMSF under the First Home Super Saver Scheme.
As of 1 July 2018, SMSF members over 18 years of age can apply to release their voluntary concessional and non-concessional contributions made from 1 July 2017, along with associate earnings to purchase their first home.
Voluntary contributions made since 1 July 2017 of up to a maximum of $15,000 from any one financial year, or $30,000 across all years can be applied for.
The Government is introducing a series of new measures designed to help Australians keep a greater portion of their superannuation savings pie.
Insurance within super may not be suitable for everyone, particularly young people and those with low balances. From 1 July 2019, insurance will be offered on an opt-in basis for members with low balances of less than $6,000; members under the age of 25; and members who have not received a contribution in 13 months and are inactive. The changes intend to protect low balances from being entirely eroded and reduce incidences of duplicate cover.
Reuniting lost super
The ATO will have the ability to reunite all inactive superannuation accounts where the balances are below $6,000 with the member’s active account as of 1 July 2019. This will benefit those with inactive low balance accounts, i.e., low-income earners, young members and seasonal workers.
Protecting your super
The Government is banning exit fees on all super accounts to enable Australians to consolidate their super accounts on a more affordable basis. Additionally, a three per cent annual cap on passive fees charged by super funds on accounts with balances below $6,000 will protect those with low balance accounts to grow and maintain their nest egg.
Avoiding unintentional cap breaches
From 1 July 2018, individuals whose income exceeds $263,157 and have multiple employers will be able to nominate that their wages from certain employers are not subject to the Superannuation Guarantee (SG). This will assist in avoiding unintentional breaches to the $25,000 annual concessional contributions cap due to multiple compulsory SG contributions.
Member limit increase
Self-managed super funds and small APRA funds will have the opportunity to increase the maximum number of allowable members from four to six as of 1 July 2019.
Integrity of personal deductible super contributions
From 1 July 2018, additional funding will be allocated to the ATO aimed at improving the integrity of processes for claiming personal superannuation contribution tax deductions. This will enable the ATO to develop a new compliance model and undertake additional compliance and debt collection activities.