Liam Shorte

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Stamp Duty on Transfers of Property to an SMSF

Immediately after I published my last blog Stamp Duty Requirements on Change of SMSF Trustees I got questions on stamp duty on property transfers to a Self Managed Superannuation Fund. At first I attempted to the answers myself but to ensure ongoing accuracy I am pleased to have Caroline Harley, one of the best lawyers in the SMSF sector review and update this information.

Caroline Harley | Special Counsel

So here is the current breakdown on stamp duty for property investors or small business owners looking to move property they own personally in to their SMSF.

Stamp duty imposed by State and Territory governments should always be researched and considered before transferring land to an SMSF. Concessions or exemptions from duty may be available depending on the State or Territory in which the land is situated.

This concession can be very significant. If the SMSF purchases NSW land/property from a member with a market value of $500,000, the duty which would apply (but for the concession) is $17,990. With the concession, the saving in duty is $17,240 as concessional duty is only $750.

Reminder: the land/property must be business real property owned in the personal name of the member rather than a company (otherwise the trustee would not be permitted to acquire the real estate).

The provisions of the duties legislation of each State or Territory differ, however where concessions or exemptions are available they generally require the transferor to continue to be the beneficial owner of the land (this relates to business real property as it is the only land which an SMSF may directly acquire from a member).

The following tables set out the details of the stamp duty offices and relevant provisions of the relevant legislation in each State and Territory. This is up to date as at 27 February 2017.

NSW	Transfer to a SMSF
Duty payable	$750 subject to conditions being met. Previously $500 but increased 01/02/2024. Depending on the documentation in place for the transaction you may be able to apply for a retrospective re-assessment and obtain a refund. An SMSF specialist lawyer would be able to advise you on this.
Relevant provisions	62A NSW Duties Act 1997
General description of legislation	Nominal duty is charged on a transfer of dutiable property from a person to a trustee of an SMSF where the: transferor is the only member of the super fund or the property is to be held by the trustee solely for the benefit of the transferor (ie property or proceeds of sale of property cannot be pooled with property held for another member and no other member can obtain an interest in the property or proceeds of sale); and property is to be used solely for the purpose of providing a retirement benefit to the transferor.
Document-ation	Evidence that it is a complying SMSF as at the date of the agreement/transfer, copy of minutes of meetings of the SMSF stating the intention to have the property transferred to it and confirming that the property was owned beneficially by the transferor member, copy of the SMSF trust deed or a variation to it, showing a non revocable clause that the property is segregated for the transferor member’s benefit only (follows wording in section62A(2))
Legislation	Duties Act 1997 (NSW)
Legislation website	http://www.austlii.edu.au/au/legis/nsw/consol_act/da199793/
Office	Office of State Revenue
Website	http://www.osr.nsw.gov.au

VIC	Transfer to a super fund
Duty payable	No duty subject to conditions being met
Relevant provisions	Section 41 Vic Duties Act 2000
General description of legislation	No duty is charged in respect of the transfer of dutiable property made without monetary consideration to a trustee of a super fund, where there is no change in beneficial ownership (again, property must be held in the personal name of the member and not a company name). A transfer of property to a trustee of a super fund by a beneficiary of the fund does not, for the purposes of this section, effect a change in the beneficial ownership of the property.
Document-ation	Documents are required – refer to ‘Evidentiary Requirements for Dutiable and Exempt Transactions’ on SRO website
Legislation	Duties Act 2000 (VIC)
Legislation website	http://www.austlii.edu.au/au/legis/vic/consol_act/da200093/
Office	State Revenue Office (SRO)
Website	http://www.sro.vic.gov.au/land-transfer-duty

No luck in QLD

QLD	Transfer to a super fund
Duty payable	$20 subject to conditions being met
Relevantprovisions	You can claim this concession on transfer duty if you: transfer dutiable property between superannuation funds to merge or split the funds create a trust of dutiable property because of the variation or reconstitution of a superannuation fund. (Read more about transfer duty on trusts.) The superannuation fund must become a complying superannuation fund within 1 year. A complying superannuation fund is: a complying superannuation fund under the Superannuation Industry (Supervision) Act 1993 (Cwlth), section 42 or 42A an exempt public sector superannuation scheme under that Act.
General desc-riptionof legislation	A transfer of dutiable property is a concessional dutiable transaction.
Document-ation	Duties office form and documents are required. https://www.publications.qld.gov.au/ckan-publications-attachments-prod/resources/755a8bd9-7134-4a5f-85e7-a54c747ec7bd/form-d2.6-v2-effective-7-jan-2008.pdf?
Legislation	Duties Act 2001 (QLD)
Legislationwebsite	http://www.austlii.edu.au/au/legis/qld/consol_act/da200193/
Office	Office of State Revenue
Website	http://www.osr.qld.gov.au/duties/index.shtm l

WA	Transfer to a super fund
Duty payable	$20
Relevant provisions	Sections 122 – 124 WA Duties Act 2008
General description of Legislation	Nominal duty is charged on a transfer of dutiable property by a person to the trustee of a super fund where –

	▪ there is consideration for the transfer; and
	▪ only the transferor can be a member of the super fund or the property is held in the superfund specifically for the transferor (ie property cannot be pooled with the assets of another member and no other members can obtain an interest in the property); and
	▪ the property (or if sold, the proceeds) can only be held in the superannuation fund to be provided to the transferor as a retirement benefit.
	If the fund subsequently fails to satisfy any of the requirements (above) full stamp duty is payable in respect of any dutiable property still held.
	Nominal duty is charged under section 124 in respect of a transfer of dutiable property to the trustee of an SMSF that is an employer sponsored fund where –
	there is no consideration for the transfer.

Document- ation	Application form is required – ‘Superannuation Fund Transactions – Application for Nominal Duty’.
Legislation	Duties Act 2008 (WA) Also refer to Duties Fact Sheet – Superannuation Transactions
Legislation website	http://www.austlii.edu.au/au/legis/wa/consol_act/da200893/
Office	Office of State Revenue
Website	http://www.finance.wa.gov.au/cms/section.aspx?id=209

ACT	Transfer to a super fund
Duty payable	Ad valorem duty applies
Relevant provisions	No provision for exemption or concession from duty
General description of legislation	Duty is charged on a transfer of dutiable property.
Document-ation	Lodgement form and documents are required.
Legislation	Duties Act 1999 (ACT)
Legislation website	http://www.austlii.edu.au/au/legis/act/consol_act/da199993/
Office	ACT Revenue Office
Website	http://www.revenue.act.gov.au

SA	Transfer to a super fund
Duty payable	Ad valorem duty applies
Relevant provisions	No provision for exemption or concession from duty
General description of legislation	A transfer of property to a person who takes as trustee is deemed to be conveyance whether or not any consideration is given (except in certain circumstances regarding the transfer of family farming properties)
Document-ation	Lodgement form and documents are required
Legislation	Stamp Duties Act 1923 (SA)
Legislation website	http://www.austlii.edu.au/au/legis/sa/consol_act/sda1923157/

Office	Revenue SA
Website	http://www.revenuesa.sa.gov.au

NT	Transfer to a super fund
Duty payable	Ad valorem duty applies
Relevant provisions	No provision for exemption or concession from duty
General description of legislation	A conveyance of dutiable property is a dutiable instrument.
Document-ation	Lodgement form and documents are required
Legislation	Stamp Duty Act (NT)
Legislation website	http://www.austlii.edu.au/au/legis/nt/consol_act/sda151/
Office	Territory Revenue Office
Website	http://www.treasury.nt.gov.au

TAS	Transfer to a super fund
Duty payable	$50
Relevant provisions	Section 49 Duties Act 2001 (TAS)
General description of legislation	Where the duties office is satisfied there is no change in the beneficial ownership of the property duty chargeable on the transfer is $50. Also an exemption is available in certain circumstances regarding the transfer of primary production land.
Document-ation	For primary production see ‘Documentary Evidence requirements Guideline’, for other transfers duties office reviews each transfer on its own facts recommend seeking confirmation of eligibility prior to lodgement.
Legislation	Duties Act 2001 (TAS)
Legislation website	http://www.austlii.edu.au/au/legis/tas/consol_act/da200193/
Office	State Revenue Office
Website	http://www.sro.tas.gov.au

If you don’t get an exemption the the rates applicable are:

Moving Property to an SMSF is not something to be done lightly without looking at the pros and cons as well as the procedures in your state or territory.

We have design a 3 part guide to buying a property in an SMSF

Even more information and complimentary strategy ideas are available on our Property in a SMSF page. Contact Caroline for specific legal advice on your proposed strategy.

IMPORTANT

This information is current as at the date of publication but may be subject to change. This article is general in nature and has been prepared without taking into account a potential your objectives, financial situation or needs. Before making a recommendation based on this article, seek personal legal and tax advice and consider its appropriateness based on the your objectives, financial situation and needs.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02 9899 3693, Mobile: 0413 936 299

PO Box 6002 NORWEST NSW 2153
Suite 40, 8 Victoria Ave, Castle Hill NSW 2154
Suite 4, 1 Dight St., Windsor NSW 2756

Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

Image courtesy of jscreationzs at FreeDigitalPhotos.net

16 Comments

by SMSF Coach - Liam Shorte on March 12, 2015 • Permalink

Posted in LRBA, Property, SMSF Management, Trustee

Posted by SMSF Coach - Liam Shorte on March 12, 2015

https://smsfcoach.com.au/2015/03/12/stamp-duty-on-transfers-of-property-to-an-smsf-as-at-01-jan-2015/

Stamp Duty Requirements on Change of SMSF Trustees

Don’t you just love dealing with different sets of State and Territories legislation when dealing with property. I recently went through a whole strategy with a client before they told me that the property was in a different state and I had to start again as the rules were different in that state.

As someone who highly recommends the use of a Corporate Trustee for SMSFs I thought it would be handy to provide a guide to the various state and territory stamp duty provisions when changing trustees.

The following tables set out the contact details for the stamp duty offices and provisions of the relevant legislation in each State and Territory. Please make sure to check that they are still current with your legal and tax advisers before changing trustees. I remind you yet again that this is General Information only.

In summary the amount of duty payable on the appointment of a new trustee and resignation of a current trustee is:

NSW: Duty of $50 payable

VIC: No duty payable

WA: Duty of $20 payable

SA: No duty payable

QLD: No duty payable

TAS: Duty of $50 payable

ACT: Duty of $20 payable

NT: No duty payable

DETAIL

NSW	Change of trustees
Duty payable	$50
Relevant provisions	Section 54 (2A) NSW Duties Act 1997
General description of legislation	Duty is charged in respect of a transfer of dutiable property to a trustee of a self managed superannuation fund as a consequence of the retirement of a trustee or the appointment of a new trustee.
Documentation	No form required. Cover letter including background to the transaction and return address.Client identification required: Individuals – certified copy of document proving date of birth. Companies – ABN/ACN
Legislation	Duties Act 1997 (NSW)
Legislation website	http://www.osr.nsw.gov.au
Office	Office of State Revenue
Website	http://www.osr.nsw.gov.au

VIC	Change of trustees
Duty payable	Not dutiable
Relevant provisions	Section 33 Vic Duties Act 2000
General description of legislation	No duty is chargeable in respect of a transfer of dutiable property to a trustee of a complying super fund solely because of the retirement of a trustee or the appointment of a new trustee.
Documentation	Refer to ‘Evidentiary Requirements for Dutiable and Exempt Transactions’ on SRO Website.
Legislation	Duties Act 2000 (VIC)
Legislation website	http://www.legislation.vic.gov.au
Office	State Revenue Office (SRO)
Website	http://www.sro.vic.gov.au

WA	Change in trustees
Duty payable	$20
Relevant provisions	Section 119 WA Duties Act 2008
General description of legislation	Nominal duty is chargeable on a transfer of dutiable property to a trustee as a consequence of the retirement of a trustee or the appointment of a new trustee (if the transfer does not confer an interest in trust property to any other person to the detriment of the beneficial interest of any person).
Documentation	Refer to ‘Duties Information Requirements’ – change of trustee.
Legislation	Duties Act 2008
Legislation website	http://www.slp.wa.gov.au/legislation/statutes.nsf/default.html
Office	Office of State Revenue
Website	http://www.finance.wa.gov.au/cms/section.aspx?id=209

SA	Change in trustees
Duty payable	Not dutiable
Relevant provisions	Section 71(5)(d) SA Duties Act 1923
General description of legislation	A conveyance of property for the purpose of effecting the retirement of a trustee or the appointment of a new trustee is exempt from duty, where the beneficial interest of any beneficiaries of the trust has not changed.
Documentation	Application for Opinion form and document that conveys land to new trustee (is stamped as exempt).
Legislation	Stamp Duties Act 1923 (SA)
Legislation website	http://www.revenuesa.sa.gov.au/services-and-information/legislation.html
Office	Revenue SA
Website	http://www.revenuesa.sa.gov.au

QLD	Change of trustees
Duty payable	Not dutiable
Relevant provisions	Section 117
General description of legislation	Transfer duty is not imposed on a dutiable transaction for the sole purpose of giving effect to a change of trustee (where the interests of beneficiaries do not change and transfer duty has been paid on all trust acquisitions for which transfer duty is imposed for the trust before the transaction).
Documentation	Must be stamped. Lodgement form and statutory declaration required.
Legislation	Duties Act 2001 (QLD)
Legislation website	http://www.legislation.qld.gov.au/OQPChome.htm
Office	Office of State Revenue
Website	http://www.osr.qld.gov.au/duties/index.shtml

TAS	Change in trustees
Duty payable	$50
Relevant provisions	Section 37 TAS Duties Act 2001
General description of legislation	Duty of $50 is charged in respect of a transfer of dutiable property to a special trustee as a consequence of the retirement of a trustee or the appointment of a new trustee. Special trustee includes the trustees of a superannuation fund.
Documentation	See ‘Documentary Evidence Requirements Guideline’
Legislation	Duties Act 2001 (TAS)
Legislation website	http://www.thelaw.tas.gov.au
Office	State Revenue Office
Website	http://www.sro.tas.gov.au

ACT	Change in trustees
Duty payable	$20
Relevant provisions	Section 54(4)
General description of legislation	Nominal duty is charged for the transfer of dutiable property to a person as a consequence of the retirement of a trustee or the appointment of a new trustee for a self managed superannuation fund.
Documentation	 Conveyance lodgement form Memorandum of transfer – Form52T Change of trustee deed Evidence that the property was purchased by the fund
Legislation	Duties Act 1999 (ACT)
Legislation website	http://www.revenue.act.gov.au/legislation/
Office	ACT Revenue Office
Website	http://www.revenue.act.gov.au

NT	Change in trustees
Duty payable	Not dutiable
Relevant provisions	Schedule 2, Exemption 6
General description of legislation	A conveyance that is made solely for the purpose of effecting the appointment of a new trustee on the retirement of a trustee or as an additional trustee if – no beneficial interest passes in the property conveyed; and no change of beneficial interest occurs as a result of the transaction; and the property conveyed was acquired by the retiring trustee or existing trustee in the capacity of trustee by virtue of an instrument that was stamped or was exempt from duty. (This rewritten stamp duty provision refers to ‘a discretionary trust’ however the application of the provision remains the same as Item 9A of the repealed Stamp duty Act – which referred to a trust.)
Documentation	Refer to ‘Stamp Duty Lodgement Guide’
Legislation	Stamp Duty Act (NT)
Legislation website	http://www.treasury.nt.gov.au
Office	Territory Revenue Office
Website	http://www.treasury.nt.gov.au

IMPORTANT

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Image courtesy of jscreationzs at FreeDigitalPhotos.net

4 Comments

by SMSF Coach - Liam Shorte on March 9, 2015 • Permalink

Posted in SMSF Management, Trustee

Posted by SMSF Coach - Liam Shorte on March 9, 2015

https://smsfcoach.com.au/2015/03/09/stamp-duty-requirements-on-change-of-smsf-trustees-as-of-01-jan-2015/

6 Key Considerations for your SMSF Investment Strategy

So your SMSF Administrator/Accountant is now having to use an Independent Auditor and suddenly you are being asked for more than just the 1 page SMSF Investment Strategy template provided by the Accountant that you used to sign without filling in the blanks and without considering its purpose.

The reason an Investment strategy is required by an SMSF and also required to be reviewed regularly is that personal circumstances changes as do markets and economies. You need to consider your investment portfolio in the light of these changes and this is a way of prompting you to do so as part of the annual review.

Each year we experience a lot of market and political volatility with differing views on where the economy is headed, leading to a subsequent impact on share and property markets.

As an investor is can be easy to get caught up in the short-term noise and lose focus. The SMSF Investment strategy requirement is a way of prompting you, the Trustee(s), to really consider what objectives you are trying to achieve and the strategies and asset allocation that you need to follow to achieve them.

Having a well thought out SMSF investment strategy is a key element in helping you achieve a smooth transition in to and through retirement.

Here are 6 important considerations in establishing your SMSF investment strategy.

Liquidity Needs: What life stage are each of the members in?
The members’ personal circumstances and life-stage will have the most important impact on your SMSF investment strategy. If you are all 20 years out from retirement, you may choose to invest for growth and ride with volatility of the share and property markets to benefit from the risk/return premium attributed to those sectors which are less liquid than cash and bonds. If however one or more of the members is approaching retirement or using a Transition to Retirement Pension strategy you may choose a more cautious approach to ensure sufficient income is available for pensions regardless of market ups and downs. That requires more active management to maintain some liquidity still seek a decent return through a diversified portfolio. For example we always recommend 12-36 months pensions are retained in cash or fixed interest to avoid selling assets in a downturn and reducing your capital value.
What’s the members’ risk tolerance
The ability of all involved to sleep comfortably at night without worrying about their investments should always be taken into consideration regardless of your age. If you or another member have no experience or confidence in certain market sectors, then short-term your investment strategy should be tailored accordingly. But you should then seek more information, education and guidance to build your knowledge and then your confidence in those missing sectors so that you can adopt a well diversified strategy long-term. It is generally accepted that the greater the risk of an asset, the greater the potential returns but this risk abates as time passes so riskier assets can pay off handsomely over time with less risk than perceived short-term. A portfolio designed to reduce your concerns while not providing optimal returns provides THE SLEEP FACTOR!
Asset allocation
Investing in the right asset classes is a major factor in the returns you will receive. Aussie Equities and Cash are not a full solution long-term. Cash and TD rates are currently low and our share market had a poor year last year and our economy is struggling while international equities, property and infrastructure are benefiting from improving economies, low interest rates and the dropping Aussie dollar. Your asset allocation should be reviewed annually and rebalanced to account for the returns from various asset classes and their future forecast. We are not saying make dramatic changes but do take tilts to certain sectors that will benefit from the current economic climate.
Avoid sector bias
The Big 4 Banks, Woolworths and Telstra do not make a diversified portfolio! Once you have decided which asset classes to invest in, it is important to diversify within those asset classes. Frequently I see investment portfolios with a narrow range of large Australian companies just like mentioned above providing very poor diversification – and leaving the overall investment portfolio heavily reliant on the fortunes of one or two sectors. Self Managed Superannuation Funds (SMSF) set up for the benefit of control without the willingness to take advice or learn about portfolio design, frequently lack diversification with an over reliance on one property, Australian shares and/or cash. With Control comes responsibility to learn and adapt.
Tax efficiency
Often the spur to look at complex and structured investments near June 30^th is the tax consideration. The amount of tax you pay on investment has a major impact on your SMSF investment strategy. Here is the tax basics for SMSFs:

15% tax on earnings and capital gains on assets held for less than 12 months in accumulation phase
10% tax on Capital Gains on assets held for greater than 12 months in accumulation phase
0% tax on earnings and capital gains on assets sold in pension phase

For example, if you were lucky enough to have bought 1000 CBA shares during the GFC at $30 and sell them now at $90 in accumulation phase you will pay $6,000 in tax with a net profit of $54,000. While if you were lucky to move in to pension phase you receive the full $60,000 tax-free. Tax is an important consideration and an understanding of the tax impacts which you purchase your asset in, and the tax payable when you dispose of the asset, are very important but should not be the sole driver of your Self Managed Superannuation Fund investment strategy.

Insurance Needs of the Members

Trustees of SMSFs now have to consider, as part of its Investment strategy “whether the trustees of the fund should hold a contract of insurance that provides insurance cover for one or more members of the fund.”

This is a significant addition to the previous provisions, and has been prompted by the Super System Review panel noting that less than 13% of SMSFs have insurance. This is a subject on its own so please refer to my earlier article for guidance Self Managed Super Funds must include an Insurance Needs Analysis as part of the fund’s SMSF Investment Strategy.

It is important to update your investment strategy on an annual basis or more often if making large contribution or large investments to make sure you are maximising the probability of achieving your financial goals whilst reducing the risk of capital losses.

You can seek professional advice to help with your investment strategy, but remember: as trustee, you are still ultimately responsible for your fund’s investment decisions so next time you sign off a template provided by your administrator remember it is you that are responsible not them.

Please contact us on 02 9894 1844 or Liam@verante.com.au if you would like to review your current SMSF investment strategy, or need assistance in preparing an SMSF investment strategy that matches your members’ needs.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

I’ll leave the last word or should I say video to the ATO

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　96993693, Mobile: 0413 936 299

PO Box 6002, NORWEST NSW 2153. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 41 621 447 345, AFSL 476223

Image courtesy of pakorn at FreeDigitalPhotos.net

4 Comments

by SMSF Coach - Liam Shorte on March 4, 2015 • Permalink

Posted in Audit, Investment Strategies

Posted by SMSF Coach - Liam Shorte on March 4, 2015

https://smsfcoach.com.au/2015/03/04/6-key-considerations-for-your-smsf-investment-strategy/

Multiple SMSFs may be a Smart Strategy for Property Investors

More than one fund! Am I kidding you? No I’m not as there are very valid reasons for using more than one SMSF for your investment needs.

To minimise Land Tax issues as detail further below but subject to State provisions;
To allocate certain assets for estate planning purposes to specific beneficiaries;
To keep a blended family superannuation interests separate;
To keep higher risk assets separate from other SMSF assets. (Retail shop with increased public liability risk);
To cater for separate risk tolerances for member of a family rather than running segregated accounts

So more on uses of multiple SMSFs by property investors

Land tax is a form of taxation applied to the value of any land that an individual or entity may own. For an individual their primary place of residence is normally exempt from Land Tax. Depending on your state or territory, land is a very broad term that encompasses vacant blocks of land, commercial and residential properties. I will be talking about NSW in this article.

Facts on NSW Land tax 2024

The Tax Year Threshold Rate for 2024 is $1,075,000

Tax on land value above the threshold $100 plus 1.6% up to the premium threshold.

Premium Threshold is $6,571,000

Tax on land value above the threshold is $88,036 for the first $6,571,000 then 2% over that

Strategy to manage land tax:

Land tax can be minimised by taking advantage of land tax thresholds that apply per entity not in aggregation. So Land tax can be controlled through the use of a separate Self Managed Super Funds (SMSF) for additional properties once you reach the exempt threshold ; .

Currently the Land Tax Free threshold sits at a land value of $1,075,000. Therefore any land value that exceeds this can be taxed at a rate as high as 2%. However, each SMSF is treated as a separate entity meaning each SMSF has its own $1,075,000 threshold. This allows property investors to hold their land across multiple SMSF’s in order to never exceed the threshold in any of these funds and in effect become exempt from land tax.

Example:

Sharon and Robert through their Love Property Superannuation Fund own an investment property in Castle Hill with land valued at $802,000 as part of a diversified strategy of their Self Managed Super Fund. Intent on expanding their property empire the couple has recently received pre-approval for an investment loan to purchase an additional property in Rouse Hill with land valued at $813,000. With this purchase the Love Property SMSF would have a combined Taxable land value of $1,615,000 obligating them to $8,740 in land tax.

However on speaking to their “SMSF Association Accredited SMSF Specialist Adviser“ (Yes you guessed ME!), Sharon and Robert set up a second Self-Managed Super Fund, Love More Property SMSF to purchase the second property. This means the land owned in their first SMSF is below the tax threshold and the land in their second SMSF is valued at below the tax threshold which effectively exempts Sharon and Robert from land tax. Running a second fund can be done for less than $2,000 per annum so a net saving of $6,740 per year or at least $67,400 over a 10 year property buy and hold strategy.

So you can see that multiple SMSFs are an effective tool to boost the returns of your property investment.

Be care of State Land Stax Legislation or Provisions

Strategy may not work in if there are grouping provisions. So please seek specialist tax advice.

https://www.sro.vic.gov.au/legislation/grouping

If you want to know see more about property in a Self Managed Super fund the go to the page https://smsfcoach.com.au/property-in-a-smsf/ for articles that cover most of the strategies and questions on this subject including Tips and Traps to be aware of in advance.

Feel you are falling behind? Then read 10 Tips For Salvaging Your Retirement Plans and then contact me for personal advice.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98993693, Mobile: 0413 936 299

PO Box 6002 NORWEST NSW 2153

40/8 Victoria Ave. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223

Image courtesy of cooldesign at FreeDigitalPhotos.net

1 Comment

by SMSF Coach - Liam Shorte on February 27, 2015 • Permalink

Posted in Property, Tax Planning

Posted by SMSF Coach - Liam Shorte on February 27, 2015

https://smsfcoach.com.au/2015/02/27/multiple-smsfs-may-be-a-smart-strategy-for-property-investors/

New Centrelink Deeming Rates Announced From March 20th 2015

The Government has announced that from 20 March 2015, Centrelink will reduce the deeming rates applicable to allowances and pensions. The lower deeming rate will be reduced from 2 per cent to 1.75 per cent for pensioner and single allowees for financial investments of up to $48,000 and for pensioner couples with investments of up to $79,600.

The higher deeming rate will fall from 3.5 per cent to 3.25 per cent for amounts over the deeming threshold.

This is estimated to affect 770,000 pensioner and allowee recipients according to the Minister for Social Services, Scott Morrison. In the media alert, the Minister suggests that part-pensioners will receive an average increase of $3.20 per fortnight or $83.20 per annum.

In summary the new deeming rates will be as follows:

Deeming Rates from March 2015

This will be received as welcome news to those pension, aged care users and Commonwealth Seniors Health Card recipients who, from 1 January 2015, have been caught by the extension of the deeming rules to account-based pensions.

It may also allow some people who were previously in receipt of the Low Income Health Card to become eligible for it again.

Future changes
The lower deeming rates may not be the end of Centrelink changes with respect to deeming. The Social Services and Other Legislation Amendment (2014 Budget Measures No. 5) Bill 2014 was introduced into the House of Representatives on 2 October 2014. One of the measures contained within this bill was to reset the deeming thresholds to $30,000 for singles and $50,000 combined for pensioner couples from 20 September 2017. This was part of the measures proposed in the May 2014 Federal Budget. To date, the Government hasn’t had any success in moving this Bill through the House and on to the Senate.

Does it make a difference?

Overall, the changes to the deeming rates are a welcome measure for all pensioners and allowees who are not in receipt of the full allowance or age pension. This is especially so for those who own direct shares and/or who are not beneficiaries of the grandfathering of account-based pensions. What will be interesting looking forward is whether there are any interest rate cuts in the near future which affect the deeming rates.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

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by SMSF Coach - Liam Shorte on February 17, 2015 • Permalink

Posted in Age Pension, Centrelink, Retirement Planning

Tagged allowances, Baulkham Hills, Castle Hill, Centrelink, Cost of Living, deeming, deeming rates, Hawkesbury, Interest Rates, pension phase, Pensions, Retirement Planning, Windsor

Posted by SMSF Coach - Liam Shorte on February 17, 2015

https://smsfcoach.com.au/2015/02/17/new-centrelink-deeming-rates-announced-from-march-20th-2015/

Herd Mentality and Bubbles – Be Careful When Following the Crowd

Whether you are a long-term investor or an opportunist, many investors find comfort in knowing that many others are investing the same way they are and they get caught up in the media hype on a certain sector. Think of the Dot Com craze in the late 90’s when many invested in this sector even though they did not understand it well and as prices rose even the hesitant among investors poured more money in for fear of missing out or FOMO as I prefer to term it. A good adviser should help you identify the risk of these fads and keep you well diversified.

Here is a good educational video from Franklin Templeton Investments on the subject.

I believe that you always need to do your own research on an investment and then cross check that with others. Be prepared to listen to those who may seem wacky, over optimistic or pessimistic before making your decisions. A good Self Managed Super Fund advisor should be able to get you a selection of research from different sources to stress test any investment.

Bubble’s go back a long time, even centuries and while we are weary of each investment that crashes we rarely learn enough to avoid the next one. From my personal collection is one of my favourite prints called Gekko’s Tulip Mania which you may have seen in the movie Wall Street 2. I have it hanging on my office wall as a constant reminder! You can read more on this bubble at Wikipedia – Tulip Mania

“This is the greatest bubble story of all time… they call it the Tulip Mania.”
– Gordon Gekko

For those looking for a truly Australian history of bubbles I would recommend reading a 2003 paper by the John Simon and published by the RBA available free online called Three Australian Asset-price Bubbles

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

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by SMSF Coach - Liam Shorte on January 5, 2015 • Permalink

Posted in Behavioural Finance, Investment Strategies

Tagged Asset Allocation, asset bubbles, Backup, Baulkham Hills, Bubble, Bubbles, Castle Hill, Crashes, Dot Com bubble, herd mentality, herding, Interest Rates, Investing, investment property, private company valuations, SMSF, Trustee, Tulip Bubble, Tulip Mania

Posted by SMSF Coach - Liam Shorte on January 5, 2015

https://smsfcoach.com.au/2015/01/05/herd-mentality-and-bubbles-be-careful-when-following-the-crowd/

How long will my superannuation last?

Generally the first question most prospective clients ask when discussing their future retirement is: “How long will my super last?” People naturally want to be confident that their income streams and investment portfolios will provide adequate income for their life expectancy.

For individuals planning their retirement, lifestyle should be considered in the long-term wealth creation process. The sum of money that retirees accumulate during their working lives will drive their total retirement income and therefore influence their lifestyle choices. Once in retirement it becomes more unlikely that individuals will be able to ‘top up’ their capital base.

Changes in medicine have ensured that life expectancies are longer and all the evidence suggests that this trend will continue. The proposition that some of us will outlive our savings is not at all unrealistic. While there are many uncertainties associated with retirement, it is possible to draw some broad rules of thumb in terms of how long retirement savings will last.

The following table shows the life expectancy rates for men and women between the ages of 55 and 70 years.

Table 1 – Life Expectancy Rates

Age	Male	Female	Age	Male	Female
55	26.95	30.53	63	20.14	23.35
56	26.08	29.61	64	19.34	22.48
57	25.20	28.70	65	18.54	21.62
58	24.34	27.79	66	17.76	20.76
59	23.48	26.89	67	16.99	19.92
60	22.63	26.00	68	16.24	19.08
61	21.79	25.11	69	15.49	18.24
62	20.96	24.23	70	14.76	17.42

Source. Australian Life Tables 2005-07

The table below illustrates, for any particular amount of retirement savings, how long this amount will last assuming a constant annual drawdown amount (left hand axis) and a constant annual effective earning rate net of taxes and fees (top axis).

Table 2 – How long before my savings run out ?

Effective Earning Rate %	1	2	3	4	5	6	7	8
Drawdown %
5%	22.43	25.80	31.00	41.04
6%	18.32	20.48	23.45	28.01	36.72
7%	15.49	16.99	18.93	21.60	25.68	33.40
8%	13.42	14.53	15.90	17.67	20.10	23.79	30.73
9%	11.84	12.69	13.72	14.99	16.62	18.85	22.23	28.55
10%	10.59	11.27	12.07	13.02	14.21	15.73	17.79	20.91
11%	9.58	10.13	10.77	11.52	12.42	13.53	14.95	16.88
12%	8.74	9.21	9.73	10.34	11.05	11.90	12.94	14.27
13%	8.04	8.44	8.88	9.38	9.95	10.62	11.43	12.42
14%	7.45	7.78	8.16	8.58	9.06	9.60	10.24	11.01
15%	6.93	7.23	7.55	7.91	8.31	8.77	9.29	9.90
16%	6.49	6.74	7.02	7.33	7.68	8.07	8.50	9.01
17%	6.09	6.32	6.57	6.84	7.14	7.47	7.84	8.26
18%	5.74	5.95	6.17	6.41	6.67	6.96	7.28	7.64
19%	5.43	5.62	5.81	6.03	6.26	6.51	6.79	7.10
20%	5.15	5.32	5.50	5.69	5.90	6.12	6.37	6.64

For example, let’s assume that James has an accumulated retirement amount of $200,000 in his SMSF when he retires at age 65. If he starts withdrawing 10% ($20,000) per year, assuming his withdrawals remain constant and he earns 4% (effective) constantly on his money, he will run out of money early in the 13th year. Even if James earns 6%, the money will be fully depleted during the 15th year.

This means that a 65 year male who has a life expectancy of 18.54 years (refer to Table 1), will require an effective earning rate of at least 6.51% percent to have sufficient funds for his life expectancy.

The above table does not take into account price inflation nor does it take into account indexation of annual drawdown amounts. If price inflation and indexation of drawdowns are included, the money runs out even faster.

If we return to James and assume that instead of $200,000 he has $400,000 and his lifestyle can be accommodated by a constant drawdown of 5%, which equates with $20,000, the table indicates that even at very low earning rates, James will have enough money to last as long as his life expectancy even if he increases the constant draw down amount to 6% or even 7% (assuming an earnings rate of at least 3% in that case).

Clearly, having more money to start with is the desirable retirement strategy.

How does asset allocation affect things?

The above analysis assumes effective earning rates ranging from 1% – 8%. This does not address the returns associated with different asset allocations and the different marginal tax rates that apply for individuals. Instead of saying that over your retirement period you would hope for a return of 5% – 6% per annum, one could also ask what particular asset allocation which will determine an earnings rate. This asset allocation will also reflect the retiree’s tolerance for risk.

However, even if this approach is adopted there will still be occasions when an investment mix may not be able to satisfy a retiree’s expectation of income for their life expectancy (and beyond). For instance, it may be that even if all investments were in growth assets the expected rate of return may not be sufficient to provide the desired income for the person’s life expectancy, notwithstanding the level of risk that would have been assumed. It is also important to remember that the life expectancy is an average for a group of people – there is a significant chance that a particular person will outlive their life expectancy. For instance for a 60 year old male it is nearly 51%.

Once again, the moral of the story is the more money you start with, the more likely you will be able to fund your retirement throughout your life expectancy.

The above information is, of course, general in nature and demonstrates the need to seek specific retirement planning advice in order to comprehensively address issues of risk and return.

Notes on using Table 2

Because the table values are independent of the initial investment it is necessary to work out what gross level of income would meet lifestyle needs. Thus if someone has $400,000 and can live on a constant amount of $20,000, they need only draw down at the 5% rate. If their income needs were higher they would need to use a higher drawdown rate.

The values reflect all fees and taxes so that by choosing an appropriate rate of earnings it is possible to model both taxed and tax-exempt income streams (the latter would have a higher effective earning rate).

A drawdown rate of 4% effectively equates to the minimum annual payment from an account-based pension at age 65. A drawdown rate of 9% equates with the minimum annual payment from an account-based pension at age 85.

If you want to know current thinking on the amount needed then read by earlier article How much do I need to live comfortably in retirement?

Feel you are falling behind? Then read 10 Tips For Salvaging Your Retirement Plans and then contact me for personal advice.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Image courtesy of patpitchaya at FreeDigitalPhotos.net

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by SMSF Coach - Liam Shorte on December 26, 2014 • Permalink

Posted in Retirement Planning

Posted by SMSF Coach - Liam Shorte on December 26, 2014

https://smsfcoach.com.au/2014/12/26/how-long-will-my-superannuation-last/

SMSF Sector Maturing as Services Improving from Industry and Regulator

We are finally seeing the SMSF sector being recognised as the retirement option of preference for engaged investors. Fees and costs are constantly being addressed but what trustees and members need is more confidence in running their funds and that comes through informative content and education.

The industry and the regulator have stepped up a notch in terms of engagement and producing news and educational content for people who want to be active in controlling their future and open to learning more about managing their finances.

Just look at the new content provided by the ATO this year:

For Trustees :

The ATO released 22 short, educational, and entertaining videos, to help you navigate a wide range of events including retirement planning, investment decisions and running an SMSF. We will release more videos next year, covering new topics to help you run your SMSF smoothly and better understand your obligations.
To help people search their website for relevant SMSF information they launched SMSF assist External Link . To use SMSF assist, type in a question or select a topic to get specific information in an instant. SMSF assist and other SMSF services have been added to the ATO app.
News articles, practical case studies and Q&As are now published as they become available and can be accessed anytime through ‘News’ on the left-hand side menu of the SMSF home page.
The ATO quarterly FREE subscription service ‘SMSF News’ has a fresh look and feel, and from 2015 will be issued on a bi-monthly basis.
They will run webinars in 2015 covering different topics for trustees and professionals.

For professionals (in addition to the above services):

The ATO began engaging with SMSF professionals through a live LinkedIn question and answer event hosted by Deputy Commissioner Alison Lendon. The event created dialogue with participants, and we answered SMSF-related questions during the forum.
Building on the success of the LinkedIn forum, they embarked on a series of webinars aimed at SMSF professionals. The webinars highlighted current issues facing the industry and provided an opportunity for participants to ask questions.

Other New Initiatives:

SMSF Association: FREE SMSF TRUSTEE EDUCATION PROGRAM

To help you better understand your role as a SMSF trustee the SMSF Association has launched a free online resource.

By completing this course, you will have learnt;

The basic facts about Superannuation and Self-Managed Superannuation Funds
How an SMSF works
The investment rules for SMSFs
The administration process to keep your SMSF healthy.

If want a source of constantly updated new on what is relevant to SMSFs then you can get subscribe free to The #SMSF News which picks up most relevant SMSF articles across the web daily. Also if you are on Twitter make sure to follow us as @SMSFCoach and subscribe to this blog up on the left hand column.

Liam Shorte B.Bus SSA™ AFP

SMSF Specialist Advisor™ & Financial Planner

Tel: 02　8853 6833, Mobile: 0413 936 299

liam@verante.com.au

PO Box 6002 BHBC, Baulkham Hills NSW 2153

Liam Shorte is a partner in VERANTE Financial Planning, Corporate Authorised Representative of Genesys Wealth Advisers Limited, Licence No 232686, Genesys Wealth Advisers Limited ABN 20 060 778 216 • AFSL No.232686

Important information :

The information in this article is provided for illustrative purposes only and does not take into consideration your personal circumstances. You are encouraged to seek financial advice suitable to your circumstances to avoid a decision that is not appropriate. Any reference to your actual circumstances is coincidental. Genesys and its representatives receive fees and brokerage from the provision of financial advice or placement of financial products.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Image courtesy of cooldesign at FreeDigitalPhotos.net

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by SMSF Coach - Liam Shorte on December 15, 2014 • Permalink

Posted in News & Stats, SMSF Management, Trustee

Posted by SMSF Coach - Liam Shorte on December 15, 2014

https://smsfcoach.com.au/2014/12/15/smsf-sector-maturing-as-services-improving-from-industry-and-regulator/

SMSF Coaching: Busting the Seven Key Myths About Bonds

Many SMSF investors are confident with shares, property and term deposits but when it comes to bonds they are feel like they hit a brick wall when they look for solid reasons to consider this sector.

I found this series of articles from Elizabeth Moran that looks at some of the myths around bonds and addresses them in detail. The series addresses the key concerns that SMSF investors mention to me when suggest a potential investment in a bond issue or bond fund. Most of the concerns are based on misinformation on the web and false rules of thumb. So, if you would like to learn more about bonds, this series of articles which looks at the “Seven Key Myths” is a good starting point.

Myth #1 My portfolio consists of shares and cash and I don’t need a bond exposure

Myth #2 It’s a bad idea to invest in bonds when interest rates or inflation are rising

Myth #3 Bonds are too risky

Myth #4. Fixed Income returns are low and will be a drag on my portfolio’s performance

Myth #5. You need a lot of money to buy bonds directly so go for a managed fund instead

Myth #6. There is too long to wait until maturity

Myth #7 I own hybrids so I already have an allocation to fixed income

Subscribe to keep updated

Subscribe to the SMSF Coach blog on the left hand column so that you don’t miss out educational articles like this.

As a thank you to FIIG I will also add a link to their SMSF Solutions page (Not a paid endorsement just a recognition of a good effort)

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Join Us Image courtesy of Stuart Miles at FreeDigitalPhotos.net

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by SMSF Coach - Liam Shorte on November 27, 2014 • Permalink

Posted in Bonds, Hybrids, Investment Strategies, Retirement Planning

Posted by SMSF Coach - Liam Shorte on November 27, 2014

https://smsfcoach.com.au/2014/11/27/smsf-coaching-busting-the-seven-key-myths-about-bonds/

Medibank Private Allocations at a Glance – How Much Do I Get?

The full pricing and allocation details for Australian public applicants has been indicated in a Government Press Release. Applicants will be able to get confirmation of their individual allocation from Tuesday, 25 November 2014 by visiting medibankprivateshareoffer.com.au or calling 1800 998 778. Applicants will need to have their Application Reference Number available.

Transaction confirmation statements will be sent to successful applicants from Thursday, 4 December 2014.

The Government has also exercised its right to claw back a further 20 per cent of the shares previously allocated to the Broker Firm Offer which will no doubt annoy the Broking community even further after a huge scale back in their offer. I cannot help feel there will be a huge amount of shareholders with mediocre holdings and headaches for their accountants and advisers trying to track applications, allocations, scale backs and refunds of excess funds.

Medibank Private will list on the ASX at 12.00pm AEDT on Tuesday, 25 November 2014. Its ASX code will be MPL.

Final price per share paid by institutional investors	$2.15
Discount per share on final insto price for retail investors	15 cents or 7%
Final price per share paid by retail investors¹	$2.00

Proceeds
Total proceeds returned to Commonwealth	$5.679B

Allocation of shares as a % of total shares
Retail allocation	60.0%
Total institutional allocation	40.0%
Domestic institutional allocation	22.9%
Offshore institutional allocation	17.1%

Details of Retail Offer
Total number of individual Applications	Approx. 440,000
Dollar amount allocated to Retail Offer	$3.311 billion
Average shareholding for Retail Offer	Approx. $5,850
Policyholder Applicants’ allocation²	33.2%
General Public Applicants’ allocation²	66.7%

Medibank Private Share Offer – How Much Will You Get

General Public Offer

Applicants who applied under the General Public Offer have received allocations as follows:

General Public Offer Applicants who did not pre-register who applied for	Receive*
$2,000	The full amount you have applied for
$2,001 to $7,000	$2,000 + 75.00% of your Application within this band
$7,001 to $14,000	$5,750 + 20.00% of your Application within this band
Over $14,000	$7,150 + 5.00% of your Application within this band

General Public Offer Applicants who pre-registered who applied for	Receive*
$2,000 to $2,300	The full amount you have applied for
$2,301 to $7,000	$2,300 + 86.25% of your Application within this band
$7,001 to $14,000	$6,353.75 + 23.00% of your Application within this band
Over $14,000	$7,963.75 + 5.75% of your Application within this band

Policyholder Offer

Applicants who applied under the Policyholder Offer have received allocations as follows:

Policyholder Offer Applicants who did not pre-register who applied for	Receive*
$2,000 to $2,300	The full amount you have applied for
$2,301 to $7,000	$2,300 + 86.25% of your Application within this band
$7,001 to $14,000	$6,353.75 + 23.00% of your Application within this band
Over $14,000	$7,963.75 + 5.75% of your Application within this band

Policyholder Offer Applicants who pre-registered who applied for	Receive*
$2,000 to $2,600	The full amount you have applied for
$2,601 to $7,000	$2,600 + 97.50% of your Application within this band
$7,001 to $14,000	$6,890 + 26.00% of your Application within this band
Over $14,000	$8,710 + 6.50% of your Application within this band

For example, a General Public Offer Applicant who did not pre-register who applied for $10,000 will receive:

Application band	Receive*
$2,000	$2,000 (100% of $2,000)
$2,001 to $7,000	$3,750 (75% of $5,000)
$7,001 to $14,000	$600 (20% of $3,000)
Over $14,000	n/a
Total	$6,350

* The final allocation of Shares will be subject to rounding and application of the Final Price to any allocation above $250,000.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

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by SMSF Coach - Liam Shorte on November 23, 2014 • Permalink

Posted in Retirement Planning

Tagged Baulkham Hills, Castle Hill, Hawkesbury, Investing, Investment, Investment Strategy, Medibank, Medibank Private, pension phase, private company valuations, Self Managed Superannuation Fund, share Offer, SMSF, superannuation

Posted by SMSF Coach - Liam Shorte on November 23, 2014

https://smsfcoach.com.au/2014/11/23/medibank-private-allocations-at-a-glance-how-much-do-i-get/

ATO Rules Out Cross-Insurance Arrangements within SMSF Borrowing Strategies

The Australian Taxation Office (ATO) on the 17th November 2014 confirmed that new regulations which came into effect on 1 July 2014 do not permit new insurance products acquired on or after 1 July 2014 to be used as part of a cross-insurance arrangement. This was a common strategy used to protect SMSFs engaging in Limited Recourse Borrowing Arrangements from being forced to sell a property if a member of the fund died or became disabled.

Insurance strategy rejected

The ATO confirmed that these types of arrangements are not permitted under the new rules as “the insured benefit will not be consistent with a condition of release in respect of the member receiving the benefit”.

Impact on SMSFs with existing cross-insurance arrangements

Where a trustee acquired insurance products prior to 1 July 2014 to implement a cross-insurance strategy, the ATO’s announcement seems to imply that those arrangements will continue to be permitted as those policies would be grandfathered and therefore exempt from the new regulations.

According to Colonial First State’s FirstTech team, where a trustee acquired a new policy to implement a cross-insurance strategy on or after 1 July 2014, the new rules will apply and the trustee will need to restructure their fund’s insurance arrangements in consequence of the ATO’s announcement. In this case, trustees may wish to contact the fund’s auditor or seek legal advice to confirm their options.

SMSF Trustees may wish to seek SMSF specific advice from the ATO before proceeding with any other debt reduction and liquidity strategies

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Image courtesy of cooldesign at FreeDigitalPhotos.net

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by SMSF Coach - Liam Shorte on November 19, 2014 • Permalink

Posted in Retirement Planning

Posted by SMSF Coach - Liam Shorte on November 19, 2014

https://smsfcoach.com.au/2014/11/19/ato-rules-out-cross-insurance-arrangements-within-smsf-borrowing-strategies/

Pay SMSF Corporate Trustee ASIC Fees 10 years in Advance – Save on Fees and Fines

I have made it very clear for many years that I believe that it’s much better for a self-managed super fund to use a corporate trustee rather than individual trustees. Yes there is an initial set up fee of between $600 to $850 including and ASIC charge of $576 but that is a one-off and I would hope that ASIC in a move to promote use of Sole Purpose Corporate Trustees might reduce that fee. (wishful thinking maybe).

Tips for Trustees

ASIC also charges these companies annual fees. They have two different charges for proprietary limited companies. One applies to companies that only perform a special purpose and another charge applies to all other companies.

Special-purpose companies include those whose sole function is to be the trustee of a super fund regulated under the laws. These types of super funds would include SMSFs.

Special-purpose companies are only charged an annual fee of $67 (up $18 in 5 years – inflation!).

The annual fee for all other proprietary limited companies is $329 (2025-26). As an example, this higher fee applies to companies that at are a trustee of an SMSF and also trustee of your family’s discretionary trust.

Because people often use their Accountant or Administrator as a mailing address it can be easy for these annual fees to be missed or a delay to occur in notifying people to pay them . So for people who are a bit lax about checking emails or opening snail mail from their fund administrator it’s very easy to miss the deadline to pay these annual ASIC fees.

If any company pays its annual ASIC fee more than a month late the late payment fee is $98 and if two months past the deadline date it will have to pay an additional $411.

I have a number of clients who have been caught in this trap and went looking for a solution. To avoid these penalties all annual ASIC fees can be paid 10 years in advance and obtain a decent discount and peace of mind that late fees are avoided.

For example, the fee for 10 years in advance for a super fund trustee company is $463, a discount of $207 on 10 years of the standard $67 annual fee for SMSF trustee companies. This discount is equivalent to a 31% discount per year. Sounds like a good deal for a forgetful, busy or even the prudent trustee.

Bare Trustee Companies

The fee for 10 years in advance for a normal trustee company is $2,438, a discount of $852 on 10 years of the standard $329 annual fee for SMSF trustee companies. This discount is equivalent to a 26% discount per year and avoids future rises.

The relevant instructions on how to pay and the required Remittance form are available here.

Note for Accountants and Administrators:

Best practice treatment of the payment is to amortise over 10 years.

In Class you can set it up as a Custom Holding asset (non-investment) and amortise 1/10th every 30 June (or company review date if that’s your preference).

in BGL SF360, you can use the existing 66000 Prepaid Expenses account in the Chart of Accounts or create a Custom Asset Account e.g. Prepaid ASIC Fees. Then amortise the ASIC fees over the prepaid period i.e 10 years. Users can refer to https://360help.com.au/x/NgNiAQ

In BGL SF360 as an extra time saver, use the SAVE & COPY function in the Journal Screen each year to copy the Journal. SF Desktop clients could use the Standing Journal function.

Liam Shorte B.Bus FSSA™ AFP

Financial Planner & Fellow SMSF Specialist Advisor™

Tel: 02　9899 3693, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

40/8. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Advisory Pty Ltd (ABN 34 605 438 042) (AFSL 476223)

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by SMSF Coach - Liam Shorte on November 19, 2014 • Permalink

Posted in SMSF Management

Posted by SMSF Coach - Liam Shorte on November 19, 2014

https://smsfcoach.com.au/2014/11/19/pay-smsf-corporate-trustee-asic-fees-10-years-in-advance-save-on-fees-and-fines/

SMSF Using an Unrelated Unit Trust for Property Development

Following on from my previous article How a SMSF can Purchase a Property with a Related Party – Using a 13.22c Trust , another strategy for those wishing to engage in property development with their SMSF involvement is for the fund trustee to invest in a unit trust that holds the development land / existing property by subscribing for units in the unit trust with partners so that no related entity group owns more than 50% of the units in the trust.

Where the fund trustee invests in an unrelated trust the trustee for the unit trust is not required to comply with the requirements of regulation 13.22C of the SIS Regulations. This means that the trustee for the unit trust can borrow to fund the land development without the fund trustee breaching the in-house asset rules in s71 of the SIS Act.

To make it very clear the unit trust will be unrelated if the fund trustee and its associates do not:

exercise Sufficient Influence; or
have a fixed entitlement to more than 50% of the income and capital of the unit trust; or
have the power to remove or appoint the trustee for the unit trust.

So each SMSF or related group of investors can own exactly 50% in combination between them and still maintain an unrelated trust and meet the above requirements.

Keep it simple as it is important that the units in the unit trust carry equal rights to income and capital so that you do not also trigger the non arm’s length income provisions under s295-550 of the Income Tax Assessment Act 1997 (1997 Act).

The diagram below shows 2 unrelated Self Managed Superannuation Funds investing in a unit trust equally (50/50) to carry out a property development. One of the SMSFs uses as related party loan to fund their purchase of the units. Remember it is only the units that are offered as security not the property in the trust.

Each SMSF contributes $350,000 and the property is developed for a total cost of $700,000 and sold for $1m. The$300,000 profit flow back through the Unit Trust to the unit holders equally.

Sufficient Influence

Where two unrelated SMSFs each hold 50% of the units in the unit trust, it is important that the trust management decisions are decided on a 50/50 basis. It should be very clear from documentation and minutes of the trust that decisions are made jointly.

How to avoid distributions to the SMSF being treated as non-arm’s length income?

Where the SMSF invests by way of a unit trust structure, any income received by the fund trustee may be treated as non arm’s length income and taxed at 47% under s295-550(5) of the Income Tax Assessment Act 1997 (1997 Act), where:

the parties are not dealing at arm’s length terms; and
the fund trustee receives an amount it would not otherwise have received if the parties were dealing on arm’s length terms.

Similarly, income the SMSF derives as a beneficiary of the trust, other than because of a fixed entitlement to income, will be treated as non arm’s length income and taxed at 47%.

Therefore, it is important to ensure that the unit trust is a fixed trust, meaning that the entitlement of unit holders to receive income and/or capital from the unit trust is fixed and indefeasible. However, even with a fixed trust it is necessary for the income to be no more than the income that would have been derived if the parties were dealing with each other at arms-length (s295-550(5)).

Managing powers of trustee appointment or removal

Again to avoid falling foul of the legislation, the constitution of the trustee company of the unit trust should be designed to ensure that the SMSF trustee and/or its associates do not have the power to control the trustee by effectively having the power to appoint and remove the trustee for the unit trust by reason that they hold a majority of the shares in the trustee. One trap is a constitution that allows the chairperson to have a casting vote where the chairperson is a SMSF Trustee or representative of the SMSF trustee.

Documentation

When the transaction is structured by way of an unrelated unit trust arrangement, the following documents should be prepared by an experienced legal expert (not off the shelf):

purpose specific unit trust deed and accompanying minutes of meeting; and
unit holders’ agreement all ensuring none of the requirements breached..

Gradual acquisitions of more units by the SMSF

Where a fund trustee invests in an unrelated unit trust the fund trustee may acquire the units held by the other party over time, subject to complying with the provisions of the SIS Act and keeping their related entity group to less than 50% of the overall trust units. Keep in mind that where the unit trust is land rich, there may be a corresponding stamp duty liability and there may be capital gains tax implications for the initial owner as well as valuation fees at each transaction date.

Remember the Sole Purpose Test

In the zest for undertaking any strategy I always remind clients about the reason for undertaking any investment. Your aim should be to provide for a better retirement. If that is not the core purpose then you are breaching the sole purpose test and should reconsider the whole strategy. Also you must review or amend your fund’s investment strategy to ensure this investment falsl within it’s guidelines..

Important information (emphasised for use of this material):

The information in this article is provided for illustrative purposes only and does not take into consideration your personal circumstances. You are encouraged to seek financial, tax and legal advice suitable to your circumstances to avoid a decision that is not appropriate. Any reference to your actual circumstances is coincidental. Magnitude, Verante and its representatives receive fees from the provision of financial advice.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557

Image courtesy of hywards at FreeDigitalPhotos.net

8 Comments

by SMSF Coach - Liam Shorte on October 3, 2014 • Permalink

Posted in Investment Strategies, Property

Posted by SMSF Coach - Liam Shorte on October 3, 2014

https://smsfcoach.com.au/2014/10/03/smsf-using-an-unrelated-unit-trust-for-property-development/

SMSF Coaching: The Complete ATO SMSF Educational Video Collection

The Australian Tax Office (ATO) has launched a great selection of short educational videos dealing on all matters to do with self-managed superannuation funds (SMSFs). The short animated videos are only 2 -3 minutes each and cover topical subjects as well as key responsibilities for SMSF trustees in an easy to understand format.

The headline for each video contains a link that will take you to the appropriate Tax Office web page, which also publishes the full transcript of the contents of each video if you prefer reading.

Thinking about an SMSF

Why do I want an SMSF

Look at these myths and facts about SMSFs before deciding if you want an SMS

What’s involved with an SMSF

Before you decide if an SMSF is right for you, you should have an idea of what’s really involved.

SMSF – Setting up your SMSF
Take a look at the key steps in setting up your SMSF.

You can’t do it all yourself,

This video deals with how SMSFs (or as they used to be known, “do-it-yourself” or DIY super funds) are not really very DIY at all. The video introduces the different people an SMSF trustee will have to work with, or who can help trustees meet their obligations.

SMSF trustees – individual or corporate
Deciding on the type of SMSF trustee is important. This video will help explain the difference between individual trustees and corporate trustees.

SMSF – trustee declaration
A trustee declaration must be completed and kept on file by SMSF trustees. Find out more about it here.

Planning for the unexpected

Life is full of surprises. Plan ahead to help your SMSF deal with unexpected issues such as a relationship breakdown, incapacity or an untimely death.

https://youtu.be/CGwMbVsxxuc

Investments

SMSF sole purpose test

Video currently being updated by ATO
Learn more about the sole purpose test and what it means to your SMSF investments.

Your SMSF needs to meet the sole purpose test to be eligible for the tax concessions normally available to super funds. This means your fund needs to be maintained for the sole purpose of providing retirement benefits to your members, or to their dependants if a member dies before retirement.

Contravening the sole purpose test is very serious. In addition to the fund losing its concessional tax treatment, trustees could face civil and criminal penalties.

It’s likely your fund will not meet the sole purpose test if you or anyone else, directly or indirectly, obtains a financial benefit when making investment decisions and arrangements (other than increasing the return to your fund).

When investing in collectables such as art or wine, you need to make sure that SMSF members don’t have use of, or access to, the assets of the SMSF.

Your fund fails the sole purpose test if it provides a pre-retirement benefit to someone – for example, personal use of a fund asset.

Super contributions cap

Video currently being updated by ATO

What are super contribution caps? Learn about the types and limits on super contributions and SMSF trustee responsibilities.

Click here for written version while video unavailable

SMSF investment strategy
Your SMSF’s investment strategy is the framework that guides your investment decisions. It pays to have a good investment strategy that is regularly reviewed. Learn what factors your SMSF’s investment strategy needs to take into account.

SMSF Borrowing and limited recourse borrowing arrangements

Can your SMSF borrow to buy an asset? Watch these case studies to learn more

SMSF – In-house assets

What are in-house assets and can your SMSF invest in them?

SMSF – Planning for retirement

Plan ahead before making super benefit payments to a member. Make sure your fund has enough cash to make minimum annual payments

SMSF annual obligations

Make sure you meet all your SMSF obligations before lodging your fund’s annual return.

Record keeping in your SMSF

SMSF paying an income stream
Learn about what is involved in paying an income stream to a member.

Being updated by ATO

Paying an income stream part 2

Watch this video to learn how tax applies when you pay benefits from your SMSF.

Being updated by ATO

SMSF – arm’s length
All SMSF transactions must be on an arm’s-length basis. This means that fund assets must be bought and sold at market value, and income on the assets should show a true market rate of return.

SMSF – Separation of assets

SMSF assets must be kept separate from your personal or business assets. Learn more about how to protect your fund’s assets.

SMSF Loans and early access

Here the ATO have focused on SMSF loans and early access, with the perceived problem being that people mistakenly think that an SMSF can provide them with a loan, or that they can access their super savings whenever they like.