Heath's Article as published on the SMSF Adviser 23 February 2017

Determining whether an amount paid to an SMSF member is a loan or access to benefits without a condition of release often depends on what the initial intention was.

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Breaching The Separation of Assets Rules

Heath's Article as published on the SMSF Adviser 04/05/16

 Under the new SISR Regulation 4.09A, where a trustee may have breached Regulation 4.09A they will have also breeched sections 31 and therefore 34 of the SISA. This can have significant tax consequences for the fund.

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SuperStream Update


Use SuperStream to cut super admin by 70%


 

Did you know that SuperStream is cutting the time small businesses spend on super administration by around 70%?

With 2016 on the horizon, the Australian Taxation Office (ATO) is encouraging small businesses to cross SuperStream off their 'to-do' list ahead of the 30 June deadline and reduce time spent on super administration.

With only two quarters left until SuperStream becomes mandatory, now is the time for small businesses to make the change and ensure their system is running smoothly before the deadline.

According to the ATO, over a quarter of a million small businesses have already adopted SuperStream. Once set-up, SuperStream is reducing the time they spend on super by around 70%. Depending on the size of the business, this means saving anything from about 1.5 hours to a whole day's effort each payment cycle.

If December and January mark quieter periods for your business, now is a great opportunity to check that your SuperStream option is ready, whether that be your payroll software, your super fund's online payment system, or a clearing house, like the ATO's Small Business Superannuation Clearing House. You can also ask your accountant or bookkeeper for help.

Importantly, you should collect the necessary employee identification data – being your employees' TFNs and their funds' unique super identifiers (USIs) - and enter it into your system ahead of the next quarterly due date on 28 January. That way, you have time to check that things are running smoothly before the deadline.

Your employees can find their fund's USI on their super statement or by calling their fund. You can also find these details using the ATO's Super Fund Lookup website.

If you aren't sure how to prepare for SuperStream, you can visit the ATO's online employer checklist. You can also ask your accountant, bookkeeper, payroll provider, clearing house or super fund for help.

The ATO provides the following links to help small businesses get ready:

·         A step-by-step checklist www.ato.gov.au/SuperStreamChecklist

·         Super Fund Lookup website

·         A short animated video

Breakout box: what is SuperStream?

SuperStream is the new way of making super contributions. Under SuperStream, employers must send super contributions electronically in a standard format, with linked data and payments.

SuperStream becomes mandatory for small employers (those with 19 or fewer employees) on 30 June 2016.

For more information, or a handy checklist, check out ato.gov.au/superstreamchecklist

Eligible employers can also use the Small Business Superannuation Clearing House to comply with SuperStream: ato.gov.au/sbsch

 

Breakout box: what employers are saying about SuperStream

More than 350,000 employers, including 250,000 small employers, are already using SuperStream. Here's what they have to say.

Debbie Pyne, Payroll Officer, Salt House Restaurant, QLD

"SuperStream is saving us a significant amount of time each month. It would normally take up to 1.5 days to complete our employees' monthly super. It is now an hour or two maximum per month.

"While the initial set-up for SuperStream had its challenges from gathering the data etc., this time investment has now paid off.

"We have been saying how easy it is to do super now, because (SuperStream) is so efficient."

Jan Morey, Owner, Sorrenberg Vineyard, Victoria

"I used to sort super out online via each fund's website. Our accountant told me about SuperStream and mentioned the upcoming deadline. Now I'm using SuperStream via the Small Business Super Clearing House. It's free and I make quarterly super contributions to three employees, two full-timers and one part-timer, and I've made three payments so far. I cannot imagine how those with even more staff would sort super out without SuperStream; it's so much easier."

Ange Hopkins, Director, Cherry Bomb Hairdressing

"(It's) definitely an easier way to make payments that has reduced the super processing time. I don't have to log into different sites to make different payments, it's seamless.

"Processing time is now five minutes rather than 45 minutes. It's hugely improved the time. The bigger the organisation, the better the streamlining."


 

 

Heath's article on external partnerships and the in-house asset rules was published on the SMSFAdviser 01/09/15 see the link below:

 

SMSF Adviser Article

 

Congratulations to Heath Griffiths named by Financial Standard as one of the top 50 most influential social media users in finance in 2014! well done http://t.co/SM6DuNGnRh

Interested in Becoming a Guest Contributor?

We are always on the look out for unique and educational pieces to share, drop us a line if you would like to contribute a piece.

Do you have an SMSF and are looking to retire, what conditions of release do you need to meet to fulfil the super laws?

Preservation Age

You must have reached preservation age which is currently 55 years of age. If you are 65 or over you can access your funds as a lump sum or income stream without any restrictions.

Retirement

You must have stopped work fully and be retired without intending to return to work.

Transition to Retirement Income Stream

If you are aged between 55 and 65 and still working you can access some of your super through a transition to retirement income stream. The amount you can access is limited.

Other Conditions of Release:

Specific rules apply to the payment of these benefits and specific advice should be obtained before accessing your funds.

Death of a Member

Upon the death of a member their super will be released to their   beneficiaries.

Incapacity

If a member has ceased gainful employment because of ill health.

Hardship

If a member can't meet reasonable and immediate family living expenses and has been receiving government income support payments for a continuous period of 26 weeks and was receiving that support at the time they applied to the trustees. The payment needs to be a single lump sum of no more than $10, 000 (only one payment in a 12 month period).

Terminal medical Conditions

If a member has a terminal medical condition and two medical professionals certify that the condition is likely to result in the member's death in the next 12 months.

Compassionate Grounds

There are specific grounds for release that the Department of Human Services must approve. If the member is experiencing financial difficulty to pay expenses and if the release is allowable under the funds governing rules the member may be able to access a lump sum on a determination of "reasonableness". 

This article is general in nature and it is recommended you obtain specific advice from a qualified SMSF specialist to assess your individual requirements.

 

 

 

Negative Returns Positive Outcomes

 

Volatility and negative returns still affect local and international investments. Depending on purchase dates & costs, some shares remain below their prior highs. If this applies to your situation, read on for a way to turn this into a positive outcome.

 

It is likely a number of us have some form of blue chip investment in our portfolio that are still worth less than what we purchased them for, but we know they are keepers for the long term. Whilst an unpleasant feeling for most, lower values can present a good opportunity to create useful outcomes from 'bad' investment returns.

 

If you have not done so in the prior GFC slump era, now is still an opportune time to consider potentially transferring existing investments between entities, such as from your own name into a Self Managed Super Fund (SMSF), Family Trust, or lower income spouse.

 

The advantages are:

  • you retain control or ownership of the investment, albeit in a different entity;
  • you secure a 'capital loss' for the original owner to offset against future capital gains tax from other investments;
  • the investment is now held in a lower tax environment, such as superannuation, which in turn leads to; better tax outcomes on income returns, including any franking credit treatment and future capital gains tax implications;
  • it may also aid in any succession or estate planning issues.

Below are examples of strategies of turning a negative return into a positive outcome, by transferring personally held shares into a SMSF:

 

Strategy 1

  • Make an 'In Specie' or 'Off Market' transfer into the SMSF of the selected investments, (put simply, the ownership of those assets are transferred to the superannuation fund).
  • This is deemed to be a contribution to the superfund, so be conscious of any limits or contribution caps that may apply. The person/s who own the shares are seen to be the ones making the contribution.
  • No money changes hands in the transfer
  • It is seen as a disposal of the asset and therefore the two cost considerations are Capital Gains Tax (CGT) implications and Stamp Duty. With regards to shares, since 1 July 2001, stamp duty on trades in marketable securities has been abolished, leaving only CGT as a consideration. As per the strategy, if transferring for less than the original purchase cost, this will be a loss to you personally.
  • Depending on the type of contribution you make, concessional or non-concessional, the super fund will be required to have enough cash to pay contributions tax on the amount of any concessional contribution.
  • Depending on your employment situation, a concessional contribution could also assist in lowering your own personal tax payable. This method may be particularly handy if you are self employed and/or personally cash poor at the moment.

 

Strategy 2

  • This is essentially the same, but rather than making an 'In Specie' transfer, the SMSF purchases the investment from you off market but at an arm's length fair market value. This will   avoid brokerage costs, but must be done at the market price of that day.
  • The advantage in this is that money is released from the super fund to you personally in the transfer, which may assist with cashflow for you
  • No limits or caps apply as this is not seen as a contribution and cannot be claimed as one. Therefore attaining other personal tax benefits from a concessional contribution is obviously not possible, but all the other advantages of the above strategy apply.

 

A real life example of this is a very widely held share that was issued by float, AMP shares:

Assuming received in float 2000 AMP shares at $10.43 base price which are valued at $ 5.64 at close 25/11/2014 which is the date of off market or in specie transfer to the fund.

This realises a Capital Loss of $ 4.79 per share x 2000 shares = $9,580 that can be used to offset against future personal capital gains for the original owner.

The client's SMSF retains ultimate ownership of the shares but they are now in low tax structure for future income from dividends and franking credit advantages. Further potential benefits are likely on any future share sales, as a SMSF also receives a concessional Capital Gains Tax treatment.

 

These strategies are potentially more valuable to high income earners who either received shares through various floats over the years, or purchased shares in their own names. The same logic could be applied to those without Self Managed Super Funds who simply wish to transfer share ownership into their low income spouse or other family member or family trust or entity.

 

Please note, this is not personal advice and we recommend that you seek specific individual advice from a qualified professional before taking any action.

 

This article was provided by Ian Byrne - CFP Ibessa Strategic Financial Specialists. For further information you can contact Ian Byrne on 07 4041 6299

 

Does my SMSF Require an Actuarial Certificate?

An actuarial certificate will determine what proportion of fund income is eligible to be exempted from income tax, also known as exempt current pension income (ECPI). Let's have a look at some scenarios.

Is it my intention to claim an exemption from income tax?

It may be that the earnings brought into the fund are so low that the cost of an actuarial certificate is more than the amount of tax being exempted. After determining your tax exempt percentage you can assess whether to treat all your assessable income as taxable or not.

Combined Accounts within the Fund

Do you have both accumulation and pension accounts within your SMSF? If so and your pension assets are not fully segregated from your accumulation assets you will require an actuarial certificate. It should be noted that this means for any period of time within the financial year in question.

Defined Benefit Pensions

Do you have a defined benefit pension, if so you will require a certificate.

Segregated Assets

If your assets are being treated as segregated and any of the following apply you will need an actuarial certificate:

·        If you have paid an income stream benefit other than an allocated pension, market linked pension or

         an account based pension;

·        If your SMSF is paying one of the above pensions and an additional income stream; and

·        If a benefits market value exceeds the funds supporting account balance.

For further information please visit the following ATO link:

What are the requirements for claiming the tax exemption?

This article is general in nature and it is recommended you obtain specific advice from a qualified SMSF specialist to assess your individual requirements.

 

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