Stay informed,seek advice and adjust strategies accordingly!
From September 20, 2025, several changes will impact the Australian Age Pension. The four key changes are:
an increase in deeming rates,
a boost to the maximum Age Pension amount,
a rise in the cut-off limits for part pensions, and
an increase in the income limit for the Commonwealth Seniors Health Card.
1. Deeming Rate Changes 📈
The most significant change is the 50 basis point increase to the deeming rates used in the income means test. Deeming rates are a notional or “assumed” income rate applied to your financial assets. They’re a simple way for the government to calculate your income without needing to track your actual investment returns.
Why are they changing? Deeming rates have been frozen for the past five years as part of the COVID-19 response. This increase is an adjustment to reflect current market conditions more accurately, even though interest rates may be declining.
What are the new rates? From September 20, 2025, the low deeming rate will increase from 0.25% to 0.75%. The standard (or higher) deeming rate will increase from 2.25% to 2.75%.
How do the rates apply? The low rate applies to the first $64,200 of financial assets for a single pensioner and the first $106,300 for a pensioner couple. The higher rate applies to any amount over those thresholds.
What’s the effect? An increase in the deeming rate means more income is deemed to have been earned from your financial assets, which will generally lead to a reduction in your Age Pension entitlement. For every $1,000 of financial assets, your fortnightly pension could decrease by $2.50.
2. Age Pension Increase 💰
The maximum rate of the Age Pension will increase, providing a boost to all pensioners.
The maximum fortnightly pension for a single pensioner will increase by $29.70, bringing the new maximum to $1,178.70.
The maximum fortnightly pension for a couple will increase by $44.80, bringing the new combined couples maximum to $1,777.00 ($888.50 each)
These increases are automatic and apply from September 20, 2025.
3. Part Pension Cut-off Limits Rise ⬆️
The maximum amount of income you can earn before your part pension is cut off will also increase. This is a direct result of the rise in the maximum Age Pension amount.
The new fortnightly cut-off limit for a single pensioner will be $2,575.40, an increase of $59.40.
The new fortnightly cut-off limit for a couple will be $3,934.00, an increase of $89.60.
TIP: If you were previously ineligible for an Age Pension due to the income means test but were close to the old cut-off limit, you should reconsider applying.
4. Commonwealth Seniors Health Card (CSHC) Income Limit Increase ✅
The income limits for the Commonwealth Seniors Health Card (CSHC) will also rise. The CSHC is a valuable card for self-funded retirees who are not on a Centrelink income support payment, providing access to cheaper medicines and other concessions.
The annual income limit for a single person will increase by $2,080 to $101,105.
The annual income limit for a couple (combined) will increase by $3,328 to $161,768.
TIP: If your income was previously just above the old limit, you should consider applying for the CSHC. This card doesn’t have an assets test, making it a good option for those disqualified from the Age Pension by their assets.
Warning before you jump into implementation of any strategy without checking your personal circumstances.
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.
Please consider passing on this article to family or friends. Pay it forward!
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking into account 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.
When Andrew Findlay passed away, he left behind more than just an estate—he left a ticking time bomb of legal uncertainty. An updated will, detailing his clear wishes, was sitting on his computer. There was just one problem: he had never signed it.
This oversight sparked a fierce court battle between his former partner and his cousin on behalf of his children, a battle that recently culminated in a significant ruling from the NSW Court of Appeal. The case of Kemp v Findlay serves as a powerful cautionary tale for anyone advising clients on estate planning. It highlights the very real dangers of informal documents and the costly, emotional litigation that can follow. While this case deals with a will, there are countless cases that involve incomplete Binding Death Benefit Nominations in an SMSF and the Succession Act 2006 (or equivalent in your state) may not help as SMSFs rely on the SIS Act and Trust Deed . Also a nomination from an SMSF to a member’s Legal Personal Representative may then lead to a estate challenge.
So, what are the key takeaways? Let’s break it down.
A Quick Case Summary
The 2015 Will: Mr. Findlay had a formal will leaving his estate to his then-partner, Elizabeth Kemp.
The 2019 Document: After separating from Ms. Kemp in 2019, he drafted a new will on his computer. This document left his estate to his three children and appointed his cousin, David Findlay, as executor. Crucially, it was never printed, signed, or witnessed.
The Dispute: Upon Mr. Findlay’s death in 2023, both Ms. Kemp (relying on the 2015 Will) and David Findlay (relying on the 2019 document) applied for probate.
The Outcome: The Court applied Section 8 of the Succession Act 2006 (NSW), which allows informal documents to be treated as a will if the Court is satisfied the deceased intended it to be their final will. The Court found the 2019 document did reflect Mr. Findlay’s clear intentions and admitted it to probate. Ms. Kemp was also ordered to pay 75% of the children’s legal costs.
🔑 5 Key Lessons for Advisers and SMSF Trustees from Kemp v Findlay
1. Never Rely on Section 8 as a Planning Tool
The big takeaway is not that “unsigned wills are fine.” The takeaway is that Section 8 is a remedial, last-resort solution, not a substitute for proper execution. While the court can validate informal documents, the process is uncertain, expensive, and hinges on convincing a judge of the deceased’s intention. Advise clients that proper signing and witnessing is the only way to guarantee certainty and avoid a fight.
SMSFs – While Section 8 does not apply to BDBNs directly, a BDBN can be subject to a family provision claim under the Succession Act 2006, where the court can, in certain circumstances, declare a death benefit as part of a notional estate to meet court-ordered provisions. The distribution of a superannuation death benefit is primarily determined by the rules of the superannuation fund and the Superannuation Industry (Supervision) Act 1993 (SIS Act). Section 59(1A) of the SISA, in conjunction with Regulation 6.17A of the SIS Regulations, sets out the strict technical requirements for a BDBN to be valid.
As many SMSF members direct their Superannuation to be dealt with via their Wills, this means there is more room for error as the Binding Death Nomination and/or the Will could be challenged.
2. Document Everything & Communicate Clearly
Mr. Findlay’s failure to clearly communicate his final intentions to his solicitor and family directly fuelled the dispute. Advise your clients to:
Formally instruct their solicitor immediately after a major life event (e.g., separation, marriage, birth of a child).
Clearly communicate their wishes to their intended executor and key beneficiaries to prevent surprise and doubt.
With a Binding Death Benefit Nomination (BDBN) the member should:
Firstly, decide if a BDBN is the preferred option or do you deliberately wish to leave the decision and flexibility to the remaining trustees of the fund?
For pension accounts you may opt to use Reversionary Pensions for more certainty.
Complete the Binding Death Benefit Nomination (Preferably a Non-Lapsing BDBN) and sign and have it witnessed.
Then submit the signed form to the trustees of the SMSF and have the trustees minute the receipt and acceptance of the BDBN.
Also ensure that the SMSF Accountant/Administrator is provided a copy and updates the SMSF software they use to display that nomination in the annual financials (in the Member Statements) so that it can trigger a reminder to review them.
3. Include Regular Estate Plan Reviews
This case is a textbook example of why wills and BDBNs must be updated. A separation is one of the most critical times to review an estate plan. Proactively schedule reviews in your annual planning review with clients, especially after major life events to ensure their documents reflect their current circumstances and relationships.
For SMSFs: Review the current nominations and see if strategies like withdrawal and recontributions now mean that funds can be directly left to adult children or others because the taxable component has been reduced. You might leave a Mixed-Tax Components pension to the spouse but allocate Tax-Free Component pensions to others directly or via your estate.
4. Warn Clients Against “DIY” Drafts (Read the Deed for SMSFs)
The existence of an unsigned, unofficial document was the catalyst for years of litigation. Counsel your clients strongly against:
Creating draft wills or notes without immediate formalisation.
Storing important documents haphazardly. An unsigned draft can be misinterpreted as a final will, creating confusion and conflict.
For BDBN’s be careful with templates and if you are using one provided by your Trust Deed provider make sure it meets your needs or have your lawyer draft a more personalised one up for you.
5. Highlight the Staggering Cost of Litigation
The court’s costs order against Ms. Kemp underscores a harsh reality: estate litigation can quickly erode the value of the estate for everyone involved. Use this case to show clients the tangible financial risk of unclear planning. Comprehensive, professionally-executed estate planning and SMSF documents are an investment in protecting their legacy and their family’s future.
The Bottom Line
Kemp v Findlay is a stark reminder that the rules of formal execution exist for a reason: to provide clarity and prevent disputes. While the court’s flexible approach ensured Mr. Findlay’s intentions were ultimately honoured, it came at a significant financial and emotional cost to his family.
For SMSFs: The Trust Deed is often the crucial source outlining how formal execution of a BDBN is to be made. Take the time to read it carefully and don’t assume it complies with the SIS Act either.
As advisers, our role is to steer clients away from this precarious path. By emphasising proper execution, clear communication, and regular reviews, we can help them ensure their wishes are carried out smoothly, preserving their assets and their family’s harmony.
Have you reviewed your wills and BDBNs recently? This case is the perfect conversation starter for SMSF Trustees to encourage proactive estate planning with your partner or other SMSF member’s. Also a key issue for professionals to raise with their clients and possibly refer to an estate planning specialist.
Stay informed,seek advice and adjust strategies accordingly!
Warning before you jump into implementation of any strategy without checking your personal circumstances.
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.
Please consider passing on this article to family or friends. Pay it forward!
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking into account 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.
Failure to pay minimum pensions just got a lot more costly
You may need to ensure your accountant, financial planner and your fellow trustees is up to date with the latest rule changes affecting the start and ending of an SMSF pension which mostly affect those that fail to take the minimum pension amounts in a financial year.
SMSF trustees, accountants and financial advisers should take note of significant changes to pension commencement rules that came into effect on 1 July 2025. These changes impact how pensions are treated for tax purposes if a minimum pension is missed and could have serious implications for retirement planning strategies.
What’s Changed?
The Australian Taxation Office (ATO) has revised Tax Ruling 2013/5 (TR 2013/5), which governs when a pension starts and ceases.
Previously, the rules provided some flexibility with minimal adverse consequences. However, the ATO has now taken a stricter stance, which may have major implications not only for the current and the previous year’s, tax position but also on strategies designed to quarantine pensions with high tax free components from ones with mixed components.
Key Implications of the Changes
1. Pension Failures Confirmed to Take Effect at the Start of the Financial Year
Under the new rules, if a pension fails to pay the minimum pension, it is treated as ceasing at the beginning of the financial year rather than the end. This means:
The pension account converts to an accumulation account immediately at 1 July of the relevant tax year.
If an existing accumulation balance exists, the two amounts will merge for tax purposes, potentially disrupting carefully planned tax strategies. These strategies often revolve around blended families.
2. Transfer Balance Cap Complications
If a pension fails at the start of the year, the transfer balance cap debit must be applied at the 30 June in the year the pension ceased. Ref: ITAA97 Section 294-80(1) item 6. NOTE: In the earlier version of this article we wrongly advised it was a credit to the TBA and immediate when in fact it is a debit and occurs 30 June at end of financial year the pension ceased. Thank you to Mark Ellen of Accurium for picking up on our error.
The pension can only restart once the member rectifies any errors (e.g., failing to meet minimum pension draw down requirements), which may take 13 to 22 months from the date the pension has to be commuted under the enforced rules. Why? Because for many people the first they realise that they have not paid the full minimum pension payment is when their accountant or administrator drafts the financial which is often 9 months after the end of the financial year. e.g., 20 June 2025 financials not completed until March 2026 and that’s when mistake found. But then the Pension is deemed to have been commuted on 01 July 2024!
During this gap, market growth could lock a portion of the funds out of pension phase due to the Transfer Balance Cap issues, limiting tax efficiency and spoiling estate planning strategies.
3. Investment Market Risks
If markets rise while a pension is inactive, the increased account balance may exceed the available transfer balance cap. This means:
Some funds could remain stuck in accumulation phase, missing out on tax-free pension earnings.
Members may not be able to restore their pension to its original value, reducing retirement income benefits.
What Should SMSF Trustees, Accountants and Advisers Do?
Given these changes, it’s crucial to: ✔ Review pension compliance to avoid accidental failures. Request a Minimum Pensions Report from your Accountant/Adviser.
✔ Do not just rely on the last 30 June Financials as you need to ensure you include any new pensions that began in the current financial year
✔ Monitor minimum drawdowns before 30 June each year to prevent unintended cessations. Have someone cross check the payments for you.
✔ Beware that Market Linked and Term Allocated Income Streams have different minimum drawdowns
✔ Plan for tax implications if pensions lapse and merge with accumulation accounts. ✔ Consider timing and market risks when restarting pensions.
Final Thoughts
The ATO’s stricter interpretation of pension rules means SMSF trustees, accountants and advisers must be more vigilant than ever to avoid costly tax, estate planning and transfer balance cap issues. Proactive planning can help mitigate risks and ensure retirees maximise their superannuation benefits.
Stay informed,seek advice and adjust strategies accordingly!
Warning before you jump into implementation of any strategy without checking your personal circumstances.
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.
Please consider passing on this article to family or friends. Pay it forward!
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking into account 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.
Here we go again. We have only a short time left to the end of the 2025 financial year to get our SMSF in order and ensure we are making the most of the strategies available to us. Here is a checklist of the most important issues that you should address with your advisers before the year-end.
It’s been another busy year and I have not had as much time to put this together so if you find an error or have a strategy to add then please let me know. Links were working at the time of writing.
Warning before we begin,
You need to check your personal super balances, contribution limits, caps and tax position before implementing any of these strategies as your own particular circumstances may warrant alternative options.
It’s all about timing
If you are making a contribution, the funds must hit the super fund’s bank account by the close of business on 30 June. Some clearing houses hold on to money for up to 14 days before presenting them to the super fund. Some Retail and Industry funds are asking for funds at least to be contributed by the 18th-20th June!
In addition, pension payments must leave the account by the close of business unless paid by cheque in which case the cheques must be presented within a few days of the EOFY. There must have been sufficient funds in the bank account to support the payment of the cheques on 30 June but a cheque should only be your very last-minute option! You can also ask your adviser or administrator about a Promissory Note if time is against you but funds are ready.
So, for SMSFs get your payments in the fund by Monday 23rd June or earlier to be sure (yes I’m Irish) as the 30th is a Monday this year. This is even more important if using a clearing house for contributions.
Review your Concessional Contributions (CC) options including Unused Carry Forward Limits
The government changed the contribution cap from 1 July 2024 to $30,000 and remember that you have the ability to make concessional contributions up to age 67 even if not working and to 75 if you meet the Work Test . This is important for those who have retired but may have sold a property or shares and triggered a large capital gain during the year. Do not not exceed your limit unless you have Unused Carried Forward Concessional limits and Total Super Balance under $500K as of last 01 July 2024.
Check employer contributions on normal pay and bonuses, salary sacrifice and premiums for insurance in super paid by employers, as they are all included in the limit.
This current 5 year period for Unused Concessional Contributions applies from 2019-20 so effectively, this means an individual can make up to $162,500 of CCs in a single financial year by utilising unapplied unused CC caps since 1 July 2019 and this years limit. Guidance on how to check your Unused Carried Forward Concessional limits via MyGov records available here. ..
This is the last year to use the 2019/20 unused Carried Forward Concessional Caps as they fall outside the 5 year rolling period from 30 June 2025.
Beware that once your Income including Salary, Investment income, Employer SGC, Personal Concessional Contributions goes over $250,000 you will be subject to Div 293 Tax
From 1 July 2025 the Super Guarantee also rises to 12%. Re-evaluate your contribution plans for 2025-26
Review plans for Non-Concessional Contributions (NCC) options
From 1 July 2022 the NCC contribution rules changed and currently the age limit of 75 (28 days after the end of the month your turn 75) applies to NCCs (that is, from after-tax money) without meeting the work test. Check out ATO superannuation contribution guidance.
NCCs are an opportunity to move investments into super and out of a personal, company or trust names.
For those couples where one has a higher balance that may be affected by the proposed Division 296 Tax, it is important to review you option to even-up spouse balances and maximise super in pension phase up to age 75. For couples where one spouse has exhausted their transfer balance cap and has excess amounts in accumulation or above $3m, they are able to withdraw from the higher balance and recontribute to the other spouse who has transfer balance cap space available to commence a retirement phase income stream. This can increase the tax efficiency of the couple’s retirement assets as more of their savings are in the tax-free pension phase environment and may help minimise Div 296 Tax.
If you have considerable additional funds to add to contribution then maybe contribute up to $120,000 before June 30 and then you may be able to contribute up to $360,000 after 1 July to maximise contributions.
From 1 July 2024 the Non-Concessional Cap rose to $120,000 per year or $360,000 under the 3 Year Bring Forward Rule.
RECONTRIBUTION STRATEGIES
Consider doing the drawdown before 30 June 2025 so that your Transfer Balance Cap and Total Super Balance on 1 July 2025 gets some additional space with the rise in the TBAR and TSB full limits to $1.2m. Note that if you had and existing pension(s) at 30 June 2024 your current limit will be anywhere between $1.6m and $2M after 1 July (Frustrating for Advisers!)
You can also make your tax components more tax free by using recontribution strategies. SMSF members can cash out their existing super and re-contribute (subject to their contribution caps) them back in to the fund to help reduce tax payable from any super death benefits left to non-tax dependants. From 1 July 2022 you can do this until they turn age 75 (contribution to be made with 28 days after the end of the month you turn 75).
Downsizer contributions
If you have sold your home in the last year and you are over 55, consider eligibility for downsizer contributions of up to $300,000 for each member.
From 1 jan 2023, the eligibility age to make downsizer contributions into superannuation was reduced from 60 to 55 years of age. All other eligibility criteria remain unchanged, allowing individuals to make a one-off, post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. These contributions will continue not to count towards non-concessional contribution caps.
The $300,000 downsizer limit (or $600,000 for a couple) and the $360,000 bring forward NCC cap allow up to $660,000 in one year contributions for a single person and $1,320,000 for a couple subject to their contributions caps.
PLEASE BE CAREFUL AS THE DOWNSIZER IS A ONCE ONLY STRATEGY AND IF YOU WOULD BENEFIT MORE IN OLDER YEARS USING THE STRATEGY THEN MAXIMISE NCCs FIRST.
Calculate co-contributions
Check your eligibility for the co-contribution, it’s a good way to boost your super. The amounts differ based on your income and personal super contributions, so use the super co-contribution calculator.
Examine spouse contributions
If your spouse has assessable income plus reportable fringe benefits totalling less than $37,000 for the full $540 tax offset or up to $40,000 for a partial offset, then consider making a spouse contribution. Check out the ATO guidance here.
You can implement this strategy up to age 75 as a Spouse Contribution is treated as a NCC in their account (and therefore counted towards your spouse’s NCC cap).
Give notice of intent to claim a deduction for contributions
A notice must be made before you commence the pension. Many people like to start pension in June and avoid having to take a minimum pension in that financial year but make sure you have claimed your tax deduction first. The same notice requirement applies if you plan to take a lump sum withdrawal from your fund.
Consider contributions splitting to your spouse
Consider splitting contributions with your spouse, especially if:
your family has one main income earner with a substantially higher balance or
if there is an age difference where you can get funds into pension phase earlier or
if you can improve your eligibility for concession cards or age pension by retaining funds in superannuation in the younger spouse’s name.
This is a simple no-cost strategy I recommend for everyone here.
Remember, any spouse contribution is counted towards your spouse’s NCC cap.
Act early on off-market share transfers
If you want to move any personal shareholdings into super (as a contribution) you should act early. The contract is only valid once the broker receives a fully-valid transfer form so timing in June is critical. There are likely to be brokerage costs involved.
Review options on pension payments
Ensure you take the standard minimum pension at your age-based rate. If a pension member has already taken pension payments of equal to or greater than the the minimum amount, they are not required to take any further pension payments before 30 June 2025. For transition to retirement pensions, ensure you have not taken more than 10% of your opening account balance this financial year.
Minimum annual payments for pensions for 2024/25 financial year onwards.
Age at 1 July
2024 – Standard Minimum % withdrawal
Under 65
4%
65–74
5%
75–79
6%
80–84
7%
85–89
9%
90–94
11%
95 or older
14%
If a pension member has already taken a minimum pension for the year, they cannot change the payment but they can get organised for 2025/26. No, you can’t sneak a payment back into the SMSF bank account unless you treat to as a new contribution!
If you need more than the minimum pension payments for living expenses then it may be a good strategy for amounts above the minimum to be treated as either:
a partial lump commutation sum rather than as a pension payment. This would create a debit against the pension member’s Transfer Balance Account (TBA). Please discuss this with your accountant and adviser first as all funds now have to report these quarterly to the ATO.
for those with both pension and accumulation accounts, take the excess as a lump sum from the accumulation account to preserve as much in tax-exempt pension phase as possible.
Check your documents on reversionary pensions
A reversionary pension to your spouse will provide them with up to 12 months to get their financial affairs organised before making a final decision on how to manage your death benefit. In NSW this may avoid issues with Binding Death Nominations and the Notional Estate (see Benz v Armstrong; Benz v Armstrong; Benz v Armstrong – 2022 NSWSC)
You should review your pension documentation and check if you have nominated a reversionary pension in the context of your family situation. This is especially important with blended families and children from previous marriages that may contest your current spouse’s rights to your assets. Also consider reversionary pensions for dependent disabled children.
The reversionary pension has become more important with the application of the $1.6-$2m million Transfer Balance Cap (TBC) limit to pension phase.
Tip:If you have opted for a nomination instead then check the existing Binding Death Benefit Nominations (many expire after 3 years in older deeds) and look to upgrade to a Non-Lapsing Binding Death Benefit Nomination. Check your Deed allows for this first.
Review Capital Gains Tax on each investment
Review any capital gains made during the year and over the term you have held the asset and consider disposing of investments with unrealised losses to offset the gains made. If in pension phase, then consider triggering some capital gains regularly to avoid building up an unrealised gain that may be at risk to legislation changes.
Collate records of all asset movements and decisions
Ensure all the fund’s activities have been appropriately documented with minutes, and that all copies of all statements, valuations and schedules are on file for your accountant, administrator and auditor.
The ATO has now beefed up its requirements for what needs to be detailed in the SMSF Investment Strategy so review your investment strategy and ensure all investments have been made in accordance with it and the SMSF Trust Deed, including insurances for members. See my article on this subject here.
Arrange market valuations (beware of the proposed Div 296 Tax Sting)
Regulations now require assets to be valued at market value each year, including property and collectibles. For more information refer to ATO’s publication Valuation guidelines for SMSFs.
On collectibles, play by the new rules that came into place on 1 July 2016 or remove collectibles from your SMSF.
Tip:The ATO is targeting audit compliance this year on Property Valuations in SMSFs as we approach the implementation of the proposed Division 296 Tax from 1 July 2025.
Tip 2: It would be better to ensure your properties truly match the market value on 1 July 2025 than to have a large rise in value recorded in future years that will trigger higher Div 296 Tax.
Check the ownership of all investments.
Make sure the assets of the fund are held in the name of the trustees (including a corporate trustee) on behalf of the fund. Carefully check any online accounts and ensure all SMSF assets are separate from your other assets.
We recommend a corporate trustee to all clients. This might be a good time to change, as explained in this article on Why SMSFs should have a corporate trustee. If you have previously moved to a Corporate Trustee ten double check all accounts/investments were changed to the name of this trustee.
Review Estate Planning and loss of mental capacity strategies
Review any Binding Death Benefit Nominations (BDBN) to ensure they are valid, consider Non-Lapsing Nominations and check the wording matches that required by the Trust Deed. Ensure it still accords with your wishes.
Also ensure you have appropriate Enduring Powers of Attorney (EPOA) in place to allow someone to step into your place as trustee in the event of illness, mental incapacity or death.
Check your Trust Deed and the details of the rules. For example, did you know you cannot leave money to stepchildren via a BDBN if their birth-parent has pre-deceased you?
Review any SMSF loan arrangements
Have you provided special terms (low or no interest rates, capitalisation of interest etc) on a related party loan? Review your loan agreement and see if you need to amend your loan.
Have you made all the payments on your internal or third-party loans, have you looked at options on prepaying interest or fixing the rates while low?
Have you made sure all payments in regards to Limited Recourse Borrowing Arrangements (LRBA) for the year were made through the SMSF trustee? If you bought a property using borrowing, has the Holding Trust been stamped by your state’s Office of State Revenue? For Related Party LRBA’s the Variable interest rate is currently 9.35% (will be updated for 2026FY in late May)
Ensure SuperStream obligations are met
For super funds that receive employer contributions, the ATO is gradually introducing SuperStream, a system whereby super contributions data is made electronically.
All funds should be able to receive contributions electronically and you should obtain an Electronic Service Address (ESA) to receive contribution information.
All funds should be able to receive contributions electronically and you should obtain an Electronic Service Address (ESA) to receive contribution information.
If you change jobs your new employers may ask SMSF members for their ESA, ABN and bank account details.
Ensure you are meeting your Quarterly TBAR Reporting deadlines
From 1 July 2023 you need to be checking in with your accountant/administrator Quarterly
All SMSFs are required to report quarterly, even if the members total super balance is less than $1 million. This means you must report the event that affects the members transfer balance within 28 days after the end of the quarter in which the event occurs.
Example: All unreported events that occurred between 1 April and 30 June 2024 must be reported by 28 October 2023. This means you cannot report at the same time as your SMSF annual return (SAR) for the 2023-24 income year. More info here
ASIC fee increased from 1 July 2023
ASIC is increasing fees by $2 for the annual review of a special purpose SMSF trustee company $63 to $65. The Government is moving gradually to a “user pays” model so expect increases to accelerate in future years. Before 30 June, for $452 you can pre-pay the company fees for 10 years and lock in current prices with a decent discount. There is a remittance form linked here.
On 6 December 2024, regulations were released to allow the commutation of legacy pensions for a limited 5-year period. There is considerable additional detail in this feature so consult an adviser if you are affected, especially to ensure you do not lose other entitlements such as the age pension.
The regulations allow a five-year timeframe for lifetime or life expectancy pensions and MLIS to be commuted.
You have the following options:
▪ withdraw the funds from superannuation (all these clients have previously met a condition of release) ▪ rollover the amount to accumulation phase, or
▪ use the funds to commence an account based pension (if transfer balance cap space is available).
Under this measure, if a lifetime or life expectancy pension is commuted, any reserve supporting that income stream is also added to the commutation value. However, no amount from the reserve is counted tow
HAS NOT PASSED: Relaxing residency requirements for SMSFs– Labor Government has failed to move on this issue.
SMSFs and small APRA funds still do not have relaxed residency requirements through the extension of the central management and control test safe harbour from two to five years as the LNP government failed to pass it before the last election and Labor have put it on the backburner. The active member test was also to be removed, allowing members who are temporarily absent to continue to contribute to their SMSF.
Improving the Home Equity Access Scheme – Social security benefits for you or your mum and/or dad
The Home Equity Access Scheme formerly called The Pension Loan Scheme is now up and running. The Government introduced a No Negative Equity Guarantee for HEAS loans and allow people access to a capped advance lump sum payment.
No negative equity guarantee – Borrowers under the HEAS, or their estate, will not owe more than the market value of their property, in the rare circumstances where their accrued HEAS debt exceeds their property value. This brings the HEAS in line with private sector reverse mortgages.
Immediate access to lump sums under the HEAS – Eligible people will be able to access up to two lump sum advances in any 12-month period, up to a total value of 50% of the maximum annual rate of Age Pension (currently maximums are $14,937 for singles and $22,518.60 for couples).
Careful if replacing Income Protection or TPD Insurance (Total Permanent Disability)
Have you reviewed your insurances inside and outside of super? Don’t forget to check your current TPD policies owned by the fund with an own occupation definition as the rules changed a few years ago. So be careful about replacing an existing policy as you may not be able to obtain this same cover inside super again.
There were major changes to Income Protection insurance in 2021 so be very careful about switching insurer unless costs have blown out as new cover is often vastly inferior to current covers. Read more here before switching cover.
Large one-off Personal income or gain – Bring forward Concessional Contributions
For those who may have a large taxable income this year (large bonus or property sale) and are expecting a lower taxable next year you should consider a contribution allocation strategy to maximise deductions for the current financial year by bringing some or all of your 2026FY limit forward to this year. This strategy is also known as a “Contributions Reserving” strategy but the ATO are not fans of Reserves so best to avoid that wording! Just call is an Allocated Contributions Holding Account. See my article on this strategy here.
Providing Proof of Crypto Currency Holdings as of 30 June.
You should be using an exchange that is set up for SMSF accounts. They should provide a Tax Summary but it may cost extra. Some exchanges are now partnering with Specialised services that are experts in Australian to offer tax reports that meet Australian Audit requirements.
The auditor will also want to verify holdings by checking:
An exchange account is set up in the name of the fund
Wallet purchased using funds from the SMSFs cash account
Cold Wallet Audit management extra step: For annual audit purposes, take a screenshot of the assets held in your Ledger wallet (e.g. via the Ledger ‘Live’ App or similar) on 30 June 2023 and also on the day you submit your paperwork and email this to the tax agent at tax time.
29. NALE/NALI applies in the 2025 year (in the sense the ATO are going to enforce it) – please ensure that if members perform services for their SMSF which is their ‘day job’ (ie. Accounting work for Accountants, Building and repair work for tradies, etc) that these are charged at the appropriate commercial rate that they charge their clients. A good article explaining this in more detail here from ASF Audits
Don’t leave it until after 30 June, review your Self Managed Super Fund now and seek advice if in doubt about any matter.
Some for 1 July 2025
Check your Salary Sacrifice or Concessional Contributions as SG rises to 12%
The superannuation guarantee (SG) rate will increase from 11% to 11.5% on 1 July 2024. You’ll need to use the new rate to calculate how much of your $30,000 concessional cap will be available to salary sacrifice or make personal deductible contributions.
Div 296 Tax – valuations of all assets on 1 July 2025 will be crucial.
For those with balances over or close to $3m and used to using low end of property valuations for your asset value, you may need to rethink this strategy as you do not want a large increase in value in future years or it will be caught under the “unrealised gains” sting in the proposed Division 296 Tax.
Warning before you jump into implementation of any strategy without checking your personal circumstances.
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.
Please consider passing on this article to family or friends. Pay it forward!
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking into account 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.
Before ever making Non-Concessional Contributions to your Superannuation of engaging in a re-contribution strategy you always need to check your personal Total Super Balance Cap.
The December 2024 Consumer Price Index (CPI) data has confirmed that the superannuation general transfer balance cap will rise by $100,000, to $2.0 million for the 2025–2026 income year. For SMSFs please remember that each member has their own Transfer Balance Cap (TBC). This increase marks the latest adjustment to the cap, which was first introduced in 2017. The transfer balance cap is a lifetime limit on the amount of superannuation that can be transferred into one or more retirement phase income streams (pension accounts) within your SMSF and/or across industry and retail funds, where earnings on superannuation are currently tax-free. Additionally, income or withdrawals after the age of 60 are generally tax-free. The cap was introduced to promote fairness in the distribution of superannuation tax concessions and to ensure the long-term sustainability of the superannuation system. While there are some flaws, it has been accepted as a fair system.
Unlike other superannuation caps, such as contribution caps, the general transfer balance cap and total super balance caps are adjusted annually based on the CPI, in $100,000 increments, rather than being indexed to Average Weekly Ordinary Time Earnings (AWOTE). The cap has increased progressively: from $1.6 million from 2017 to 2021, to $1.7 million from 2021 to 2023, to $1.9 million from 2023 to 2024, and will rise to $2.0 million for the 2025–2026 year. Please note the Concessional Contribution cap ($30K) and Non-Concessional Contribution Cap ($120K) are not increasing.
Personal Transfer Balance Cap (the thorn in the side if advisers!)
The personal transfer balance cap is specific to each individual when they first start a retirement phase income stream. Your personal cap will match the general transfer balance cap at the time. Therefore, if you start your retirement phase income stream on or after 1 July 2025, your personal transfer balance cap will be set at $2.0 million.
If you began your income stream before 1 July 2025, your personal transfer balance cap would range anywhere from $1.6 million to $1.9 million, depending on the specific year you started your first pension. If you didn’t use the full amount of your personal transfer balance cap at the time, a proportional increase may apply to your personal transfer balance cap on 1 July 2025. So don’t be surprised to be told you have a TBC if $1,713,325 as it can get that very personalised!
What if I contribute too much?
If you exceed your personal transfer balance cap, you must remove the excess from your income stream and either take it in cash or transfer it back into your superannuation account. An excess transfer balance tax would then be payable. The ATO will notify you if you’ve exceeded your cap.
Other Changes Related to Indexation
The indexation of the transfer balance cap will have a flow-on effect on other superannuation measures linked to this cap, including the total superannuation balance test. Starting from 1 July 2025, the total superannuation balance test will increase to $2 million. This balance determines eligibility for making after-tax non-concessional contributions and using the bring-forward rule.
If your total superannuation balance is below $2 million as of 30 June 2025, you’ll be able to make non-concessional contributions starting 1 July 2025, as long as you are under age 75. Additionally, the bring-forward rule will apply against the higher cap.
For those under 75 at 1 July 2025, and if you haven’t triggered the bring-forward rule in the previous financial years, you may contribute up to $360,000. Where an individual’s balance is close to $2 million, they can only make a contribution or use the bring forward to take their balance to $2 million but not beyond.
TSB on 30 June of prior financial year
Contribution and bring-forward available
Less than $1.76m
3 years ($360,000)
$1.76m to < $1.88m
2 years ($240,000)
$1.88m to < $12m
1 year ($120,000, no bring-forward available)
$2m and above
Nil
Changes to Government Co-Contribution and Spouse Contributions Tax Offset
Eligibility for a government co-contribution and entitlement to the spouse contributions tax offset will also be affected by the total superannuation balance test, which will be $2 million from 1 July 2025.
Opportunity
The increase in the superannuation general transfer balance cap (TBC) to $2.0 million for the 2025–2026 income year presents significant opportunities for individuals and SMSF Trustees looking to maximize their retirement savings. As the transfer balance cap (TBC) affects various aspects of superannuation, such as total superannuation balance (TSB) tests and eligibility for non-concessional contributions, it is essential to review your superannuation strategy in light of these changes. Working with an SMSF Specialist Advisor can help you optimize your superannuation contributions to your SMSF, plan for retirement, and ensure that you stay compliant with the latest regulations.
Warning before you jump into implementation of any strategy without checking your personal circumstancesand the specifics of the property you are considering.
Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then, why not contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one-on-one consultation (after 1 July 2025 due to our waiting list). Just click the Schedule Now button up on the left to find the appointment options.
Please consider passing on this article to family or friends. Pay it forward!
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking into account 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.
The decision to purchase property through an SMSF requires careful consideration. This is perhaps why, in September 2024, the Australian Tax Office (ATO) reported that of the total estimated value of non-residential property assets held by the 621,809 SMSFs, only makes up about 13%.
One of the most common queries we get is “can our SMSF acquire a residential property from us personally”
Talk to an accountant or financial adviser about whether you can buy a residential property from a related party or rent one to your family and often the answer is a simple one; “you cannot acquire a residential property from a related party or lease it to a member or related party” But is this true in all cases?
An SMSF Specialist Advisor (SSA) will often dig deeper to explore the proposed strategy in more detail because it is not about the nature of the property, whether it is a residential property or a commercial office or industrial unit, but rather it is about the actual use of that property at the time of acquisition or when entering the lease.
We often see a residential property in suburbs or regional towns where a Doctor, Dentist, Accoutnant or other professional is using a residential property 100% for their business with no one living in the property. In this case the residential property is actually a Business Real Property and can be acquired from your fund.
Who is the property being acquired from and how is that property being used at the time of the purchase?
The exemption in s66 for business real property is tested at acquisition, so if it is currently not 100% Business Real Property as per s66(5) of the SIS Act, it cannot be acquired from a related party. But there is another chink in this rule, in that it does not have to be exactly 100% as in the case of a Farm where the use of the farmhouse for residential is incidental and therefore allowed. Another example would be the managers quarters in a Motel. So you can se that it pays to look deeper in to the exact details of a property’s use.
Tip on Scenario: Can an SMSF acquire a residential property and repurpose it as a business property so it can be let back to related party business?
– If the property will be used WHOLLY AND EXCLUSIVELY for the business at the time of acquisition, then YES. If not, then is the non-business use incidental? If not, then No
What if some portion of property is used for personal storage?
– Then the property is not used WHOLLY AND EXCLUSIVELY for business, so NO.
One solution maybe to change the nature of the residential property before purchase with the cooperation of the vendor and lease the premises properly from them. This might involve fitting out the rooms as offices/treatment rooms etc. Then when you go to acquire/move the property in to the SMSF it meets the Business Real Property definition. Please don’t try to bend rules, the ATO and your auditor will be looking to see that the changes are long term and with a serious intention for the property to remain as a business real property.
To help is is good to refer to the ATO definition of Business Real Property “Business real property generally means land and buildings used wholly and exclusively in a business.”
For more detailed information on what qualifies as Business Real Property see the ATO self-managed superannuation funds ruling SMSFR 2009/1: business real property for more information.
Other Tips and Traps
Minor Personal Use: In terms of using a small part of a property for personal use such as storage then refer specifically to paragraph 215 : “215. It is the Commissioner’s view that the de minimus principle of statutory interpretation will apply to the ‘wholly and exclusively’ threshold in the business real property definition. This principle will accommodate non-business use of the property that is relatively minor or trifling.”
Changing use of property while under an LRBA: you cannot change nature of the property while under an LRBA. It would be a breach of the rules by changing a residential property in to a commercial property while under a LRBA.
Warning before you jump into implementation of any strategy without checking your personal circumstancesand the specifics of the property you are considering.
Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then, why not contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one-on-one consultation (after 1 July 2025 due to our waiting list). Just click the Schedule Now button up on the left to find the appointment options.
Please consider passing on this article to family or friends. Pay it forward!
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking into account 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.
OK, yet again we have only a short time left to the end of the 2024 financial year to get our SMSF in order and ensure we are making the most of the strategies available to us. Here is a checklist of the most important issues that you should address with your advisers before the year-end.
It’s been another busy year and I have not had as much time to put this together so if you find an error or have a strategy to add then please let me know. Links were working at the time of writing.
Warning before we begin,
Before we start, just a warning as in the rush to take advantage of new strategies you may have forgotten about how good you have it already Be careful not to allow your accountant, administrator or financial planner to reset any pension that has been grandfathered under the pension deeming rules that came in on Jan 1st 2015 without getting advice on the current and possible future consequences resulting in the pension being subject to current deeming rates if you lose the grandfathering. Point them to this document
It’s all about timing
If you are making a contribution, the funds must hit the super fund’s bank account by the close of business on 30 June. Some clearing houses hold on to money for up to 14 days before presenting them to the super fund. Some Retail and Industry funds are asking for funds at least 7 days before the end of the financial year!
In addition, pension payments must leave the account by the close of business unless paid by cheque in which case the cheques must be presented within a few days of the EOFY. There must have been sufficient funds in the bank account to support the payment of the cheques on 30 June but a cheque should only be your very last-minute option! You can also ask your adviser or administrator about a Promissory Note if time is against you but funds are ready.
So, for SMSFs get your payments in the fund by Monday 24th June or earlier to be sure (yes I’m Irish) as the 30th is a Sunday this year. This is even more important if using a clearing house for contributions.
Review your Concessional Contributions (CC) options and new rules
The government changed the contribution rules from 1 July 2020 to extend the ability to make contributions from age 65 up to age 67. Read more here. Maximise contributions up to CC cap of $27,500 but do not exceed your limit unless you have Unused Carried Forward Concessional limits and Total Super Balance under $500K as of last 01 July 2022. Guidance on how to check your Unused Carried Forward Concessional limits via MyGov records available here
Some of the sting has been taken out of excess contributions tax but you really don’t need the additional paperwork to sort out the problem. Check employer contributions on normal pay and bonuses, salary sacrifice and premiums for insurance in super as they may all be included in the limit.
Consider using the ‘Unused Carry Forward Concessional Contribution” limits
Broadly, the carry forward rule allows individuals to make additional CC in a financial year by utilising unused CC cap amounts from up to five previous financial years. Eligibility requires a total superannuation balance just before the start of that financial year of less than $500,000 (across all your super accounts).
This measure applies from 2018-19 so effectively, this means an individual can make up to $132,500 of CCs in a single financial year by utilising unapplied unused CC caps since 1 July 2018. Guidance on how to check your Unused Carried Forward Concessional limits via MyGov records available here
This is the last year to use the 2018/19 unused Carried Forward Concessional Caps as they fall outside the 5 year rolling period from 30 June 2024.
Beware that once your Income including Salary, Investment income, Employer SGC, Personal Concessional Contributions goes over $250,000 you will be subject to Div 293 Tax
From 1 July 2024 the Concessional Cap rises to $30,000 per year. Super Guarnatee also rises to 11.5%. Re-evaluate your contribution plans for 2024-25
Review plans for Non-Concessional Contributions (NCC) options
From 1 July 2022 the NCC contribution rules changed and currently the age limit of 75 (28 days after the end of the month your turn 75) applies to NCCs (that is, from after-tax money) without meeting the work test. Check out ATO superannuation contribution guidance.
NCCs are an opportunity to move investments into super and out of a personal, company or trust names.
Even-up spouse balances and maximise super in pension phase up to age 75. For couples where one spouse has exhausted their transfer balance cap and has excess amounts in accumulation are able to withdraw from the higher balance and recontribute to the other spouse who has transfer balance cap space available to commence a retirement phase income stream. This can increase the tax efficiency of the couple’s retirement assets as more of their savings are in the tax-free pension phase environment.
Make your tax components more tax free by using recontribution strategies. SMSF members can cash out their existing super and re-contribute (subject to their contribution caps) them back in to the fund to help reduce tax payable from any super death benefits left to non-tax dependants. From 1 July 2022 you can do this until they turn age 75 (contribution to be made with 28 days after the end of the month you turn 75).
From 1 July 2024 the Non-Concessional Cap rises to $120,000 per year or $360,000 under the 3 Year Bring Forward Rule. Re-evaluate your contribution plans for 2024-25
RECONTRIBUTION STRATEGIES
Consider doing the drawdown before 30 June 2023 so that your Transfer Balance Cap and Total Super Balance on 1 July 2024 gets some additional space with the rise in the TBAR and TSB full limits to $1.9m. Note that if you had and existing pension(s) at 30 June 2023 your current limit will be anywhere between $1.6m and $1.9M (Frustrating for Advisers!)
If you have additional funds to add to the withdrawal then maybe take up to $330,000 before June 30 and then you may be able to contribute up to $360,000 using the new Non-Concessional Cap.
Downsizer contributions
If you have sold your home in the last year and you are over 55, consider eligibility for downsizer contributions of up to $300,000 for each member.
From 1 jan 2023, the eligibility age to make downsizer contributions into superannuation was reduced from 60 to 65 years of age. All other eligibility criteria remain unchanged, allowing individuals to make a one-off, post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. These contributions will continue not to count towards non-concessional contribution caps.
The $300,000 downsizer limit (or $600,000 for a couple) and the $330,000 bring forward NCC cap allow up to $630,000 in one year contributions for a single person and $1,260,000 for a couple subject to their contributions caps. That rises on 1 July 2024 to $660,000 for a single person and $1,320,000 for a couple subject to their contributions caps
PLEASE BE CAREFUL AS THIS IS A ONCE ONLY STRATEGY AND IF YOU WOULD BENEFIT MORE IN OLDER YEARS USING THE STRATEGT THE MAXIMISE NCCs FIRST.
Calculate co-contributions
Check your eligibility for the co-contribution, it’s a good way to boost your super. The amounts differ based on your income and personal super contributions, so use the super co-contribution calculator.
Examine spouse contributions
If your spouse has assessable income plus reportable fringe benefits totalling less than $37,000 for the full $540 tax offset or up to $40,000 for a partial offset, then consider making a spouse contribution. Check out the ATO guidance here.
You can implement this strategy up to age 75 as a Spouse Contribution is treated as a NCC in their account (and therefore counted towards your spouse’s NCC cap).
Give notice of intent to claim a deduction for contributions
A notice must be made before you commence the pension. Many people like to start pension in June and avoid having to take a minimum pension in that financial year but make sure you have claimed your tax deduction first. The same notice requirement applies if you plan to take a lump sum withdrawal from your fund.
Consider contributions splitting to your spouse
Consider splitting contributions with your spouse, especially if:
your family has one main income earner with a substantially higher balance or
if there is an age difference where you can get funds into pension phase earlier or
if you can improve your eligibility for concession cards or age pension by retaining funds in superannuation in the younger spouse’s name.
This is a simple no-cost strategy I recommend for everyone here. Remember, any spouse contribution is counted towards your spouse’s NCC cap.
Act early on off-market share transfers
If you want to move any personal shareholdings into super (as a contribution) you should act early. The contract is only valid once the broker receives a fully-valid transfer form so timing in June is critical. There are likely to be brokerage costs involved.
Review options on pension payments
The government has not extended the Temporary Reduction in Minimum Pensions as part of the COVID-19 response. Ensure you take the standard minimum pension at your age-based rate. If a pension member has already taken pension payments of equal to or greater than the the minimum amount, they are not required to take any further pension payments before 30 June 2024. For transition to retirement pensions, ensure you have not taken more than 10% of your opening account balance this financial year.
Minimum annual payments for pensions for 2023/24 financial year onwards.
OK we are back to normal rates from 01/07/2023, no more COVID reductions.
Age at 1 July
2023-24 Back to Standard Minimum % withdrawal
Under 65
4%
65–74
5%
75–79
6%
80–84
7%
85–89
9%
90–94
11%
95 or older
14%
Minimum Pension Standards
If a pension member has already taken a minimum pension for the year, they cannot change the payment but they can get organised for 2024/-25. So, no you can’t sneak a payment back into the SMSF bank account!
If you need more than the minimum pension payments for living expenses then it may be a good strategy for amounts above the minimum to be treated as either:
a partial lump commutation sum rather than as a pension payment. This would create a debit against the pension member’s Transfer Balance Account (TBA). Please discuss this with your accountant and adviser first as all funds now have to report this quarterly to the ATO.
for those with both pension and accumulation accounts, take the excess as a lump sum from the accumulation account to preserve as much in tax-exempt pension phase as possible.
Check your documents on reversionary pensions
A reversionary pension to your spouse will provide them with up to 12 months to get their financial affairs organised before making a final decision on how to manage your death benefit. In NSW this may avoid issues with Binding Death Nominations and the Notional Estate (see Benz v Armstrong; Benz v Armstrong; Benz v Armstrong – 2022 NSWSC)
You should review your pension documentation and check if you have nominated a reversionary pension in the context of your family situation. This is especially important with blended families and children from previous marriages that may contest your current spouse’s rights to your assets. Also consider reversionary pensions for dependent disabled children.
The reversionary pension has become more important with the application of the $1.6-$1.9 million Transfer Balance Cap (TBC) limit to pension phase from 01/07/2023.
Tip:If you have opted for a nomination instead then check the existing Binding Death Benefit Nominations (many expire after 3 years) and look to upgrade to a Non-Lapsing Binding Death Benefit Nomination. Check your Deed allows for this first.
Review Capital Gains Tax on each investment
Review any capital gains made during the year and over the term you have held the asset and consider disposing of investments with unrealised losses to offset the gains made. If in pension phase, then consider triggering some capital gains regularly to avoid building up an unrealised gain that may be at risk to legislation changes.
Collate records of all asset movements and decisions
Ensure all the fund’s activities have been appropriately documented with minutes, and that all copies of all statements, valuations and schedules are on file for your accountant, administrator and auditor.
The ATO has now beefed up its requirements for what needs to be detailed in the SMSF Investment Strategy so review your investment strategy and ensure all investments have been made in accordance with it and the SMSF Trust Deed, including insurances for members. See my article on this subject here.
Arrange market valuations
Regulations now require assets to be valued at market value each year, including property and collectibles. For more information refer to ATO’s publication Valuation guidelines for SMSFs.
On collectibles, play by the new rules that came into place on 1 July 2016 or remove collectibles from your SMSF.
Tip:The ATO is targeting audit compliance this year on Property Valuations in SMSFs as we approach the implementation of the Division 293 Tax from 1 July 2025.
Check the ownership of all investments.
Make sure the assets of the fund are held in the name of the trustees (including a corporate trustee) on behalf of the fund. Carefully check any online accounts and ensure all SMSF assets are separate from your other assets.
Review Estate Planning and loss of mental capacity strategies
Review any Binding Death Benefit Nominations (BDBN) to ensure they are valid, and check the wording matches that required by the Trust Deed. Ensure it still accords with your wishes.
Also ensure you have appropriate Enduring Powers of Attorney (EPOA) in place to allow someone to step into your place as trustee in the event of illness, mental incapacity or death.
Check your Trust Deed and the details of the rules. For example, did you know you cannot leave money to stepchildren via a BDBN if their birth-parent has pre-deceased you?
Review any SMSF loan arrangements
Have you provided special terms (low or no interest rates, capitalisation of interest etc) on a related party loan? Review your loan agreement and see if you need to amend your loan.
Have you made all the payments on your internal or third-party loans, have you looked at options on prepaying interest or fixing the rates while low?
Have you made sure all payments in regards to Limited Recourse Borrowing Arrangements (LRBA) for the year were made through the SMSF trustee? If you bought a property using borrowing, has the Holding Trust been stamped by your state’s Office of State Revenue? For Related Party LRBA’s the Variable interest rate is currently 8.85%
Ensure SuperStream obligations are met
For super funds that receive employer contributions, the ATO is gradually introducing SuperStream, a system whereby super contributions data is made electronically.
All funds should be able to receive contributions electronically and you should obtain an Electronic Service Address (ESA) to receive contribution information.
All funds should be able to receive contributions electronically and you should obtain an Electronic Service Address (ESA) to receive contribution information.
If you change jobs your new employers may ask SMSF members for their ESA, ABN and bank account details.
Ensure you are meeting your Quarterly TBAR Reporting deadlines
From 1 July 2023 you need tio be checking in with your accountant/administrator Quarterly
All SMSFs are required to report quarterly, even if the members total super balance is less than $1 million. This means you must report the event that affects the members transfer balance within 28 days after the end of the quarter in which the event occurs.
Example: All unreported events that occurred between 1 April and 30 June 2024 must be reported by 28 October 2023. This means you cannot report at the same time as your SMSF annual return (SAR) for the 2023-24 income year. More info here
ASIC fee increased from 1 July 2023
ASIC is increasing fees by $4 for the annual review of a special purpose SMSF trustee company $59 to $63. The Government is moving gradually to a “user pays” model so expect increases to accelerate in future years. Before 30 June, for $407 you can pre-pay the company fees for 10 years and lock in current prices with a decent discount. There is a remittance form linked here.
HAS NOT PASSED: Relaxing residency requirements for SMSFs– Labor Government has failed to move on this issue.
SMSFs and small APRA funds still do not have relaxed residency requirements through the extension of the central management and control test safe harbour from two to five years as the LNP government failed to pass it before the last election and Labor have put it on the backburner. The active member test was also to be removed, allowing members who are temporarily absent to continue to contribute to their SMSF.
HAS NOT PASSED: Legacy retirement product conversions (Under Review STILL by Government)
Individuals were to be able to exit a specified range of legacy retirement products, together with any associated reserves over a two-year period but the legislation was not passed and is now to be reviewed by the new Government. The specified range of legacy retirement products includes market-linked, life expectancy and lifetime products, but not flexi-pension products or a lifetime product in a large APRA-regulated or public sector defined benefit scheme.
Currently, these products can only be converted into another like product and limits apply to the allocation of any associated reserves without counting towards an individual’s contribution cap.
There is considerable additional detail in this feature so consult an adviser if you are affected, especially to ensure you do not lose other entitlements such as the age pension.
Improving the Home Equity Access Scheme – Social security benefits for you or your mum and/or dad
The Home Equity Access Scheme formerly called The Pension Loan Scheme is now up and running. The Government introduced a No Negative Equity Guarantee for HEAS loans and allow people access to a capped advance lump sum payment.
No negative equity guarantee – Borrowers under the HEAS, or their estate, will not owe more than the market value of their property, in the rare circumstances where their accrued HEAS debt exceeds their property value. This brings the HEAS in line with private sector reverse mortgages.
Immediate access to lump sums under the HEAS – Eligible people will be able to access up to two lump sum advances in any 12-month period, up to a total value of 50% of the maximum annual rate of Age Pension (currently $14,511.90 for singles and $21,876.40 for couples).
Careful if replacing Income Protection or TPD Insurance (Total Permanent Disability)
Have you reviewed your insurances inside and outside of super? Don’t forget to check your current TPD policies owned by the fund with an own occupation definition as the rules changed a few years ago so be careful about replacing an existing policy as you may not be able to obtain this same cover inside super again.
There were major changes to Income Protection insurance in 2021 so be very careful about switching insurer unless costs have blown out as new cover is often vastly inferior to current covers. Read more here before switching cover.
Large one-off Personal income or gain – Bring forward Concessional Contributions
For those who may have a large taxable income this year (large bonus or property sale) and are expecting a lower taxable next year you should consider a contribution allocation strategy to maximise deductions for the current financial year. This strategy is also known as a “Contributions Reserving” strategy but the ATO are not fans of Reserves so best to avoid that wording! Just call is an Allocated Contributions Holding Account. See my article on this strategy here.
Providing Proof of Crypto Currency Holdings as of 30 June.
You should be using an exchange that is set up for SMSF accounts. They should provide a Tax Summary but it may cost extra. Independent Reserve provides one audited by KPMG for $50. COINSPOT also offer tax reports that meet Australian Audit requirements.
The auditor will also want to verify holdings by checking:
An exchange account is set up in the name of the fund
Wallet purchased using funds from the SMSFs cash account
Cold Wallet Audit management extra step: For annual audit purposes, take a screenshot of the assets held in your Ledger wallet (e.g. via the Ledger ‘Live’ App or similar) on 30 June 2023 and also on the day you submit your paperwork and email this to the tax agent at tax time.
29. NALE/NALI applies in the 2024 year (in the sense the ATO are going to enforce it) – please ensure that if members perform services for their SMSF which is their ‘day job’ (ie. Accounting work for Accountants, Building and repair work for tradies, etc) that these are charged at the appropriate commercial rate that they charge their clients. A good article explaining this in more detail here from ASF Audits
Don’t leave it until after 30 June, review your Self Managed Super Fund now and seek advice if in doubt about any matter.
One for I July 2024 Check your Salary Sacrifice or Concessional Contributions as SG rises to 11.5%
So busy, I forgot the superannuation guarantee (SG) rate will increase from 11% to 11.5% on 1 July 2024. You’ll need to use the new rate to calculate how much of your new indexed limit of $30,000 concessional cap will be available to salary sacrifice or make personal deductible contributions.
Warning before you jump into implementation of any strategy without checking your personal circumstances.
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.
Please consider passing on this article to family or friends. Pay it forward!
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking into account 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.
The ATO online services site, accessible through myGov, has now become a very useful tool for individuals in managing their superannuation and accessing superannuation information. Unfortunately, their financial planners cannot still access this information so they will often ask you to access this information for them.
You can look up your superannuation information such as contributions for the year to date, carry forward unused concessional contributions, total superannuation balance or transfer balance cap transactions, saving valuable time and minimising the risk of missing important information and making the wrong contributions.
NAVIGATING THE MYGOV WEBSITE
It is relatively easy to find the superannuation data on myGov, and access has improved over time.
If you do not have a myGov account, you need to create one at my.gov.au
Once logged in they need to scroll down to “Link a Service” and follow the steps to link to the ATO.
Those who already have a myGov account which is linked to the ATO, need to click on Australian Taxation Office (ATO) under Your Linked Services.
Information you need to link your myGov account to ATO online services
You will need at least 2 of the following:
Your Bank Account Details where a tax refund paid to or has earned interest in last 2 years
PAYG Payment Summary within last 2 years
Centrelink Payment Summary from last 2 years
Notice of Assessment within last 5 years
Dividend Statement within last 2 years
Superannuation account statement from last 5 years
More detailed information on each option is available here
INFORMATION
Once you have accessed your online ATO account, go to the Super tab, select Information and follow the links:
The information that appears here comes via the ATO from various reporting that superannuation funds and employers are obliged to do as well as from the individual’s income tax return.
It is important to remember that whilst myGov is a useful resource, it may not always be up to date, especially early in a financial year when super funds and individuals have not yet lodged income tax returns for the previous year.
In addition, those who use self-managed super funds (SMSFs) may find their information is not up to date as SMSFs do not have the same reporting frequency as retail and industry funds.
TOTAL SUPERANNUATION BALANCE (TSB)
This tab indicates an individual’s TSB on the most recent 30 June as well as historic TSBs going back to the 2016/17 financial year.
TSB is used to determine if an individual qualifies for several super-related measures the following financial year including the ability to make non-concessional contributions or use carry forward concessional contributions.
TSB is not always as simple as the member’s account balance on 30 June, so being able to look it up on myGov is invaluable.
BRING FORWARD ARRANGEMENT
This section advises you whether or not you are in a bring-forward arrangement.
CONCESSIONAL CONTRIBUTIONS
Here you can find out the total concessional contributions you made each year and how you compare with your own concessional contributions cap. Remember that current year contributions may not all be showing up, so should be cross checked. For example, contributions to SMSFs such as personal contributions and related employer contributions, or personal contributions where a tax deduction hasn’t been successfully claimed.
CARRY-FORWARD CONCESSIONAL CONTRIBUTIONS
The carry-forward concessional contribution tab shows the total unused concessional contributions available to carry forward from previous years. It also links the you directly through to the TSB tab to check your eligibility to use the carry-forward amounts available (ie to check that TSB on the previous 30 June was under $500,000).
TRANSFER BALANCE CAP
If you already had a retirement phase income stream at 1 July 2017, or you commenced a retirement phase income stream since 1 July 2017, you can check the balance of your Transfer Balance Account, your personal transfer balance cap and any available cap space.
EMPLOYER CONTRIBUTIONS
This section is handy if you are looking to make personal deductible contributions and aren’t sure how much your employer has already contributed on your behalf as well as to check that an employer has been making Super Guarantee or salary sacrifice contributions.
MANAGE
Under the “Manage” tab, the following functions are available:
request a transfer of super between funds
withdraw any ATO-held super
make an excess non-concessional contribution election (ie release the excess or retain in the fund)
make a Division 293 election
apply for a release of super on compassionate grounds
apply for a First Home Super Saver Determination
NB: It appears that the Transfer Super, Withdraw ATO-held super and the Non-concessional election tabs only appear if these options are available to you. That is, if you have at least two super funds (for the Transfer super tab), or amounts held by the ATO (for Withdraw ATO–held super) or an excess non-concessional determination (Non-concessional election).
Warning before you jump into implementation of any strategy without checking your personal circumstances.
Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then, why not contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one-on-one consultation (after 1 February 2023 due to our waiting list). Just click the Schedule Now button up on the left to find the appointment options. Thank you to the industry tech experts who prepare much of this useful information for advisers but let me amend it to meet the needs of SMSF trustees. They do the heavy lifting for which I am eternally grateful.
Please consider passing on this article to family or friends. Pay it forward!
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking into account 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.
OK, yet again we are with only a few weeks left to the end of the financial year to get our SMSF in order and ensure we are making the most of the strategies available to us. Here is a checklist of the most important issues that you should address with your advisers before the year-end.
It’s been another busy year and I have not had as much time to put this together so if you find an error or have a strategy to add then please let me know. Links were working at the time of writing.
Warning before we begin,
Before we start, just a warning as in the rush to take advantage of new strategies you may have forgotten about how good you have it already Be careful not to allow your accountant, administrator or financial planner to reset any pension that has been grandfathered under the pension deeming rules that came in on Jan 1st 2015 without getting advice on the current and possible future consequences resulting in the pension being subject to current deeming rates if you lose the grandfathering. Point them to thisdocument
It’s all about timing
If you are making a contribution, the funds must hit the super fund’s bank account by the close of business on 30 June. Some clearing houses hold on to money before presenting them to the super fund.
In addition, pension payments must leave the account by the close of business unless paid by cheque in which case the cheques must be presented within a few days of the EOFY. There must have been sufficient funds in the bank account to support the payment of the cheques on 30 June but a cheque should be your very last-minute preference!
Get your payments in by Friday 23rd June or earlier to be sure (yes I’m Irish). This is even more important if using a clearing house for contributions.
Review your Concessional Contributions (CC) options and new rules
The government changed the contribution rules from 1 July 2020 to extend the ability to make contributions from age 65 up to age 67. Read more here. Maximise contributions up to CC cap of $27,500 but do not exceed your limit unless you have Unused Carried Forward Concessional limits and Total Super Balance under $500K as of last 01 July 2022. Guidance on how to check your Unused Carried Forward Concessional limits via MyGov records available here
Some of the sting has been taken out of excess contributions tax but you really don’t need the additional paperwork to sort out the problem. Check employer contributions on normal pay and bonuses, salary sacrifice and premiums for insurance in super as they may all be included in the limit.
Consider using the ‘Unsed Carry Forward Concessional Contribution” limits
Broadly, the carry forward rule allows individuals to make additional CC in a financial year by utilising unused CC cap amounts from up to five previous financial years. Eligibility requires a total superannuation balance just before the start of that financial year of less than $500,000 (across all your super accounts).
This measure applies from 2018-19 so effectively, this means an individual can make up to $130,000 of CCs in a single financial year by utilising unapplied unused CC caps since 1 July 2018. Guidance on how to check your Unused Carried Forward Concessional limits via MyGov records available here
Beware that once your Income including Salary, Investment income, Employer SGC, Personal Concessional Contributions goes over $250,000 you will be subject to Div 293 Tax
Review plans for Non-Concessional Contributions (NCC) options
From 1 July 2022 the NCC contribution rules changed and currently the age limit of 75 (28 days after the end of the month your turn 75) applies to NCCs (that is, from after-tax money) without meeting the work test. Check out ATO superannuation contribution guidance.
NCCs are an opportunity to move investments into super and out of a personal, company or trust names.
Even-up spouse balances and maximise super in pension phase up to age 75. For couples where one spouse has exhausted their transfer balance cap and has excess amounts in accumulation are able to withdraw from the higher balance and recontribute to the other spouse who has transfer balance cap space available to commence a retirement phase income stream. This can increase the tax efficiency of the couple’s retirement assets as more of their savings are in the tax-free pension phase environment.
Make your tax components more tax free by using recontribution strategies. SMSF members can cash out their existing super and re-contribute (subject to their contribution caps) them back in to the fund to help reduce tax payable from any super death benefits left to non-tax dependants. From 1 July 2022 you can do this until they turn age 75 (contribution to be made within 28 days after the end of the month you turn 75).
The Bring Forward Rule for 2022-23 compared to after 1 July 2023
Maximum NCC cap
Current
From 1 July 2023
$330,000
< $1.48M
< $1.68M
$220,000
$1.48 – $1.59M
$1.68 – $1.79M
$110,000
$1.59 – $1.7M
$1.79 – $1.9M
NIL
> $1.7M
> $1.9M
Bring Forward Limits affected by TSB
RECONTRIBUTION STRATEGIES
Consider doing the drawdown before 30 June 2023 so that your Transfer Balance Cap and Total Super Balance on 1 July 2023 gets some additional space with the rise in the TBAR and TSB full limits to $1.9m. Note that if you have existing pensions you new limit will be anywhere between $1.6m and $1.9M (Frustrating for Advisers!)
Downsizer contributions
If you have sold your home in the last year and you are over 55, consider eligibility for downsizer contributions of up to $300,000 for each member.
From 1 jan 2023, the eligibility age to make downsizer contributions into superannuation will be reduced from 60 to 55 years of age. All other eligibility criteria remain unchanged, allowing individuals to make a one-off, post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. These contributions will continue not to count towards non-concessional contribution caps.
The $300,000 downsizer limit (or $600,000 for a couple) and the $330,000 bring forward NCC cap allow up to $630,000 in one year contributions for a single person and $1,260,000 for a couple subject to their contributions caps.
PLEASE BE CAREFUL AS THIS IS A ONCE ONLY STRATEGY AND IF YOU WOULD BENEFIT MORE IN LATER YEARS USING THE STRATEGY THEN MAXIMISE NCCs FIRST.
Calculate co-contributions
Check your eligibility for the co-contribution, it’s a good way to boost your super. The amounts differ based on your income and personal super contributions, so use the super co-contribution calculator.
Examine spouse contributions
If your spouse has assessable income plus reportable fringe benefits totalling less than $37,000 for the full $540 tax offset or up to $40,000 for a partial offset, then consider making a spouse contribution. Check out the ATO guidance here.
From 1 July 2022 you can implement this strategy up to age 75 as a Spouse Contribution is treated as a NCC in their account (and therefore counted towards your spouse’s NCC cap).
Give notice of intent to claim a deduction for contributions
A notice must be made before you commence the pension. Many people like to start pension in June and avoid having to take a minimum pension in that financial year but make sure you have claimed your tax deduction first. The same notice requirement applies if you plan to take a lump sum withdrawal from your fund.
Consider contributions splitting to your spouse
Consider splitting contributions with your spouse, especially if:
your family has one main income earner with a substantially higher balance or
if there is an age difference where you can get funds into pension phase earlier or
if you can improve your eligibility for concession cards or age pension by retaining funds in superannuation in the younger spouse’s name.
This is a simple no-cost strategy I recommend for everyone here. Remember, any spouse contribution is counted towards your spouse’s NCC cap.
Act early on off-market share transfers
If you want to move any personal shareholdings into super (as a contribution) you should act early. The contract is only valid once the broker receives a fully-valid transfer form so timing in June is critical. There are likely to be brokerage costs involved.
Review options on pension payments
The government has extended the Temporary Reduction in Minimum Pensions as part of the COVID-19 response. Ensure you take the new minimum pension of at least 50% of your age-based rate below. If a pension member has already taken pension payments of equal to or greater than the 50% reduced minimum amount, they are not required to take any further pension payments before 30 June 2023. For transition to retirement pensions, ensure you have not taken more than 10% of your opening account balance this financial year.
Minimum annual payments for pensions for 2022/23 and 2023/24 financial years.
OK we are back to normal rates from 01/07/2023
Age at 1 July
2023-24 Back to Standard
Minimum % withdrawal
2022-23 50% reduced
minimum pension
Under 65
4%
2%
65–74
5%
2.5%
75–79
6%
3%
80–84
7%
3.5%
85–89
9%
4.5%
90–94
11%
5.5%
95 or older
14%
7%
If a pension member has already taken a minimum pension for the year, they cannot change the payment but they can get organised for 2023/24. So, no, you can’t sneak a payment back into the SMSF bank account!
If you still need pension payments for living expenses but have already taken the 50% minimum then it may be a good strategy for amounts above the 50% reduced minimum to be treated as either:
a partial lump commutation sum rather than as a pension payment. This would create a debit against the pension members transfer balance account (TBA). Please discuss this with your accountant and adviser asap as some funds will have to report this quarterly and others on an annual basis.
for those with both pension and accumulation accounts, take the excess as a lump sum from the accumulation account to preserve as much in tax-exempt pension phase as possible.
Check your documents on reversionary pensions
A reversionary pension to your spouse will provide them with up to 12 months to get their financial affairs organised before making a final decision on how to manage your death benefit. In NSW this may avoid issues with Binding Death Nominations and the Notional Estate (see Benz v Armstrong; Benz v Armstrong – 2022 NSWSC)
You should review your pension documentation and check if you have nominated a reversionary pension in the context of your family situation. This is especially important with blended families and children from previous marriages that may contest your current spouse’s rights to your assets. Also consider reversionary pensions for dependent disabled children.
The reversionary pension has become more important with the application of the $1.6-$1.9 million Transfer Balance Cap (TBC) limit to pension phase from 01/07/2023.
Tip: If you have opted for a nomination instead then check the existing Binding Death Benefit Nominations (many expire after 3 years) and look to upgrade to a Non-Lapsing Binding Death Benefit Nomination. Check your Deed allows for this first.
Review Capital Gains Tax on each investment
Review any capital gains made during the year and over the term you have held the asset and consider disposing of investments with unrealised losses to offset the gains made. If in pension phase, then consider triggering some capital gains regularly to avoid building up an unrealised gain that may be at risk to legislation changes.
Collate records of all asset movements and decisions
Ensure all the fund’s activities have been appropriately documented with minutes, and that all copies of all statements and schedules are on file for your accountant, administrator and auditor.
The ATO has now beefed up its requirements for what needs to be detailed in the SMSF Investment Strategy so review your investment strategy and ensure all investments have been made in accordance with it and the SMSF Trust Deed, including insurances for members. See my article on this subject here.
Arrange market valuations
Regulations now require assets to be valued at market value each year, including property and collectibles. For more information refer to ATO’s publication Valuation guidelines for SMSFs.
On collectibles, play by the new rules that came into place on 1 July 2016 or remove collectibles from your SMSF.
Check the ownership of all investments
Make sure the assets of the fund are held in the name of the trustees (including a corporate trustee) on behalf of the fund. Check carefully any online accounts and ensure all SMSF assets are separate from your other assets.
Review Estate Planning and loss of mental capacity strategies
Review any Binding Death Benefit Nominations (BDBN) to ensure they are valid, and check the wording matches that required by the Trust Deed. Ensure it still accords with your wishes.
Also ensure you have appropriate Enduring Powers of Attorney (EPOA) in place to allow someone to step into your place as trustee in the event of illness, mental incapacity or death.
Check your Trust Deed and the details of the rules. For example, did you know you cannot leave money to stepchildren via a BDBN if their birth-parent has pre-deceased you?
Review any SMSF loan arrangements
Have you provided special terms (low or no interest rates, capitalisation of interest etc) on a related party loan? Review your loan agreement and see if you need to amend your loan.
Have you made all the payments on your internal or third-party loans, have you looked at options on prepaying interest or fixing the rates while low? Have you made sure all payments in regards to Limited Recourse Borrowing Arrangements (LRBA) for the year were made through the SMSF trustee? If you bought a property using borrowing, has the Holding Trust been stamped by your state’s Office of State Revenue.
Ensure SuperStream obligations are met
For super funds that receive employer contributions, the ATO is gradually introducing SuperStream, a system whereby super contributions data is made electronically.
All funds should be able to receive contributions electronically and you should obtain an Electronic Service Address (ESA) to receive contribution information.
All funds should be able to receive contributions electronically and you should obtain an Electronic Service Address (ESA) to receive contribution information.
If you change jobs your new employers may ask SMSF members for their ESA, ABN and bank account details.
Ensure you are ready for Quarterly TBAR Reporting
From 1 July 2023
All SMSFs will be required to report quarterly, even if the members total super balance is less than $1 million. This means you must report the event that affects the members transfer balance within 28 days after the end of the quarter in which the event occurs.
All unreported events that occurred before 30 September 2023 must be reported by 28 October 2023. This means you cannot report at the same time as your SMSF annual return (SAR) for the 2022–23 income year. More info here
ASIC fee increases from 1 July 2021
ASIC is increasing fees by $4 for the annual review of a special purpose SMSF trustee company $59 to $63. The Government is moving gradually to a “user pays” model so expect increases to accelerate in future years. Before 30 June for $407 you can pre-pay the company fees for 10 years and lock in current prices with a decent discount. There is a remittance form linked here.
HAS NOT PASSED: Relaxing residency requirements for SMSFs– new Government to review.
SMSFs and small APRA funds still do not have relaxed residency requirements through the extension of the central management and control test safe harbour from two to five years as the LNP government failed to pass it before the election. The active member test was also to be removed, allowing members who are temporarily absent to continue to contribute to their SMSF.
HAS NOT PASSED: Legacy retirement product conversions (Under Review By New Government)
Individuals were to be able to exit a specified range of legacy retirement products, together with any associated reserves over a two-year period but the legislation was not passed and is now to be reviewed by the new Government. The specified range of legacy retirement products includes market-linked, life expectancy and lifetime products, but not flexi-pension products or a lifetime product in a large APRA-regulated or public sector defined benefit scheme.
Currently, these products can only be converted into another like product and limits apply to the allocation of any associated reserves without counting towards an individual’s contribution cap.
There is considerable additional detail in this feature so consult an adviser if you are affected, especially to ensure you do not lose other entitlements such as the age pension.
Improving the Home Equity Access Scheme – Social security benefits for you or your mum and/or dad
The Home Equity Access Scheme formerly called The Pension Loan Scheme is now up and running. The Government introduced a No Negative Equity Guarantee for HEAS loans and allow people access to a capped advance lump sum payment.
No negative equity guarantee – Borrowers under the HEAS, or their estate, will not owe more than the market value of their property, in the rare circumstances where their accrued HEAS debt exceeds their property value. This brings the HEAS in line with private sector reverse mortgages.
Immediate access to lump sums under the HEAS – Eligible people will be able to access up to two lump sum advances in any 12-month period, up to a total value of 50% of the maximum annual rate of Age Pension (currently $13,882 for singles and $20,852 for couples).
Careful if replacing Income Protection or TPD Insurance (Total Permanent Disability)
Have you reviewed your insurances inside and outside of super? Don’t forget to check your current TPD policies owned by the fund with an own occupation definition as the rules changed a few years ago so be careful about replacing an existing policy as you may not be able to obtain this same cover inside super again.
There were major changes to Income Protection insurance in 2021 so be very careful about switching insurer unless costs have blown out as new cover is often vastly inferior to current covers. Read more here before switching cover.
Large one-off Personal income or gain – Bring forward Concessional Contributions
For those who may have a large taxable income this year (large bonus or property sale) and are expecting a lower taxable next year you should consider a contribution allocation strategy to maximise deductions for the current financial year. This strategy is also known as a “Contributions Reserving” strategy but the ATO are not fans of Reserves so best to avoid that wording! Just call it an Allocated Contributions Holding Account. See my article on this strategy here.
Providing Proof of Crypto Currency Holdings as of 30 June.
You should be using an exchange that is set up for SMSF accounts. They should provide a Tax Summary but it may cost extra. Independent Reserve provides one audited by KPMG for $50. COINSPOT also offer tax reports that meet Australian Audit requirements.
The auditor will also want to verify holdings by checking:
An exchange account is set up in the name of the fund
Wallet purchased using funds from the SMSFs cash account
Cold Wallet Audit management extra step: For annual audit purposes, take a screenshot of the assets held in your Ledger wallet (e.g.via the Ledger ‘Live’ App or similar) on 30 June 2023 and also on the day you submit your paperwork and email this to the tax agent at tax time.
Don’t leave it until after 30 June, review your Self Managed Super Fund now and seek advice if in doubt about any matter.
One for 1 July 2023 Check your Salary Sacrifice or Concessional Contributions as SG rises to 11%
So busy, I forgot the superannuation guarantee (SG) rate will increase from 10.5% to 11% on 1 July 2023. You’ll need to use the new rate to calculate how much of your $27,500 concessional limit will be available to salary sacrifice or make personal deductible contributions.
Warning before you jump into implementation of any strategy without checking your personal circumstances.
Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then, why not contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one-on-one consultation (after 1 February 2023 due to our waiting list). Just click the Schedule Now button up on the left to find the appointment options.
Please consider passing on this article to family or friends. Pay it forward!
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 into account 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.
Depending on the tax components of your Superannuation balance you may leave a nasty tax bill for your ultimate beneficiaries on death. Here, we will review the use of withdrawal and re-contribution strategies, to maximise benefits for eventual beneficiaries and offer some protection against future legislation changes. Seek personal advice before implementing any strategy.
What has changed
The withdrawal and re-contribution strategy has been popular from both a retirement and estate planning perspective to manage tax outcomes for retired members and beneficiaries on the death of a member.
The benefit of the withdrawal and re-contribution strategy should now be reassessed as a result of some of the reforms which took effect incrementally since 1 July 2017:
• the Non-Concessional Contribution (NCCs) cap is now $120,000 ($360,000 using 3 year bring forward rule).
• indexation to $2m of the Total Super Balance cap (TSB) rule to determine eligibility to make NCCs
• partial indexation to between $1.6 and $2m Transfer Balance Cap (TBC( applicable to existing and new pensions.
• the abolition of anti-detriment payment (sigh of relief from many professionals!), and
From 1 July 2022, the ability for SMSF members over 67 to continue to make Non-Concessional (NCC) contributions up to age 75. This will help you get the maximum benefit available under the re-contribution strategy.
The basic re-contribution strategy
The re-contribution strategy involves withdrawing an amount from an SMSF member’s balance and making a non-concessional contribution (NCC) back into the SMSF in the same or another member’s name. This effectively enables any taxable component of the lump sum withdrawn to be converted into a tax-free component paying nil tax on death benefits.
Before you can use the strategy, the SMSF member needs to have met a full condition of release to be eligible to make lump sum withdrawals. Now, if you are under 75 you do not need to meet the work test eligibility to make NCCs but you do have to ensure that your Total Super Balance contribution cap limit will allow a re-contribution of the funds.
We normally suggest using this strategy after meeting a condition of release after age 60 and before age 75 because if this strategy is implemented by a person who is 60 or over, any withdrawal is received tax-free and not included in assessable income.
The re-contribution strategy may help to:
reduce the tax to be paid by non-tax dependant beneficiaries (usually financially independent adult children) on any death benefit lump sum after the member passes away.
offer some protection against legislative changes to taxing of pensions as NCCs are after-tax contributions where no tax concession has been received.
Case Study Example
Michael, a widower, (aged 60) has $720,000 in an SMSF account. The tax components of his account are split 50:50, meaning that $360,000 of the account is taxable and $360,000 is tax-free. He has fully retired and therefore has complete access to his super benefits.
Michael has two adult children, his daughter Carmel and son Sebastian (neither of whom are financial dependents). Michael has a valid non-lapsing binding death benefit nomination in place in favour of them equally.
If Michael passed away today, $360,000 of his super benefit which is attributable to the taxable component would be subject to tax at a maximum rate of 15% plus Medicare Levy (if not paid to estate) as Carmel and Sebastian are not tax dependants.
Michael could use the re-contribution strategy which may give a better outcome for the kids from a tax perspective saving up to $61,200 ($360,000 x 17%). In addition, assuming Michael has other taxable passive investment income outside super, if Michael was to start an account-based pension, a concessional contribution strategy could also help him to reduce tax payable on his income using funds from the SMSF pension payments until he reaches age 67 and afterward to age 75 if he meets the work test yearly.
Maximum Total Super Balance for additional contributions
A person will not be eligible to make NCCs if their total super balance (across all super funds) on the prior 30 June is equal to or greater than $1.9m depending on their personal limit. If the total super balance is less than$1.9m but more than $1.68m on 30 June of the prior year, the person will be eligible to contribute some NCCs but cannot fully utilise the 3-year bring-forward of $360,000. In relation to the re-contribution strategy, this means that:
TSB on 30 June of prior financial year
Contribution and bring-forward available
Less than $1.76m
3 years ($360,000)
$1.476m to < $1.88m
2 years ($240,000)
$1.88m to < $2m
1 year ($120,000, no bring-forward available)
$2m and above
Nil
re-contributions, whereby one member of a couple makes a withdrawal from their SMSF account and contributes into their spouse’s member account, may become attractive to the extent that it would enable them both to maintain a member account balance of less than $1.9m, potentially preserving future eligibility to make NCCs.
$1.9 – $2m Pension transfer balance cap
From 1 July 2024, a transfer balance cap rose to $2m (indexed) but somewhere between $1.6 and $2m for those who already have a pension in place. This measure was introduced in 2017 to limit the maximum amount that an individual can transfer into the retirement phase of superannuation. Any amount in excess of the transfer balance cap needs to
remain in accumulation, or
use a re-contribution strategy where one spouse makes a lump sum withdrawal and contributes the amount into their spouse’s account may also allow the couple to collectively hold more of their wealth in tax-effective superannuation pensions.
The Traps and interaction with Centrelink strategies
When deciding whether to use a re-contribution strategy, it’s important to consider each member’s personal circumstances, as well as any implications the re-contribution strategy may have on their broader situation.
Moving Funds to a Spouse under Age Pension age
A popular Centrelink strategy involves a person who is of Age Pension age cashing out some of his/her super and having the money contributed in the SMSF member account of their spouse who is below Age Pension age. This strategy can enable the older spouse to get more Age Pension, as super in the accumulation phase is not means-tested when held in the name of a person under Age Pension age. It can also enable taxable money to be converted into tax-free money and may result in a Government co-contribution or spouse tax offset.
I hope this guidance has been helpful and please take the time to comment. Feedback is always appreciated. Please reblog, retweet, like on Facebook, etc to make sure we get the news out there. As always please contact me if you want to look at your own options. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or via Skype. 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
U40/8 Victoria Ave. Castle Hill NSW 2154
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking into 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.
The Australian Financial Review has released an article (behind paywall) today focusing on poor performance of Evans Dixon’s internal funds marketed heavily to many of their clients. The main focus is on the fall in value of their own stock but equally on the heavily fee laden products such as US Masters Residential Property Fund (URF).
source AFR and Bloomberg
Well that’s almost exactly 3 years after another finance website, EVISER, that I was very proud to be apart of, called out the fund as “A magic pudding, just not for investors” and “one of the most expensive managed funds we’ve ever laid our eyes on”. Here is that full extensive article written by John Nunan and Richard Livingston for Eviser in MAY 2016 and bear in mind that the fund was showing positive returns at the time but hiding its true colours. All data on fees and charges were relevant as of May 2016 but may have changed in the last 3 years.
US Masters Residential Property Fund: A magic pudding, just not for Investors
We explain why the US Masters Residential Real Estate Fund is one of the most expensive managed funds we’ve ever laid eyes on.
KEY INFORMATION
Fund: US Masters Residential Property Fund
Fund manager: URF Investment Management Pty Ltd (part of Dixon Advisory Group)
Fund size (at 31 Mar 2016) $622m (market capitalisation)
Inception date June 2011 (listed on ASX in July 2012)
Performance (since inception) at 31 Mar 2016 11.7% per annum (calculated by Dixons based on share price performance, including dividends and adjusted for rights issues).
FEE SUMMARY
Investment management fee: 1.24% pa (plus GST)
Administration fee: 0.25% pa (plus GST)
Responsible entity fee: 0.08% pa (plus GST)
Custodian fee: 0.02% pa (plus GST)
Other: listing fees, salary and wages recharges, office admin recharges, asset disposal fees, asset acquisition fees, structuring and arranging fee, debt arranging fee and handling fee (see table in article for more information)
Performance fee: None
Buy/sell spread: N/A (traded on ASX)
The Magic Pudding is a classic Australian children’s book that tells the story of a pudding that, no matter how often it’s eaten, is always available for its owners to eat next time they’re ready for a meal.
The US Masters Residential Property Fund (ASX Code: URF) is the magic pudding of investment vehicles – a continuous buffet of fees for the manager and promoter, Dixon Advisory Group (now Evans Dixon) and its associates. When we first read the fund’s financial statements we were amazed at the number of different fees Dixon and its associates (which we’ll refer to simply as ‘Dixon’) were able to charge to the fund. However, buried deep in the balance sheet or related party notes, we’d find yet another fee.
But it’s not just the fees that worry us about this fund. We have so many questions about the fund, its strategy, the strength of its balance sheet and the risks, that even if we were to ignore the fee load, we’d be unlikely to ever get comfortable making an investment.
The fund and its investment strategy
Launched in 2011, and listed on the ASX in 2012, the fund was initially presented as an opportunity for Australian investors, with the benefit of a strong Australian dollar, to invest in residential real estate in the New York metropolitan area (mainly Hudson County, New Jersey) at attractive valuations. Rental yields were expected to be greater than 8 per cent a year.
Over time the investment strategy has morphed into what is today, a strategy of buying and renovating properties in neighbourhoods undergoing rapid growth and gentrification, with the intention of ultimately leasing them. This has transformed the fund into less of a passive, rent earning investor and more of a property speculator, with a large proportion of the fund’s earnings coming from revaluations of the properties it owns (more below).
Property investors know that managing (and renovating) a property isn’t a simple or cheap exercise and this shines through in the portfolio owned by this fund. The fund requires a large range of services, with the key ones provided by Dixon. In addition to being the investment manager, Dixon provides the following paid services: the responsible entity; administration and accounting; architecture, design and construction; property management and leasing; property acquisition and disposal; execution, structuring and arranging (capital raisings); and debt arranging. Dixon also charges a handling fee when it raises new capital from its clients.
You won’t be surprised to learn this shopping list of services isn’t cheap. Details of some of the services and the fees charged can be found in the Services and Fees section of the fund’s website. In Table 1, we’ve summarised these and the others we’ve found scattered throughout the financial statements and the Product Disclosure Statement (PDS).
We’ll return to the smorgasbord of fees in a moment. First let’s take a quick look at what the fund owns and where the money comes from.
The portfolio
Pictures of funky Brooklyn, Manhattan and Hoboken townhouses are scattered throughout the regular quarterly updates (click here for the 31 March 2016 update). However, it’s not what the properties look like, or where they’re located that’s of interest to us. We’re focused on whether they’re being leased or not.
Table 2 shows the fund’s portfolio at 31 March 2016, including both freestanding properties owned directly and multi-family buildings owned through various joint venture entities. The status of these properties is as follows:
Occupied (leased) – 63 per cent Renovation/turnover – 34 per cent For lease – 3 per cent
Due mainly to renovation works, effectively a third of the fund’s assets aren’t available for lease. Combined with rising valuations and falling rental yields, this means the days of the fund being a high yielding investment are gone, at least for now.
In the year ended 31 December 2012, the fund earned $4.2 million of rental income on an average investment property balance of $67 million. Given the rapidly growing nature of the fund it’s a very rough estimate, but this equates to an average rental yield of over 6 per cent. Revaluations of properties contributed another $5.7 million of profit (a little more than the rent).
Fast forward to 31 December 2015 and the (now much larger) fund earned almost $22 million of rental income on an average investment property balance around $703 million. That equates to an average yield just over 3 per cent. Meantime, property revaluations contributed almost twice as much as rent – about $40.8 million.
These figures highlight the increasingly speculative nature of the fund’s investment portfolio and also why the fund has struggled to generate positive operating cash flow since its inception. Even if the fund shifts to a position where the portfolio is fully (or almost fully) leased, this basic proposition is unlikely to change, at least anytime soon.
In the 31 March 2016 update Dixon estimated that the fund would earn another USD11.4 million in rent from the properties currently being renovated. While this might eliminate last year’s $14.4 million ‘core’ loss (see Table 4 and related discussion below) it would only reduce the negative $30.6 million operating cash flow, not turn the fund into a positive operating cash flow producer.
The fund has a low level of income, high level of expenses and relies on non-cash items to turn a profit. This, together with its growing acquisitions, means that it has had to continually tap unitholders on the shoulder for further capital and borrow from a variety of sources.
The current funding structure for the fund is set out in Table 3. A key feature is the two tranches of URF Notes that were issued in 2014 and 2015 and pay a fixed interest rate of 7.75 per cent.
The use of borrowing adds to the speculative nature of the fund’s portfolio. In the case of the URF Notes, often the fund is effectively borrowing money at 7.75 per cent to buy assets which won’t earn a cent initially, will have substantial sums spent renovating them and then will be put out to lease to earn rental income at a rate of say 3 to 4.5 per cent (although hopefully calculated on an upgraded book valuation).
Put this way, it’s fairly obvious why the fund’s strategy is such a cash drainer in the early years and how it could come unstuck. A downturn in the New Jersey or Brooklyn property markets (where most of the fund’s assets are located) could place pressure on both the ability to revalue the properties upwards (post renovation) and flat or falling rents. In this scenario the ability of the fund to pay its interest bill and generate a reasonable profit for unitholders, could be pushed a long way into the distant future.
Depending on the severity, a property downturn could cause the fund to have to sell properties in order to repay the URF Notes (which mature in 2019 and 2020) and other debts, exacerbating the fund’s problems in generating cash.
The early year cash flow drought associated with the underlying portfolio is magnified by the substantial levels of fees and other expenses incurred by the fund.
Let’s take a look at them in more detail.
Financial analysis
To put it bluntly, we’ve seen very few fee-fests like this fund. Perhaps some of the crazy tax deals beat it – for instance, managed agricultural schemes – but we struggle to recall a more traditional investment fund that’s paying fees in the order of five per cent or more (calculated as a percentage of the net asset base), year-in, year-out.
Admittedly, it’s not an apples for apples comparison to something like an Australian share fund, since property is typically a more expensive asset class to manage. But asset class alone doesn’t explain the continually high fee load being borne by this fund.
Table 4 shows the fund’s accounting results for each year since it was launched, and Table 5 shows some key financial ratios. We’ve used our own display format as it better demonstrates how the fund loses money on a ‘core’ basis each year, but generates a profit through renovating and revaluing the properties and, perhaps even more importantly, foreign exchange (FX) gains. It also highlights the amount of fees that have been paid by the fund since it was created.
At 31 December 2015, the fees totalled almost $100 million, and there’s a chance we’ve missed some as the fund’s disclosure of fees is both complicated and in a constant state of flux. If there’s an easily digestible summary of the fees paid by the fund somewhere on the Dixon website, we haven’t found it.
We’ve already discussed the fund’s low level of income and high levels of URF Note interest. When you add in the fees, it explains the large operating cash outflows the fund has experienced since launch. Cumulatively, the fund has burned through almost $50 million in operating cash flow between launch and 31 December 2015.
Fees on borrowed money
Dixon is paid an extraordinary array and volume of fees, but that’s not the only issue. Despite earning fees for managing and renovating the portfolio, making
purchases and sales and raising money, Dixon is paid an investment management fee of 1.24 per cent (for whatever aspect of the fund’s investment management that hasn’t been paid for already), together with administration (0.25 per cent), responsible entity (0.08 per cent) and custodian fees (0.02 per cent). Added together, these percentage fees add to 1.59 per cent, plus GST.
Scarily, these fees are paid on the gross assets of the fund, so it currently works out at around 3 per cent based on the unitholders equity (with all the transaction based fees on top). This is a massive fee load but even worse, the fact the fees are on gross assets gives Dixon a strong disincentive to deleverage the fund (at least, by diverting income or asset sale proceeds to paying down debt) since they’d effectively be costing themselves a substantial amount of money. A perverse incentive like this is the very reason we don’t like geared investment vehicles paying fees on gross assets.
So there you have it: the fund is an extraordinarily expensive cash burner. However, the fund has survived and prospered, largely on the back of three critical factors: property revaluations, foreign exchange gains and the ability to regularly source new capital and borrowings.
Performance
Table 4 demonstrates how the fund relies on property revaluations and foreign exchange gains to compensate for large ‘core’ losses. While the gains on revaluations may ultimately be reflected in a higher level of rental income (or asset sale proceeds) the FX gains are ‘one-off’ profit items that may not be repeated, or may even reverse themselves in future years.
Worryingly, through to 31 December 2015, FX gains on translation contributed almost 100 per cent of the cumulative post-tax accounting profits of the fund.
Effectively, for all of the fund’s activity and the substantial revaluation gains made as a result of renovations, the fund’s accounting profits to date have more to do with the recent depreciation of the AUD against the USD than anything property related.
In the 31 March 2016 update, Dixon reported that the fund has produced returns of 11.7 per cent a year since its launch in June 2011. However, over that same period, the US dollar itself has returned over 7 per cent a year (measured in AUD returns) and a simple US property , such as the Vanguard REIT (NYSE Code: VNQ), has returned around 11.5 per cent.
In AUD terms, that works out at almost 20 per cent a year for a simple real estate , that doesn’t have the development risk or financing risk associated with URF. URF is a great example of reasonable absolute performance hiding terrible relative performance.
Risk
More worrying than the lacklustre performance is the amount of risk taken to achieve it. At first glance, a debt-to-equity ratio for a property trust of just under 50 per cent (at 31 March 2016) is nothing to get too worried about. But this fund is no ordinary property trust. It’s part property owner, part developer, part FX speculator (due to the fact it has issued the URF Notes in Australian dollars) and part guarantor of the juicy Dixon fee arrangements.
Without knowing whether Dixon intends to ease off the ‘buy and renovate’ strategy, repay the URF notes, or restructure some of the fee arrangements it’s difficult to tell when this fund may produce positive operating cash flow, or indeed whether it will ever do so. That means it’s relying on being able to raise further capital, borrow, or sell assets at a profit in order to pay the bills.
The problem with this type of approach is that everything can come unstuck at once. A downturn in the property market would make it difficult to sell assets
at a profit and tough to borrow or raise capital (except at a large valuation discount). In that scenario, the fund may be forced to sell assets at discounted
valuations to raise cash and if that happens the debt to equity ratio can increase rapidly.
If the fund had a property portfolio generating, say, a 5 per cent rental yield, with expenses running at 2 per cent a year, the story might be very different. In that case, it might be able to sit tight, pay its interest bills and wait for a recovery. However, the fund’s constant operating cash outflows means it has to continually tap unitholders and lenders for more cash and if that dries up, the conservative approach is to assume it will have big problems.
Summing it up
We could dig further into the property portfolio – for instance, analyse per square metre lease rates for Hoboken rental properties – but it really doesn’t matter. This fund has produced relatively little for investors versus alternative investments, largely because it suffers under a crushing fee and expense load that has eroded a lot of the gains produced by FX movements and a buoyant underlying property market.
Looking forward, with FX gains more difficult to come by, unitholders are taking on an enormous amount of risk since the fund is now substantially leveraged and has an expense load that keeps on increasing. It’s unclear exactly how a property downturn might play out, but our concern is that this fund could end up suffering a crunch and suffer massive losses from having to sell assets on the cheap.
If you know enough about New Jersey property to be bullish on freestanding Hoboken houses, buy one directly, or team up with some fellow investors to do so. But if you’re simply an Australian SMSF trustee looking for some exposure to global property and infrastructure, there are plenty of better options available. You simply don’t need this fund, or the expense and the risk that comes with it.
Disclaimer: This article is general in nature and does not take your personal situation into consideration. This article is not a recommendation of any investment or facility mentioned in it, and you should seek financial or legal advice specific to your situation before making any financial and/or investment decision. This disclaimer is in addition to our standard Terms and Conditions. The Product Disclosure Statement (Offer Document) for this fund can be found here.
Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why not 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 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
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.
Even the most seasoned SMSF Trustees and members realise that they need to be on top of their game over the coming 12 months. If you are running your own SMSF or your better half is doing so, then drag yourself and them along to the SMSF Association’s SMSF & Investor Event. Let the experts guide you.
Full disclosure, I am a board member of the SMSF Association and I do want as many people as possible to come along and boost their knowledge and be prepared for what the budget and possible new future government will throw at us. I have also bargained for a deal for you and if you use the coupon code “SMSFCoach” when registering you will be able to attend for FREE
So what is on the agenda:
Following the Federal Budget and leading up to the end of the financial year, hear from key SMSF and investment experts on crucial factors you as a trustee or your clients if you’re a n SMSF professional,, should be thinking about in regards to your fund/your clients’ funds. The program will feature:
A Special Address on the impact of the removal of franking credit refunds on SMSFs
Your SMSF Update – what’s new in self managed super
End of Financial Year – review your investment portfolio in light of political and investment markets
Peter Hogan our SMSF Education expert will discuss Everything you need to know about starting and receiving pensions – whether you are starting to think about moving into retirement or already earning a pension this session will cover everything you need to know especially as it relates to the Transfer Balance Cap.
And more to be announced soon…
WHERE & WHEN
Date: Tuesday 9 April 2019
Time: 8:15am – 3:30pm (including lunch and morning tea)
Register here using the coupon code ‘SMSFCoach’ for Free
(I confirm that I receive no commissions, fees or incentives for promoting this event and will not receive any of your private information)
SHOUT OUT TO SMSF PROFESSIONALS
If you are a SMSF Accountant, Auditor or Financial Planner then please pass on this opportunity to your clients as we need SMSF Trustees to be more knowledgeable than ever. Understand that ASIC now expects you to be providing education to your clients and you must find cost effective ways of doing this. Why not leverage of your association membership and provide your clients with access to this event or maybe even come along with a group of them.
If you are in Victoria don’t feel left out we will be coming to Melbourne too in June!
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
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.
The ATO has recently redesigned the Division 293 notice to provide information clearly and concisely. This includes providing the full assessment calculation to make it easier for people to understand how their tax has been calculated. This will also make it easier to identify any erroneous assessments due to incorrect reporting of information
Julie Steed, Senior Technical Services Manager of Australian Executor Trustees Part of the IOOF group, has kindly provided a refresher on the Division 293 tax and a review of the newly redesigned ATO notice that can be seen here: Div 293 notice of assessment
Division 293 tax
From 1 July 2017, the income threshold above which individuals pay an additional 15% tax on certain superannuation contributions reduced from $300,000 to $250,000. In December 2018 the ATO began issuing over 90,000 Division 293 notices for the 2017/18 income year. It is estimated that approximately 125,000 individuals will receive a Division 293 notice in the 2025FY.
Importantly, there are no strategies that can be used to reduce an individual’s liability for Division 293 tax. However, understanding the options that are available and how the Division 293 notice process works will assist individuals who receive a notice.
Overview
People with Division 293 income greater than $250,000 will pay 15 per cent additional tax on certain superannuation contributions. The tax is a personal tax rather than a tax deducted from super contributions by a fund. However, individuals may elect to release funds from super to pay the tax (see the Choices section below).
Division 293 income
Division 293 income includes:
taxable income
reportable fringe benefits
total net investment losses.
Ad-hoc income
Individuals who are not generally high income earners may still be liable for Division 293 tax if they receive certain one-off payments during a year. Such payments include eligible termination payments, the taxable component of a superannuation death benefit and capital gains.
However, the taxable component of a super lump sum benefit (other than a death benefit) is not included where:
it is received by individuals from preservation age to age 59
it is up to the current low rate cap of $205,000.
Division 293 contributions
Division 293 contributions include:
employer contributions
personal deductible contributions
contributions for a defined benefit interest (valued by an actuary)
employer contributions (including salary sacrifice) to a constitutionally protected fund.
The additional tax does not apply to:
excess concessional contributions
non-concessional contributions
contributions to certain Government funds for senior personnel, unless they are salary sacrifice contributions
contributions for certain Judges to defined benefit funds.
Calculation of Division 293 tax
Division 293 tax is 15% of the lesser of:
the amount of the Division 293 contributions
the amount of Division 293 income and Division 293 contributions above the $250,000 threshold.
Case study
Ryan has the following Division 293 details:
Division 293 income
$240,000
Division 293 contributions
$20,000
Total
$260,000
Division 293 tax is payable on $10,000, being the lesser of:
$20,000
$260,000 – $250,000 = $10,000
The Division 293 tax amount is 15% x $10,000 = $1,500
Division 293 notice
The ATO issues an Additional tax on concessional contributions (Division 293) notice to individuals which specifies the additional amount of tax that is payable and the due date for payment.
The ATO has recently redesigned the Division 293 notice to provide information clearly and concisely. This includes providing the full assessment calculation to make it easier for people to understand how their tax has been calculated. This will also make it easier to identify any erroneous assessments due to incorrect reporting of information.
The notice will also explain how to avoid interest charges, view statements of accounts online and the process for disagreeing with the assessment.
Choices
When an individual receives a Division 293 assessment they can choose to pay the tax from their personal resources. Alternatively, they can elect to have the amount released from their super fund to pay the tax. The time frame for making the election is 60 days. However, this may be a greater time frame than the date upon which payment of the tax is due.
The election can be made to release the tax amount from any super fund (other than some defined benefit funds). There is no requirement for the release to be made from the fund that received the contributions.
Release authority
If an election to have the amount released from super is made, the ATO will send the super fund a release authority and the fund will make the payment to the ATO. Funds are required to make the payment within 10 business days from the date the release authority is issued by the ATO.
Importantly a fund must not release an amount until they have received the ATO release authority. This requirement is sometimes misunderstood by SMSF trustees.
Conclusion
Understanding the choices available and the process involved in paying Division 293 tax can assist in ensuring that any tax payable is completed in a manner most appropriate to an individual’s circumstances.
Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why not 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.
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.
Here are some of the key issues we will discuss with you to get a better understanding on whether an SMSF is suitable to meet your objectives and circumstances. They have been developed to address concerns about people being pushed or rushing in to a SMSF. We want to protect access to the SMSF option for the long-term.
What do you or your family want to achieve by establishing an SMSF . This explores your reasons for investigating this strategy and if it aligns with your short, medium and long-term goals or is it something you have just felt was right for you. We will have no hesitation in suggesting you consider alternatives that may meet your true objectives. We don’t believe an SMSF is right for everyone.
Is contributing more to superannuation the right option for you at your age when we take in to account your financial commitments now and in the future as this money will be locked away until you meet a condition of release most likely in your 60’s. It may be more appropriate for your to concentrate on using excess funds for debt reduction, medium term investing in your name or an insurance bond for tax minimisation while retaining access to the capital. We develop our strategies to suit you!
Is running a strategy via an SMSF suitable for you in terms of your experience, knowledge and available time. There are many busy executives, truck drivers and small business owners that I have had to talk out of running and SMSF when they can’t even find 1 hour in their week to schedule a meeting or even engage via Skype to understand their trustee obligations.Yet they thought they run a $800,000 investment portfolio! I hesitate to mention the one who said he could do his research while driving to work on his mobile! Or the couple who felt they were “property experts” because they had 4 Queensland regional properties, having never once visited any of them or done more than a cursory Google search using the highest valuations found and ignoring recent listings. By the time we analysed the portfolio they were going nowhere, low-income and negative capital growth. On asking for Property Inspection reports we found they were also up for tens of thousands in repairs and maintenance over the coming years. It was agreed that their super was safer in their well diversified existing strategy than another “punt” on property in an SMSF until learned more about property investing from a Buyer’s Agent.
What funds do have to rollover from an existing fund(s). Are you able to move those funds? Some people are in government, military or state funds that cannot be accessed before a certain age like MSBS or Local Govt Super or maybe a Defined Benefit Scheme that’s too sweet to leave! Are you able to redirect future Super Guarantee contributions from your employer as some have a mandated fund under enterprise bargaining agreements etc. Are there high exit fees or underlying investments that are not liquid? Is it the right move for you?
Have insurance needs been adequately identified and addressed for your future protection? We have to look at the current insurances in place and do a needs analysis to see if they should be maintained, altered, replaced or cancelled.
We need to know if you are aware of and clear about trustee responsibility? This blog and other material we point you to will give you the knowledge base you require to run a fund. We may suggest you do this education before committing to setting up the SMSF. Your urgency to set up a fund does not let us abrogate our duties.
We will walk you through the costs of setting up and administering the SMSF annually as well as costs related to specific strategies you want to undertake? This includes fees associated with all related aspects of SMSFs including advice, investments, establishment, legal and administration?
We will help you with the development and management of the SMSF investment strategy and ensure it is compliant and will help achieve your objectives. We will ground you in reality (no reasonable investment will provide excessive returns long-term so we might burst a few myths.
If the SMSF is to engage in borrowing or gearing? We will guide you around what is a reasonable level of gearing in your circumstances and to achieve your retirement plans and analyse the affordability of the gearing strategy. We will provide you with a full 3 step guide on the rules, the process and the mistakes to avoid during implementation.
One last warning :
We want you to use the right strategy at the right time for your future financial security.
This may explain why from 2017 to 2025 we have been one of the most recognised among the best of the best SMSF Advisers in a number of professional awards.
It contains a huge library of articles, life events, videos, quiz’s and calculators, so that you can learn about managing money while having a bit of fun at the same time.
The best part of all is that you work at your own pace and we offer a free trial to one and all but it will always be free to our clients as part of our advice service.
Watch this short video which explains what is available in this vast knowledge base.
Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572
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.
The SMSF Coach 