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How to select a default fund for your business

Posted on August 7, 2020 by admin

Business owners might be required to select a default fund for employees when they do not want to nominate their own superannuation funds. Funds should meet specific requirements that are stated as per super law, so it is important to select a complying fund. However, there are other factors that you may have to think about before selecting a default fund to make sure that you and your employees get the most out of it. PricingNaturally, one of the main considerations while selecting a super fund should be pricing. Funds that have a lower fee may not cover extras, and this requires careful analysis to see what extras have been left out. Coverage for extras like being able to track down missing super is a key feature that employees will prefer your default fund has. Employee preferencesEmployees are likely to prefer funds that allow flexibility with their investment options and have essential features like insurance policies covering death, total and permanent disability (TPD), and income protection. You may want to consider options that give your employees a comprehensive cover while keeping an eye out for any exclusions that might affect you. Industry fundChecking industry funds may help reveal awards that […]

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How to avoid SMSF disputes

Posted on July 30, 2020 by admin

Self-managed super funds (SMSF) can be vulnerable to disputes, especially when family members are involved. SMSF disputes may be caused by a number of reasons such as relationship breakdowns, (common in funds where parents and siblings are in a member and trustee relationship) and fundamental differences in opinions. Other common triggers for SMSF disputes include: investment strategy disagreements, differences in opinions over the payment of benefits, especially in SMSFs involving both parents and their children, payment of death benefit disputes, and disagreements on the distribution of SMSF death benefit payments between surviving members. Consider the following methods to avoid SMSF disputes. Clear decision-making proceduresDisagreements are bound to occur when it comes to money, so it is important to include concise decision-making provisions to keep things fair for all parties involved. For example, trustee decisions can be made by a simple majority rather than unanimously, and a particular trustee may be provided a casting vote in the case that a deadlock occurs. Provisions could also include voting rights that are based on the value of a member’s account balance within the SMSF to avoid situations where a member with minority interest out-votes a member with a large fund account balance. Updating […]

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What circumstances permit early access to your super?

Posted on July 23, 2020 by admin

Early access to your superannuation is permitted under a few limited circumstances outlined by the ATO. In the case that you are experiencing financial struggle and would like to withdraw from your super, be aware of the particular circumstances that will allow you to do so. Compassionate grounds: Withdrawing super on compassionate grounds is permitted in the event that you need money to pay for: medical treatment and medical transport for you or your dependant, palliative care for your or your dependant, making a payment on a home loan or council rates so that you don’t lose your home, accommodating a disability for you or your dependant, or expenses associated with the death, funeral or burial of your dependant. Severe financial hardship: You can also be permitted access to your superannuation due to severe financial hardship. However, when requesting withdrawals under severe financial hardship, individuals need to contact their super provider for access rather than the ATO. Both of the following conditions must be met for you to be eligible to withdraw some of your super: you have received eligible government income support payments continuously for 26 weeks, and you are unable to meet reasonable and immediate family living expenses. […]

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Tax-deductible super contributions

Posted on July 16, 2020 by admin

Individuals may be able to claim tax deductions for personal superannuation contributions they make. Personal super contributions are made after-tax, not to be confused with the pre-tax contributions made by employers. This includes contributions made using inheritance money, savings, proceeds from the sale of assets, or from a bank account directly into a super fund. To be eligible, individuals must receive their income from: salary and wages, super, personal businesses, investments, government pensions or allowances, partnership or trust distributions, a foreign source. A valid notice of intent to claim or vary a deduction must be provided to and acknowledged by your super fund before being able to claim a deduction for personal super contributions. A valid notice may be: A Notice of intent to claim or vary a deduction for personal contributions form (NAT71121). A form that your super fund provides. A written statement to your fund explaining your wish to claim a deduction for your personal super contributions. Deductions claimed for a super contribution will result in the contribution being subject to 15% tax in the fund. As well as this, after-tax contributions that have been successfully claimed will not be eligible for a super co-contribution from the government. […]

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Tax on super death benefits for dependants vs non-dependants

Posted on July 9, 2020 by admin

A super death benefit is the super paid after a person’s death, usually to a nominated beneficiary. These benefits are subject to different tax treatments, depending on whether the beneficiaries are dependant or non-dependant. Superannuation death benefits will generally be received tax-free by tax dependants, who are considered to be: A child of the deceased who is under 18 years of age, A spouse or former spouse of the deceased, A person who has an interdependency relationship with the deceased (e.g. if they live together or have a close personal relationship), A financial dependant of the deceased. Dependants will not have to pay tax on the tax-free component of their super in the event that they: Withdraw it as a lump sum, or Receive an account based income stream. However, they will be taxed at their marginal rate if they receive a capped benefit income stream and: The deceased was at least 60 years of age at the time of death The dependent is over 60 years of age and the total of their tax-free component and taxed element exceeds their defined benefit income cap. Not all super death benefits are subject to tax; for non-dependants, there is a taxable […]

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Do you need to lodge a transfer balance account report?

Posted on July 2, 2020 by admin

Self-managed super funds (SMSF) may be required to lodge a transfer balance account (TBA) report by 28 July 2020 in the case of a TBA event. A TBA report will need to be lodged with the ATO in the event that both of the following apply: A TBA event occurred in a member’s SMSF between 1 April and 30 June 2020, Any member of the SMSF has a total super balance greater than $1 million. SMSFs will also need to complete this report when a member needs to correct information about a TBA event that they have previously reported to the ATO or are responding to a commutation authority. According to the ATO, an event is classified as a TBA event if they result in credit or debit in a member’s transfer balance account. Such events include: Super income streams in existence just before 1 July 2017 that both continue to be paid on or after 1 July 2017, or were in retirement phase on or after 1 July 2017, Super income streams that stop being in retirement phase, Limited recourse borrowing arrangements (LRBA) payments entered into on or after 1 July 2017, LRBA payments resulting in an increase in […]

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Carrying on a business in an SMSF

Posted on June 25, 2020 by admin

Self-managed super funds can carry on a business providing the business is allowed under the trust deed and operated for the sole purpose of providing retirement benefits for fund members. Carrying on a business through an SMSF does have restrictions that other businesses do not have, such as entering into credit arrangements or having overdrafts. SMSF trustees that carry on a business through their fund must adhere to the sole purpose test. The ATO looks for cases where: The trustee employs a family member. The ‘business’ is an activity commonly carried out as a hobby or pastime. The business carried on by the fund has links to associated trading entities. There are indications the fund’s business assets are available for the private use and benefit of the trustee or related parties. The same regulatory provisions still apply to funds that carry on a business, i.e, SMSF investments must be made on a commercial ‘arm’s length’ basis, business activities must be conducted in accordance with the SMSF’s investment strategy, collectables and personal use assets cannot be displayed at the business premises and so on. The SMSF cannot be involved in the following business activities: Selling an SMSF asset for less than […]

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How to transfer a business property into your SMSF

Posted on June 18, 2020 by admin

Employers with a self-managed super fund (SMSF) looking to protect their business assets can consider transferring their business real property into their SMSF. Transferring business property into your SMSF is useful to protect your assets in the event of your business failing or facing litigation. It is possible for SMSF members to transfer business real property (land and buildings used exclusively for the business) to their SMSF by using a combination of methods. In-species transferAn in-species transfer in the context of a business property refers to the ownership transfer of a property from one entity to another without the need to convert it into cash. During an in-species transfer, the value of the property is considered a contribution to your SMSF and is restricted by CGT regulations and contribution caps. Cashing in your SMSFYou can use the cash available in your SMSF to buy your business property at market value as a normal cash purchase. The property must first be valued by an independent and qualified party before this is allowable. SMSFs that do not have enough sufficient capital to do this may consider using their non-concessional contributions cap to cover the outstanding balance. Limited recourse borrowing arrangement (LRBA)In the […]

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Divorce and splitting your SMSF assets

Posted on June 11, 2020 by admin

Running an SMSF under regular circumstances comes with enough compliance obligations as it is. Adding divorce or separation into the equation can raise even more legal and tax issues that need to be addressed. The breakdown of your relationship does not absolve you from your responsibilities as an SMSF trustee; you are still expected to continue acting in accordance with super laws and in the interests of all members. As a trustee, you must: include another trustee in the decision-making process, and acknowledge requests to redeem assets and rollover benefits to another super fund. When it comes to dividing SMSF assets, separating couples can transfer assets, such as property, from one SMSF fund into another. During this process it is important to consider: How they will decide to split their superannuation fund. They can choose to enter into a formal written agreement, seek consent orders, or if the separating couple cannot reach an agreement, they can seek a court order. Whether they have the necessary documentation readily available, as it is essential in the event of an ATO audit. Due to there being beneficial tax consequences in splitting a superannuation fund, it is essential that the documentation, such as the […]

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SMSF property investment regulations to keep in mind

Posted on June 2, 2020 by admin

Property is a common investment option for SMSFs, however, the ATO has a number of regulations SMSF owners need to be wary of. The ATO is particularly concerned with those using SMSF assets to invest in property in a way that is detrimental to retirement purposes. To ensure you do not breach provisions of the Superannuation Industry (Supervision) Act 1993 (SISA), here is a breakdown of the ATO’s common regulatory concerns: Whether arrangement amounts to your SMSF are being made to purposes outside of the sole purpose test (referred to as a collateral purpose). Whether your SMSF meets operating standards such as record-keeping, ensuring assets are appropriately valued and recorded at market price, and keeping SMSF assets separate from members’ assets. Whether the arrangement includes the SMSF acquiring assets from a related party. If the arrangement features the SMSF borrowing money and meets borrowing provisions. Whether the SMSF has contravened the in-house assets by exceeding the level of in-house assets allowed. Cases of illegal early release of superannuation when SMSF arrangements do not meet relevant payment standards. Also keep in mind that you cannot improve a property or change the nature of a property while there is a loan in […]

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