All posts tagged superannuation

Reminder: Minimum annual payments for Superannuation Income Streams in 2014 / 15 including SMSF Pensions.


Yes the Government have been messing about with the system so much over the last few years that many clients have been totally confused and had to confirm their minimum pension payments for last year so I thought I would just remind everyone of this years limits so they can put their payment plans in place.

How much to take to stay compliant with your pension

How much to take to stay compliant with your pension

If you started a pension or annuity on or after 1 July 2007, a minimum pension amount is required to be paid each year. There is no maximum amount other than the balance of your super account, unless it is a transition to retirement pension in which case the maximum amount is 10% of the account balance.

The minimum payment amounts will not be reduced for the  2014-15 year. The following table shows the minimum percentage factor (indicative only) for each age group.

Age

Minimum % withdrawal (2014-15)

Under 65

4%

65-74

5%

75-79

6%

80-84

7%

85-89

9%

90-94

11%

95 or more

14%

Note that these withdrawal factors are indicative only. To determine the precise minimum annual payment (especially for market linked income streams), see the pro-rating, rounding and other rules in the Superannuation Industry (Supervision) Regulations 1994.

For rules and limits on other Payments from super here are the relevant links to the ATO site.

Low rate cap amount

Untaxed plan cap amount

Minimum annual payments for super income streams

Preservation age

Super lump sum tax table

Super income stream tax tables

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. Please reblog, retweet, put on your Facebook page if you found information helpful.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

SMSF Specialist Adviser 

 Follow SMSFCoach on Twitter Liam Shorte on Linkedin NextGen Wealth on Facebook   

Verante Financial Planning

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.

1 Comment
by SMSF Coach - Liam Shorte on October 1, 2013  •  Permalink
Posted in Pension Strategies, Pensions, Tax Planning
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Posted by SMSF Coach - Liam Shorte on October 1, 2013

https://smsfcoach.com.au/2013/10/01/reminder-minimum-annual-payments-for-superannuation-income-streams-in-2014-15-including-smsf-pensions/

Protecting your Retirement and your Grandchildren


Sometimes it pays to think outside the square when wondering how you can help your adult children and at the same time protect your own enjoyment of your retirement. I’ll use a case study to explain this further. Insurance Safety Net

Case Study

Sam & Penny are 63 year-old retirees with two adult children. Both children have their own families and one also owns his own business. Sam & Penny wanted to give their children’s finances a boost now while they had young children and needed help rather than on their death.

 

Challenge

Although Sam & Penny were keen to help out their children, they also wanted to keep the money in the immediate family (protected from in-laws and creditors).

In addition, they wanted to make sure their grandchildren were protected financially in case something happened to their parents.

They had seen friends having to take over raising grandchildren after a death of a child and saw the health, social and financial effects that had on their retirement so they wanted to put some protection in place.

 

Solution

We facilitated private loan agreements giving each of their children $100,000 to use towards reducing their mortgage debt. The loan required a minimal amount of interest to be paid yearly and no principal but it was enough to confirm a valid contract was in place. It cost $100 for each completely valid loan agreement

Importantly, if one of their children splits up from their spouse or their son’s business goes under, Sam & Penny can call in that loan, protecting their money from any family settlement and/or creditors. They can then later re-gift the children back the money when appropriate. I know this sounds harsh but they worked hard for their money and want to see it benefit their own children.

Sam & Penny also set up an annual $1,000 super contribution (Non-concessional) for each of their children, and their spouses, on the condition that it’s used to fund life, disability or income protection insurance. The added benefit is that they families also got some additional funds from the Government Co-Contribution which enabled better cover to be purchased on level premiums.

These contributions ensure that Sam & Penny’s grandchildren are financially set up if something happens to their parents. This strategy also protects Sam & Penny’s nest egg, because their grandchildren won’t need their financial support if the worst happens.

They are perfectly happy to step in if needed to care for their grandchildren but they have seen what the added financial worries did to their friend’s health and want to ensure they don’t suffer likewise.

 

Benefits

  • Help their children get ahead
  • Protect the family’s money from ex-spouses, de-facto partners and creditors
  • Protect their grandchildren’s education and lifestyle
  • By locking in level premiums at a young age their children will benefit from lower premiums for life.
  • Keep their own nest egg intact for their retirement and provide a safety net.

Summary

There are ways to pass money to your adult children while protecting it from loss in the event of relationship breakdown.

Sometimes offering funds to insure your children is a far more cost effective way of coping with tragedies protecting everyone’s financial future.

Verante Financial Planning provides comprehensive financial planning services, covering both wealth creation and wealth protection. We help our clients grow their wealth and protect their families and businesses.

Why not click here to Schedule a Meeting by phone, face to face or via Skype if you want to look at your own insurance and family protection options. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or online via Skype.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

SMSF Specialist Adviser 

 Follow SMSFCoach on Twitter Liam Shorte on Linkedin NextGen Wealth on Facebook   

Verante Financial Planning

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.

Leave a comment
by SMSF Coach - Liam Shorte on September 13, 2013  •  Permalink
Posted in Insurance Strategies, Retirement Planning
Tagged , , , , , , , , , , , , , ,

Posted by SMSF Coach - Liam Shorte on September 13, 2013

https://smsfcoach.com.au/2013/09/13/protecting-your-retirement-and-your-grandchildren/

Using an Anti-Detriment Payment vs. Recontribution Strategy in your SMSF


I have used the anti-detriment payment strategy to improve death benefit payments over the years but they are dwarfed by the number of SMSFs using recontribution strategies.

Anti-Detriment vs. Recontribution

No clear winner

With the implementation of the Simple Super legislation in July 2007, many strategies have been published regarding re-contributing into your superannuation fund with the benefit of avoiding the 17% tax on death benefits to non-dependants. However this may not always be beneficial as paying no tax may result in no anti-detriment payment being received which is an additional / alternative strategy available.

The recontribution strategy involves a member of a superannuation fund, normally after age 60 or if fully retired after age 55, withdrawing a lump-sum, and then recontributing the amount back into the fund as a non-concessional contribution. The result of this process increases a member’s tax free component of their benefit and reduces the taxable portion.

The advantages of this include:

  • Members under age 60 become eligible for an increased tax-free portion on their pension;
  • Non-tax dependent beneficiaries of a deceased member’s account pay no tax on the tax-free portion but 16.5% on the balance.

There are also considerations that must be taken into account before implementing such a strategy, such as:

  • by withdrawing lump sum benefits from super below the age of 60, you will only be able to receive the first $185,000 of your taxable portion at a concessional tax rate;
  • Your ability to recontribute is restricted. For the current financial year, you may contribute up to an annual cap of $180,000. For members under 65, they may contribute up to $540,000 in a financial year by using the “3 year bring forward” rule.

An anti-detriment payment is effectively a refund of contributions tax paid by a member during the accumulation phase. It is an additional payment that may be made to an eligible dependant if a death benefit is taken as a lump sum. The anti-detriment payment is calculated based on the taxable portion of a deceased members balance so a reduction in the taxable component through a recontribution strategy will effectively reduce any anti-detriment payment available. The effect of either strategy can be seen below.

Consider the following example:

 Member with $600,000 in their account all from SG Contributions and Salary Sacrifice i.e. no Tax Free component – 100% Taxable Component. He has a son and daughter who each earn about $90,000 per annum.

 In this case not only has the deceased member’s dependant received an additional $105,882, the relevant Fund will be able to apply $705,880 in deductions against its income going forward. Where, for example, the deceased’s adult son and daughter choose to become members of the SMSF and, on average, the SMSF earns $40,000 a year in investment income, a deduction of this size could shield the Fund from tax (on concessional contributions and investment income) for over 8 years!

Anti-Detriment

Without Anti-Detriment
Tax Free Component Nil Tax Free Component Nil
Lump sum death benefit $600,000 Lump sum death benefit $600,000

Anti-detriment payment

 $105,882 Anti-detriment payment Nil
Total death benefit $705,880 Total death benefit $600,000
Tax deductions going forward ($105,882/15%) $705,880 Tax deductions going forward Nil

The following table looks at the effect of implementing a re-contribution strategy on death benefits paid to a non-dependant for tax purposes (such as adult children) and a dependant (spouse) compared to an anti-detriment payment is as follows:

Strategy 1: No Recontribution Strategy (lump sum paid to adult child)

Strategy 2: No Recontribution Strategy (lump sum paid to spouse)

Strategy 3 Full Recontribution Strategy used

  Strategy 1 Strategy 2 Strategy 3
Taxable Component $600,000 $600,000 Nil
Tax-free component Nil Nil $600,000
Anti-detriment payment $105,882 $105,882  
Total benefit (pre-tax) $705,882 $705,882 $600,000
Tax payable by non-dependant $116,471 Nil Nil
Total benefit (after-tax) $589,411 $705,882 $600,000

Generally, the recontribution strategy is worth considering if the benefit is likely to be paid to a non-dependent for tax purposes, such as an adult child unless they will make use of the SMSF for their own future superannuation strategy. This is because the tax savings generally outweigh any potential anti-detriment payment they would otherwise receive.

For a spouse or dependant child, you will usually be better off relying on the anti-detriment provisions – because they pay no tax on death benefits. However this requires prior planning and willingness to pay additional administration costs and taxes on anti-detriment reserve even when you reach pension age.

Where the anti-detriment payment tax deduction causes a tax loss in the fund, the full quantum of the loss may not give a benefit to remaining members. In circumstances where for example the spouse is in pension phase, it is important to recognise that “Exempt Current Pension Income” absorbs carry forward losses (other than carry forward capital losses) before it is available to offset income of the Fund. Also, an anti-detriment reserve can affect the calculation of exempt pension income in the fund. Therefore, the full benefit of the anti-detriment may not be able to be utilized.

An alternative solution for those looking to use an Anti-detriment strategy and with a terminal illness or shorter expected life expectancy is to roll-over the member’s account to a retail or industry superannuation account provider that have a policy of making anti-detriment payments as their set up means they will have more flexibility to fund anti-detriment payments.

Another alternative for those dealing with a death of someone well before retirement age is the use of a Future Service Benefits Deduction so click on the link to read more about that.

If you believe that setting up a recontribution and/or an anti-detriment strategy could be beneficial to your superannuation fund and to the your beneficiaries, then now is the time to plan for this and put in place the appropriate structures and strategies. Contact me at our Windsor or Castle Hill offices or by phone or email if you would like to discuss your options.

Keep updated by putting an email address in on the left hand column and pressing the “Sign me up!” button. Happy to take comments or questions in the section below.

Bye for now.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

SMSF Specialist Adviser 

 Follow SMSFCoach on Twitter Liam Shorte on Linkedin NextGen Wealth on Facebook   

Verante Financial Planning

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.

2 Comments
by SMSF Coach - Liam Shorte on August 5, 2013  •  Permalink
Posted in Anti-Detriment, Estate Planning
Tagged , , , , , , , , , , , , , , , , , , , ,

Posted by SMSF Coach - Liam Shorte on August 5, 2013

https://smsfcoach.com.au/2013/08/05/using-an-anti-detriment-payment-vs-recontribution-strategy-in-your-smsf/

Using your SMSF to plan now for a future downsize and a seachange


Living in Sydney and I have many clients who dream of retiring up or down the coast or inland to more suitable and often slower paced areas of Australia.  SMSF Property Investment

Many plan to downsize and sell their Sydney home in retirement and purchase a place on the coast. The issue that arises is that they often feel they have identified the area or actual property they want to live in during retirement and want to secure it now. Others are afraid that the selected area will be priced out of their budget in future years with so many baby boomers retiring over the coming decades.

So here is a solution we used for a few of our clients wanting to plan ahead and reduce that risk.

Jeff & Joan (of course it’s not their real names!) came to see me in 2006 and they had a lovely house in Hills District of Sydney but it was 2 storeys and with Jeff’s knees playing up they knew that they would need a single level property later. Also they planned to move to Lake Macquarie in 10 years to be nearer their children and hopefully future grandchildren in Newcastle in retirement.

They could not borrow to buy a property in their own names as they had business and family commitments that reduced their borrowing capacity.

They had a decent sized SMSF and could afford to buy a property as part of their diversified strategy so we put this strategy to them.

Sole Purpose Test issues

Due to the issues with the sole purpose test we convinced them that rather than looking for a specific property in the range of $750,000 they might use themselves but stretch their budget, they should identify a suitable investment property with good rental and capital growth prospects to deliver the best possible return for their retirement. Our argument was that the debt burden would be too high and their personal circumstances and needs can change but a good investment property could deliver the result they need to fund a better retirement regardless of those changing circumstances.

They identified a good investment property in Lake Macquarie that ticked all the boxes including affordability and was currently tenanted. We revised the SMSF Investment strategy and put the trustees reasoning for investing in residential property and the projected returns and maintained a diversified investment portfolio with the other funds. We also looked at options and exit strategies as part of the analysis and the investment stood up as a sound one for their portfolio.

There SMSF purchased the property in early 2007 for $400,000 and it was a sound investment over the following 5 years providing a reasonable rental income and about 3% capital growth per year over that time which was decent for a single level property just one street back from the water.

In 2012 Jeff decided to retire early and Joan agreed to reduce her hours. They put their house in Castle Hill on the market on reviving their needs thy believe it would be prudent not spend too much for their dream home and settle for the current investment property. gave the Lake Macquarie Tenants 4 months notice which they felt was fair. Their Sydney property sold a few months later for $850,000.

We got a professional valuation on the Lake Macquarie property and it was valued between $480,000-$500,000, so we agreed a market value of $490,000. The couple elected for a lump sum pension commutation from their SMSF paid “in-specie” as the Lake Macquarie property from their Self Managed Super fund and because it was in NSW they did have to pay Stamp Duty on the transfer. I believe on Victoria and WA there  are exemptions that apply on such transfers as long as it is the same Beneficial Owners after the transaction. We sought legal advice here in NSW and were unable to get this concession.

The couple then used $150,000 to renovate the property and kept $150,000 in Term Deposits in their own name. This left approximately $500,000 which they contributed as Non-Concessional contributions equally to the SMSF.

What were the benefits?

  1. If they had stretched to the mor expensive property they would gave had to take on debt and could not have considered the early retirement.
  2. Secured a foothold in the property market in their area of choice for future retirement.  The relief of having some certainty should not be underestimated by advisers.
  3. They did not over extend their personal debt which would have left them very exposed during a downturn in their business from 2008-2010
  4. Rental income from 2007 to 2012 was taxed at only 15% rather than their higher marginal rates.
  5. Secured a $90,000 tax-free gain on the investment property as they were in pension phase.
  6. Turned their superannuation accounts from mostly a Taxable component to accounts with more than $250,000 each of non-concessional components and Tax Free to their adult children as part of their Estate Planning.
  7. Oh and they missed the GFC effect on this portion of their investments!

Downside:

  1. Yes we had to pay Stamp duty but that was highlighted from the start as a possibility
  2. The house prices did not run away from them in Lake Macquarie but at least they were not worried.

I must also mention a comment the clients made in their latest review and that was that in the 12 months since they moved they realise a waterfront property comes with higher rates and maintenance costs that would not have suited their retirement budget so well. Oh and they now have 2 grandchildren that they look after 2 days per week while enjoying the Lake Macquarie lifestyle they wanted.

Why not checkout my article “ What can my SMSF invest in?” as a good place to start.

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 online via Skype.

Keep updated by putting an email address in on the left hand column and pressing the “Sign me up!” button. Happy to take comments in the section below.

Bye for now.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

SMSF Specialist Adviser 

 Follow SMSFCoach on Twitter Liam Shorte on Linkedin NextGen Wealth on Facebook   

Verante Financial Planning

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.

Leave a comment
by SMSF Coach - Liam Shorte on July 31, 2013  •  Permalink
Posted in Property, Retirement Planning
Tagged , , , , , , , , , , , , , , , , , , , , , , ,

Posted by SMSF Coach - Liam Shorte on July 31, 2013

https://smsfcoach.com.au/2013/07/31/using-your-smsf-to-plan-now-for-a-future-downsize-and-a-seachange/

Owning your business property in a SMSF


Business Premises

Business Premises owned by SMSF

Interested in property and also running a business? Then one popular strategy used by many small business owners is to own their business premises in their self managed superannuation fund (SMSF).

Before we start let me emphasise, this is not a strategy to prop up a failing business.

There are a number of benefits in adopting this strategy:

  • As superannuation is generally more tax-effective than other investment entities you can have one of your major assets owned by a separate entity to yourself or your business thereby offering a greater degree of diversification of risk and ;
  • some asset protection as in the event of severe financial difficulty or even bankruptcy, creditors find it more difficult to get access to or create caveats over super fund investments as long as the premises were bought or transferred to the SMSF in good times, for clearly documented reasons and not deliberately to prevent creditors efforts to seek redress.
  • By having the premises owned by the fund rather than a third-party landlord you have more freedom to add fixtures and fittings, additional capacity and make changes to the layout without having to seek someone else’s approval and have surety of tenure that the costs can be recouped over time rather than worrying about ability to renew a lease at the landlords whim.
  • By accessing the capital held in a self managed super fund, your business can have more flexibility to make better use of its own capital to build or maintain the business.
  • It can often make it easier to sell a business later or pass it to family if they are not burdened with the capital requirements of funding a property purchase as part of the deal. This can also be a very stable income source in retirement as commercial / industrial property rents are often 7% or more.

When a SMSF owns real estate and you want to lease it back to your business which is seen as a related party of the fund the property must meet the definition of business real property (BRP).

Related parties of your fund include all its members, all their relatives and entities that those members and relatives control, or are deemed to control.

The definition of business real property is in subsection 66(5) of the SIS Act:

business real property , in relation to an entity, means:

a)    any freehold or leasehold interest of the entity in real property; or

b)    any interest of the entity in Crown land, other than a leasehold interest, being an interest that is capable of assignment or transfer; or

c)    if another class of interest in relation to real property is prescribed by the regulations for the purposes of this paragraph – any interest belonging to that class that is held by the entity;

where the real property is used wholly and exclusively in one or more businesses (whether carried on by the entity or not), but does not include any interest held in the capacity of beneficiary of a trust estate.

Accordingly, two basic conditions must be satisfied before an SMSF, or any other entity related to or dealing with an SMSF, can be said to hold business real property :

  • the SMSF or the other entity must hold an eligible interest in real property; that is an interest identified in paragraph (a), (b) or (c) of the business real property definition; and
  • the underlying land must satisfy the business use test in the definition, which requires the real property to be ‘used wholly and exclusively in one or more businesses’ carried on by an entity.

For more detail and numerous examples of Business Real Property you should see Self Managed Superannuation Funds Ruling SMSFR 2009/1

If the property does not easily fit the definition of a BRP, then the asset will be considered an in-house asset and my advice is to not to push the limits of the ATO’s patience. Seek good legal and tax advice to ensure you understand all the implications and requirements of having or transferring a property into a a SMSF

SMSFs with in-house assets need to make sure that their fund’s total in-house assets do not exceed 5 per cent of the market value of all the fund’s assets. The 5% test is measured at acquisition and at the end of each financial year. If there is a breach, then corrective action must be taken.

Document the Lease

To keep the relationship on an arm’s length basis do not take short cuts, treat the lease like it was between 2 unrelated parties out and  formal lease between the SMSF and the tenant (your or any other business). The terms of the lease should be clear and easily identified by an auditor reviewing the actions and paper trail of the trustees.

As trustee’s you are dealing with this property on behalf of the SMSF so you must be prepared to enforce the terms of the lease with the tenants. Lease payments must be paid on time and I recommend a direct debit be set up to ensure the temptation to delay or miss payments is avoided. If the business fails to meet its rental payment schedule the default penalty clauses must be enforced as they would for a third-party lease.

TIPS

For an online source to a flexible comprehensive lease agreement that ticks all the boxes  you can visit DIY Legal Kits – Lease Agreements

Example

Peter the Physiotherapist is specialising in rehabilitation and water therapy and needs a property where he can install heavy equipment bolted to the floors and a hydrotherapy pool.

A suitable property is available locally for $750,000. The problem is that the business doesn’t have the capital to purchase the property or the capacity to borrow that amount.

Peter and his wife Margaret have their own SMSF which has $450,000 in the fund.

Peter & Margaret decide that SMSF should purchase the property using a Limited Recourse Borrowing Arrangement to borrow the other $400,000 plus costs leaving $100,000 liquid cash in the fund.

They must use a Holding trust arrangement to hold the property under this type of scenario.

A lease must be put in place between the SMSF and the Business

A commercially comparable rent needs to be agreed and paid from the business to the SMSF.

The SMSF is a very tax effective investment vehicle in the long-term as once the members enter pension phase, the CGT and tax on rental income can be minimised.

For more details on how borrowing to buy a property in an SMSF works please see the following 3 part series of articles from earlier this year:

Property through super in a SMSF – Part 1: Background

Property through super in a SMSF – Part 2: The Process

Property through super in a SMSF – Part 3: 20 most common mistakes

Before contemplating this type of transaction is contemplated, it’s essential to consider the member’s long term retirement needs and the super fund’s investment strategy. Consider what are the impacts on the super fund in terms of liquidity, diversification, returns on the investment and what if the business fails and the  property remains vacant unable to find a suitable tenant.

Keep updated by putting an email address in on the left hand column and pressing the “Sign me up!” button. Happy to take comments in the section below.

To discuss your needs you can contact me at my Castle Hill or Windsor offices or I am happy to use Skype, phone or email as suits your needs.

Bye for now.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

SMSF Specialist Adviser 

 Follow SMSFCoach on Twitter Liam Shorte on Linkedin NextGen Wealth on Facebook   

Verante Financial Planning

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.

1 Comment
by SMSF Coach - Liam Shorte on July 29, 2013  •  Permalink
Posted in Borrowing, Property
Tagged , , , , , , , , , , , , , , , , , , , , ,

Posted by SMSF Coach - Liam Shorte on July 29, 2013

https://smsfcoach.com.au/2013/07/29/owning-your-business-property-in-a-smsf/

Make sure you do not leave SMSF money idle in savings accounts


Have you put aside some money in a savings account or high interest savings account that you have put aside and are not making transactions on? Well beware of you could find the funds get nabbed by the Government when after 3 years they qualify as a “Dormant Account“.  Missing Money

I was alerted to this by an Accountant friend who held some of their SMSF money in an online high interest savings account and had parked a fixed amount there for more than 3 years as it was earmarked for a specific future use. Low and behold the Government nabbed it as it qualified as a Dormant Account. It was not some minor amount either as it was over $10K!

So if you have such an account look after your interests and make a small transaction yearly to ensure it remains “Active”. As little as 1 cent being transferred in or out will keep the account as on Active status. As a Trustee it’s your duty to look after the money of the Self Managed Super Fund and to take reasonable care to protect it..

Unforeseen Outcomes

The action of the government raises an issue for fund administrators and auditors:

The client has not met a condition of release so the money is restricted and should not leave the fund so the question is has this money left the superannuation system or not?

Further, if the funds are to be claimed back with this good online provider is arranging asap, as the funds will be coming from outside of the SMSF fund will they be considered a form of contribution?

Want a Superannuation Review or are you just looking for an adviser 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. Do it! make 2016 the year to get organised or it will be 2026 before you know it.

Please consider passing on this article to family or friends. Pay it forward!

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

SMSF Specialist Adviser 

 Follow SMSFCoach on Twitter Liam Shorte on Linkedin NextGen Wealth on Facebook   

Verante Financial Planning

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.

1 Comment
by SMSF Coach - Liam Shorte on June 28, 2013  •  Permalink
Posted in Audit, News & Stats
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Posted by SMSF Coach - Liam Shorte on June 28, 2013

https://smsfcoach.com.au/2013/06/28/make-sure-you-do-not-leave-smsf-money-idle-in-accounts/

One Page SMSF End of Financial Year Checklist 2013


Ok last day to get your SMSF fund in order and ensure we are making the most of the strategies available to us. Here is a one page checklist of the most important issues that you should address with your advisors well before the year-end. For more detail on each issue visit the full article on The SMSF Coach – EOFY 2013 Strategies

1. It’s all about timing! Forget about doing anything for your fund after the Thursday June 27th
2. Review  Your Concessional Contributions – 25K , 25K, 25K max
3. Review your Non-Concessional Contributions
4. Co-Contribution
5. Spouse Contribution
6. Over 65? Do you meet the work test? (The 40 hours in any 30 days rule)
7. Check any payments you may have made on behalf of the fund.
8. Notice Of Intent To Claim A Deduction
9. Contributions Splitting
10. Off Market Share Transfers (selling shares from your own name to your fund)
11. Pension Payments
12. Reversionary Pension is often preferred option to pass funds to spouse or dependent child.
13. Review Capital Gains Tax Position of each investment
14. Review and Update the Investment Strategy not forgetting to include Insurance of Members
15. Collate and Document records of all asset movements and decisions
16. June Contributions Deductible this year but can be allocated across 2 years.
17. Market Valuations of all assets now required
18. In-House Assets – keep below the 5% limit at all times
19. TPD Insurance (Total Permanent Disability – basically “never work again” insurance)
20. Do you need to update to a Corporate Trustee
21. Check the ownership details of all SMSF Investments
22. Review Estate Planning and Loss of Mental Capacity Strategies.

As always please contact me if you want to look at your own options as we are currently taking on new clients. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or online via Skype.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

SMSF Specialist Adviser 

 Follow SMSFCoach on Twitter Liam Shorte on Linkedin NextGen Wealth on Facebook   

Verante Financial Planning

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.

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by SMSF Coach - Liam Shorte on June 27, 2013  •  Permalink
Posted in Audit, Checklists, Contribution Strategies, Financial Planning, SMSF, SMSF Management
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Posted by SMSF Coach - Liam Shorte on June 27, 2013

https://smsfcoach.com.au/2013/06/27/one-page-smsf-end-of-financial-year-checklist-2013/

Can My SMSF Buy And Lease Plant And Equipment To My Business


ID-100210503

Plant or Equipment in an SMSF?

I get this question on Plant and Equipment financing regularly from business clients with an SMSF. The technical answer is yes subject to complying with the regulatory provisions of SIS Act. In reality for most businesses the answer is most likely NO as there are so many ways you can breach one or more of the rules governing this area. Let’s look at some of those rules.

Firstly it is a requirement that a SMSF and any assets it considers purchasing must meet the Sole Purpose Test.

Sole purpose test

• Section 62: trustee must ensure fund is maintained solely for core purposes, such as benefits to members upon retirement and ancillary purposes

Other relevant issues include:

Formulating Investment Strategy

Section 52: trustee must formulate and give effect to investment strategy that has regard to whole of circumstances including:

• risk involved in making, holding and realising, and likely return from investments having regard to objectives and expected cash flow requirements

Lending to members, relatives and financial assistance:

Section 65: A trustee must not lend fund money or provide financial assistance to:
• member of fund OR relative of a member

• ‘Financial assistance’ has no technical meaning and their frame of reference is language of ordinary commerce … one must examine commercial realities of transaction and decide whether it can properly be described as giving of financial assistance (Charterhouse Investment Trust Ltd v Tempest Diesels Ltd [1986] BCLC 1, 10)

In-house asset rules:

An In-house asset is:
• loan to ‘related party’
• investment in ‘related party’
• investment in a ‘related trust’
• asset subject to lease between trustee and a related party (this is the one that matters in your case)

However a SMSF can have up to 5% of fund’s assets in invested “in-house” assets without breaching the rule so if the equipment’s value were less than 5% of the funds total value then you would not be in breach of this rule….but remember the other rules hold equal importance. Also it is important that this rule is met on an ongoing basis so if stock markets drop or cash is taken out of the fund for pensions you need to revisit the value of the in-house asset.

Arm’s length requirements:

Section 109(1): A trustee must not invest unless:

• the trustee and the other party are dealing with each other at arm’s length OR
the terms and conditions are no more favourable to the other party than if they were at arm’s length
• Section 109(1A): If trustee invests and is required to deal with investment with another party not at arm’s length, must deal as if were at arm’s length

• The term ‘at arm’s length’ is not defined in the SIS Act so open to interpretation

• implies dealing that is carried out on commercial terms again subject to interpretation

• useful test to apply is whether prudent person, acting with due regard to own commercial interests, would have made the investment (APRA v Derstepanian (2005) 60 ATR 518, 524)

So example of how this works:

Let’s say you have $600,000 in your SMSF and you want to purchase an excavator for $25,000 to lease to your own business.

  1. The SMSF Trustees do their research and minuted how they calculate a lease rate that takes into account market return on their investments, allows for the depreciation of the asset and insists on the insurance of the vehicle with its interest noted on the policy to protect its investment. They are satisfied that this provides a decent return for the fund not correlated to the other assets of the funds invested in shares and term deposits. Sole Purpose, S62 and S52 satisfied.
  2. They amend the SMSF Investment Strategy to include this type of asset with the target allocation to “Other Assets” or specifically have an allocation to “Plant & Equipment”
  3. They ascertain that the business could be approved to obtain finance for the excavator from a third-party on similar terms. Section 65 met as clear finance available elsewhere and that this is not the reason why the arrangement is being entered into.
  4. As the value of the excavator ($25k) is less than 5% of the fund ($30K) it does not breach the In house asset rule. This needs to be monitored annually.
  5. They arrange for a written commercial lease agreement comparable with the standard lease available in the market to be entered into by all parties. S109(1) satisfied

So in summary, yes it can be done but in reality there are so many ways you can trip up that it is really not worth the hassle and raising the eye of the ATO or challenging your Auditor’s patience. Your first step is to engage your Accountant and a SMSF Specialist before considering these types of strategies. I would be interested to receive comments from people who have implemented these strategies.

Why not checkout my article ” What can my SMSF invest in?” as a good place to start.

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 online via Skype.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

SMSF Specialist Adviser 

 Follow SMSFCoach on Twitter Liam Shorte on Linkedin NextGen Wealth on Facebook   

Verante Financial Planning

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.

Image courtesy of Supertrooper at FreeDigitalPhotos.net

18 Comments
by SMSF Coach - Liam Shorte on June 19, 2013  •  Permalink
Posted in Investment Strategies, Property, SMSF, SMSF Management
Tagged , , , , , , , , , , , , , , , , , , , , , ,

Posted by SMSF Coach - Liam Shorte on June 19, 2013

https://smsfcoach.com.au/2013/06/19/can-my-smsf-buy-and-lease-plant-and-equipment-to-my-business/

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