Superannuation Tax Advice

When does my employer need to contribute super?

Your employer must pay super for you if you are eligible. To be eligible you must be:

• Aged 18 years or over but under 70 years of age, and
• Paid at least $450 (before tax) in a calendar month.

What are the types of super contribution?

Super contribution can be concessional (which is normally done by your employer) and non-concessional (your personal super contribution).

How the super contribution is taxed?

Concessional contributions are taxed in the Superfund at a rate of 15% and non-concessional contributions are not taxed.

How can I receive the Government co-contribution in my super?

You can be eligible a maximum $1,000 co-contribution for every $1 you contribute to your super. However, you must reduce this by 3.333 cents for every dollar your total income is over the minimum income threshold amount. Eligibility test is complex & you can contact us for free consultation.

When can I start receiving my super?

You can access your super when you reach preservation age (The preservation age is the age you can normally access your benefits and it depends on your date of birth.) and retire, or you turn 65 (even if you have not retired from the workforce).

Superannuation 2012 Federal Budget

Higher tax concession for high income earners reduced

The Government will reduce the tax concession which very high income earners receive on their concessional contributions, so it is more in line with the concession received by average income earners. Individuals with income greater than $300,000 will have the tax concession on their contributions reduced from 30 per cent to 15 per cent (excluding the Medicare levy)

The definition of income for the purpose of this measure includes concessional superannuation contributions is less than the $300,000 threshold, the reduced tax concession will only apply to the part of the contributions that is in excess of the threshold.

The reduced tax concession will not apply to concessional contributions which will exceed the concessional contributions cap and are therefore subject to excess contributions tax.

This measure will take effect from 1 July 2012.

Following the media release No.74, Stronger Super – Self Managed Super Fund Reforms, issued on 10th May 2011 by the Assistant Treasurer and Minister for Financial Services and Superannuation, The Australian Taxation Office has issued a media release on 28th March 2012.

 “To enhance transparency and strengthen the integrity of the self-managed super funds (SMSF) system, SMSFs which dispose or acquire assets from a related party will need the process to occur through an underlying market. Where an underlying market doesn't exist, the transfer must be made at a price determined by a qualified independent valuer.These amendments will apply in cases where an acquisition from a related party is permitted. In many cases, SMSF trustees and investment managers are prohibited from acquiring assets from related parties. However, there are exceptions, such as listed securities, business real property and certain in-house assets acquired at market value.Transfers of listed securities will be the transaction most commonly affected by this requirement to use an underlying market. Currently, shares can be transferred to and from a related party off-market without engaging a broker to buy and sell the shares. Under the proposed amendments, listed securities must be sold on and purchased through the market or exchange. Any increased transaction costs due to this measure will only be incurred by SMSFs that choose to enter into related-party transactions.This is part of the Stronger Super suite of measures that address potential risks and inconsistencies under the current law.”

The Government believes that current non-market transactions are not transparent and in some cases do not meet the arm’s length agreement which can lead to abuse of the current system. This can occur through the manipulation of a transaction date and/or asset value to achieve a more favourable outcome in terms of contribution caps and capital gains tax.

The measures come in on 1 July 2012, so any member looking at transferring related party assets into their superannuation fund, especially direct equities should be doing so prior to 30 June 2012. We have seen that a lot can happen in the market in a day or so, so leaving the transfer to be done on-market by a broker could have significant effects on the price of the equity. Especially so while waiting for settlement, cash transfers tot eh fund and then being able to purchase the asset once again in the funds name.

After 1 July 2012 there will also be additional brokerage costs associated with the transaction. Additional costs for non-market investment may be significant. For example, previously of a property was transferred in the SMSF, a real estate appraisal of the property was sufficient for the transaction, and did not require an independent valuation. We are still waiting for further guidelines, which will provide the guidance needed for valuations for related party transactions where there is no underlying market.

Is a SMSF right for me?

Your super can play a very important part in your retirement life. Most people choose to entrust their super to a large retail or industry superfund where your super is pooled together with a large number of other members. However, many people feel more comfortable managing their own superfund so that they can have better control of their money and they can choose the investment options to suit their own risk appetite, instead of trusting other people to manage their money. Sounds great? Well, before you start to set up your own superfund, please consider the following points:

•Consider the option of managing a superfund or whether you feel more comfortable seeking professional advice.

•Ensure you have sufficient assets, time and skills to manage your own fund as it requires some investment and basic tax knowledge and time to manage your own superfund.

 

•Follow the super and tax laws and understand the risks. The ATO is very strict on SMSF rules and you should be prepared to adhere to those rules. You need to understand that the superfund is solely for your retirement. It is important to note that the superfund is like a separate entity from you, which means that any personal use of funds will not comply with the rules.

 

•Tailor your trust deed and investment strategy to suit the members of your fund. This is the advantage of managing your own superfund. You are in total control of your superfund’s investment options.

 

•Make sure you meet your record keeping, reporting and auditing obligations. As this can be difficult for most SMSF owners, it is better to seek professional assistance and IPS may be your best choice as we can help you to meet those obligations for a very low fee.

 

After you have reviewed the points mentioned above, you should have some idea of whether a SMSF is right for you and you may have some confidence to start your own superfund. You can also get advice from a financial advisor on whether a SMSF is suitable for you. A Tax agent or accountant such as IPS  can help you set up a SMSF and provide ongoing assistance to manage the SMSF.

Self Managed Super Funds: The low-down

Thinking about self-managed super?

SMSFs aren't for everyone and you should think carefully before deciding to set one up. It's a major financial decision and you need to have the time and skills to do it. There may be other, better options for your super savings. Either way you should certainly get professional advice. Cameron Reed, IPS Director of SMSF, has just be awarded the National Chairman’s Award for service to SMSF Professional Association of Australia and the SMSF industry. Cameron is available to discuss your superannuation affairs on 55 813 200.

Setting up an SMSF

If you set up an SMSF you become a trustee of the fund. This means you'll be responsible for managing your SMSF according to its trust deed and the laws and rules that apply to SMSFs. The key principle is that you run your SMSF for the sole purpose of providing retirement benefits to fund members.

Managing your fund's investments

You need to manage your fund's investments in the best interests of fund members and in accordance with the law. Your investments must be separate from the personal and business affairs of fund members, including yourself.

Accepting contributions

You can accept money contributions for your members from various sources but there are some restrictions, mostly depending on the member's age and whether they've exceeded the contribution caps. Generally you can't accept an asset as a contribution from a member, though there are some exceptions.

Reporting, record keeping and administration

As a trustee you'll have a number of administrative obligations - for example, you'll need to arrange an annual audit of your fund, keep appropriate records and report to the ATO on the fund's operation.

Accessing your super

Accessing the super in your SMSF to pay benefits is generally only allowed when a member reaches what's called their 'preservation age' and meets one of the specified conditions of release - for example, they retire. There are very limited circumstances, such as death or terminal illness, where a member's super can be accessed before this. There are significant penalties for unlawfully releasing super benefits.

Understanding tax and SMSFs

The income of your SMSF is generally taxed at a concessional rate of 15%. To be entitled to this rate your fund has to be a 'complying fund' that follows the laws and rules for SMSFs.

Winding up an SMSF

At some point you may need to wind up your SMSF. This could happen if all the members and trustees have left the SMSF or all the benefits have been paid out of the fund.

What Are The Advantages of a Self-Managed Super Fund?

Self-Managed Super Fund advantages include:

Control

A Self Managed Super Fund (SMSF) provides maximum control over your superannuation assets and allows you the flexibility to decide how your funds are invested and how the fund will operate. Investment Choice – a SMSF can be structured to meet the specific needs of members. The fund must have an investment strategy and it can invest in a wide range of investments including property, shares, cash or other assets that suit the investment objectives of the self managed super fund. The whole reason (sole purpose) for a SMSF is to establish a fund to support members in retirement. Opportunities for investment gearing also exist.

Tax Concessions

Investing in a self-managed super fund (SMSF) has tax advantages making superannuation a powerful wealth creation strategy.

• The concessional 15% tax rate applies to income of the self managed super fund, including contributions for which the tax payer has claimed a tax deduction.
• Capital gains realised on investments held for longer than 12 months are taxed at an effective rate of 10%.
• Utilising franking credits from dividends and the offsetting of capital losses can lower tax.
• There is a concessionally taxed end-benefit as well as pension benefits

Estate Planning

A self managed super fund can be structured to be used for efficient estate planning and is a long term multi-generational family benefit

Self-Managed Superannuation Funds (SMSFs) Advice

Using a SMSF to provide for your financial needs in retirement is a popular but potentially complex financial structure. When operated well, running an SMSF can be ideal for people with sufficient capital who wish to be more ‘hands on’ with their retirement savings. However there are obligations and responsibilities that come with running your own SMSF which means that there are risks that need to be managed.

Running your own SMSF doesn’t negate the need to seek answers to some of the more basic questions all people face. Answers to questions such as “How long will our money last in retirement?” and “What lifestyle can we expect from our current investments?”.  These sort of questions are often overlooked. Yet these are some of the most important issues that many of us face.

With International Professional Services SMSF service you receive:

• pro-active and comprehensive strategic advice;
• full SMSF administration and compliance documentation;
• portfolio management services; and
• management of compliance and administration requirements.

Our SMSF service not only eases the ever-increasing compliance and administrative burden to trustees, but allows you to take advantage of the most up to date legislative opportunities and SMSF specific strategies, helping to meet your financial goals now and well into the future.