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What to look for when choosing a super fund

Posted on August 19, 2019 by admin

Over the course of your life, the contributions made to your superannuation fund can often end up being your greatest asset. Because of this, selecting a super fund is an important decision, choosing a fund with the right investment strategies for you could be the difference between retiring comfortably or not. There are five different types of superannuation fund to choose from but not all options are available to everyone. SMSFs:Self-managed super funds (SMSFs) are those where the trustee is responsible for managing and making regular contributions to the fund. This option allows for more responsibility in terms of administration, compliance and investment decisions. Industry funds:Industry funds generally cater to employees from a specific industry although they are open to everyone. Industry funds are not-for-profit, meaning they have historically charged lower fees on average with profits funnelled back into members’ funds. Retail funds:Retail funds are offered to everyone and are usually run by investment companies or banks. A portion of the profits derived from the activities of retail super funds then goes to the shareholders. Corporate funds:Corporate funds are offered to specific corporations or if you are employed by a particular employer. They often return profits to their members (although […]

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Ineligible downsizer contributions and how they are administered

Posted on August 12, 2019 by admin

When a downsizer contribution is ineligible, the fund must re-assess the amount in accordance with the Superannuation Industry (Supervision) Regulations 1994 and the trust deed. This is to determine if the amount can be retained as a non-concessional contribution. Provided the trust deed allows so, the fund can return the contribution to the member or adjust the prior downsizing contributions to nil and report this amount as a non-concessional contribution when the member meets the age and work tests. When a contribution can’t be returned or returned in full:Members who no longer have a super interest with the fund, or an insufficient return amount, must have their contribution re-reported as non-concessional, even if the contribution was returned because the member did not meet the age/work tests. Some of the contribution may be an excess non-concessional contribution (ENCC). Regardless of the age of the member, if this is the case the member will receive an ENCC determination or when the fund can’t return the full amount. Members will continue to have access to all review rights under the ENCC scheme. Even if the member is in pension phase, the funds will still need to return an ineligible downsizer contribution if it […]

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Illegal early release of super on ATO watch-list

Posted on August 6, 2019 by admin

Illegal early release of super (IER) is one of the risk areas that the ATO has identified as being of most concern and in need of action. Each year, the ATO analyses its data to identify the areas of high risk that will form part of its compliance program. Aside from illegal early release, another key risk area is non-lodgement. In the last year, the ATO has targeted individuals and promoters who register self-managed super funds with the intention of using the fund to illegally access super benefits. In the 2019 financial year, the ATO cancelled the registration of 609 newly registered SMSFs who intended to use the funds for IER. They also withheld the details of 352 funds from the Super Fund Lookup, meaning they couldn’t receive payments and rollovers. The ATO has warned of severe consequences for you and your fund if super is accessed before you are legally entitled to it. These include disqualification of trustees, administrative penalties, the fund deemed as non-complying, or even prosecution. Fund trustees or members who have knowingly been involved in a scheme or been approached by anyone claiming that they can withdraw their super early should contact the ATO immediately to […]

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Tax requirements for capped defined benefit income streams 

Posted on July 29, 2019 by admin

Members who receive income from one or more capped defined benefit income streams may have additional tax liabilities. They would then need to calculate their entitlement to the 10% tax offset if the income from all their capped defined benefit income streams exceeds their defined benefit income cap. SMSF’s who pay a capped defined benefit income stream to members with a cap will need to provide the ATO with a PAYG withholding payment summary annual report, due by 14 August 2019. Members will have a cap if they have income from a capped defined benefit income stream and are 60 and above or under 60 and receiving a death benefit income stream from a person who died aged 60 or over. When preparing their individual tax return, members need to: Consider all income they receive from capped defined benefit income streams. At label 7M, include half of the income from the tax-free component and taxed elements of all their capped defined benefit income streams which exceeds their defined benefit cap. At label 7N, include any untaxed element. At label T2, calculate and include their entitlement to the 10% tax offset (the amount may be nil). The defined benefit income cap […]

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What SMSF records should you keep?

Posted on July 22, 2019 by admin

A key responsibility for trustees of self-managed super funds (SMSFs) is to ensure proper and accurate tax and superannuation records are kept for the fund. When you have been running your fund for a long period of time and have amassed a large amount of information, it can be hard as a trustee to know exactly what records to keep, how long for and where to store them. The ATO requires SMSF trustees to keep the following records for a minimum of five years: Accurate accounting records that explain the transactions and financial position of the SMSF. An annual operating statement and statement of the SMSF’s financial position. Copies of all annual returns and transfer balance account reports lodged. Copies of any other statements the fund trustee is required to lodge with the ATO or other super funds. The following records are required to be kept for a minimum of 10 years: Minutes of trustee meetings and decisions if matters affecting the fund were discussed, such as the fund’s investment strategy. Records of all changes of trustees, and members’ written consent to be appointed as trustees. Trustee declarations that recognise the obligations and responsibility of any trustee or director of […]

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SMSF rollovers in SuperStream to be deferred

Posted on July 15, 2019 by admin

The 2019-2020 Federal Budget suggested a deferral of the extension of SuperStream to self-managed superannuation fund (SMSF) rollovers from 30 November 2019 to 31 March 2021. The commencement of this deferral has recently been confirmed by the government. The deferral will coincide with the $19.3 million that will be provided to the Australian Taxation Office (ATO) over three years from 2020-21, enabling electronic requests to be sent to superannuation funds for the release of money required under a number of superannuation arrangements. With the combined date for both bringing electronic release authorities into SuperStream and allowing SMSF rollovers, changes needed to update SuperStream will only need to be undertaken once. The deferral aims to reduce administrative costs for funds and allows for a more integrated design of SuperStream. First introduced in 2015, SuperStream is a government standard for processing superannuation payments electronically in a streamlined manner. Currently, SuperStream can only process rollovers between two APRA funds electronically but with the change will see this process extend to SMSFs. Regulations for the deferral to put into effect will be made promptly.

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Claiming a tax deduction for personal super contributions

Posted on July 8, 2019 by admin

Members of self-managed super funds (SMSFs) that are eligible can claim an income tax deduction on personal super contributions. Members that intend to do this must notify their fund trustee before lodging their 2019 individual tax return. The eligibility requirements to claim a deduction for personal super contributions include: Contributions that were made before 1 July 2017 were made to a complying super fund or retirement savings account. Contributions that were made on or after 1 July 2017 were made to a fund that was not: A Commonwealth public sector super scheme for which you have a defined benefit interest. A constitutionally protected fund or another untaxed fund that did not include your contribution in its assessable income. A super fund that notified the ATO before the start of the income year that they would treat all member contributions as non-deductible. Members must meet the age restrictions: If you are aged 75 or older, you can claim a deduction for contributions made before the 28th day of the month after you turned 75. If you are aged 65 or older, you must satisfy the work test or meet the work test exemption criteria in order for your fund to accept […]

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PAYG reporting dates approach

Posted on June 27, 2019 by admin

Changes have been made throughout the year regarding SMSFs and their pay-as-you-go (PAYG) withholding. As the end of the financial year and the due date for PAYG reporting approaches, SMSF trustees should be checking whether they are meeting new withholding obligations for capped defined benefit income streams paid to their members. If you have PAYG withholding obligations in 2018–19 you must provide your members with a PAYG payment summary by 14 July 2019 and lodge a PAYG withholding payment summary annual report with the ATO by 14 August 2019. SMSFs have PAYG withholding obligations for super benefits paid to members who are: Under 60 and the benefit is an income stream (pension) or a lump sum. Under 60 and the death benefit is a pension which is a capped defined benefit income stream where the deceased was 60 or over when they died. 60 or over and the benefit is a pension which is a capped defined benefit income stream. Capped defined benefit income streams include life expectancy and market linked pensions which were payable before 1 July 2017 and reversionary income streams paid to beneficiaries. SMSF trustees who are paying a capped defined benefit income stream to a member […]

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Is your SMSF adequately diversified?

Posted on June 24, 2019 by admin

When forming a fund’s investment strategy, diversification is a notable consideration for SMSF trustees. By spreading the investments of a fund across different asset classes and markets that offer varying risks and returns, SMSF members can better position themselves for a secure retirement. Why diversify?The intention of diversification is to spread the investment risk of an SMSF. The idea is that if one asset underperforms, it can be offset by the success of other assets and keep the fund on track to meet its investment objectives. Diversifying investments across uncorrelated assets, such as shares and bonds, may also make it possible for investors to lower the volatility of the portfolio. How to diversify your fund:Accessing certain asset classes can be challenging for SMSFs due to minimum investment requirements or other ownership restrictions. Managed funds and exchange-traded funds (ETFs) are two options that can provide easy access to diversification. Managed funds pool together money from multiple investors which professional managers then invest in a variety of assets, such as global or local shares, offshore property or high-yield investments. ETFs, on the other hand, aim to replicate the performance of a particular index or group of assets, which can give an investor […]

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First Home Super Saver Scheme

Posted on June 18, 2019 by admin

The First Home Super Saver (FHSS) scheme was introduced in the Federal Budget 2017–18 to reduce pressure on housing affordability. The scheme allows people to save money for their first home inside a superannuation fund, helping first home buyers to save faster. Changes introduced to the FHSS scheme in the Treasury Laws Amendment (2019 Measures No. 1) Bill 2019, will come into effect on 1 July 2019. The FHSS can now only be applied to a first home that is bought in Australia, as opposed to previously being in any location. Another change is that individuals must now also apply for and receive an FHSS determination from the ATO before signing a contract for their first home or applying for the release of FHSS amounts. A contract can be signed to purchase or construct a home either: From the date a valid request to release your FHSS amounts is made; Or up to 14 days before a valid request to release your FHSS amounts is made. There is no longer a waiting period between the first FHSS amount being released and signing a contract to purchase or construct the home. Individuals now have 12 months from the date they make […]

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