madigan No Comments

Downsizer super contribution

From 1 July 2018, eligible individuals 65 years and older may be able to contribute some of the proceeds of the sale of their home into super.

To be eligible, you must be 65 years old or older, you or your spouse must have owned your home for 10 consecutive years, the home must be in Australia (and cannot be a houseboat, mobile home or caravan) and the home must be exempt, partially exempt or entitled to an exemption from capital gains tax under the main residence exemption.

An individual can contribute up to $300,000 ($600,000 for a couple) and the contribution will not count towards concessional or non-concessional contribution caps.  A contribution must be made within 90 days of the change of ownership of the dwelling.

Before making a downsizer contribution, professional advice should be sought to ensure that the concession is available to your situation, that it is appropriate and that your super fund will accept a downsizer contribution.

madigan No Comments

ATO SMSF Investment strategy letter

The ATO has recently written to about 17,700 SMSF trustees and their auditors where they believe that the SMSF’s investment strategy may not meet the diversification requirement.  The ATO advises that they are writing to SMSF’s that hold 90% or more of funds in one asset, or a single asset class.

The ATO reminds SMSF trustees that their investment strategy must meet the following requirements.

  • the diversification of fund investments
  • the risks of inadequate diversification within the context of their SMSF investment portfolio (for example, the risks associated with the fund’s investments in a diversified portfolio of shares is likely to be lower than that of another asset class, such as cryptocurrency)
  • the making, holding, realising, and the likely return from their fund investments relating to their retirement objectives and expected cash flow requirements
  • the liquidity of their investments, allowing the fund to meet costs and pay benefits as members retire
  • whether insurance cover should be held for one or more members.

alex No Comments

Superannuation – Transfer Balance Cap

The superannuation reforms that commenced on 1 July 2017 introduced a new concept – the Transfer Balance Cap.

The Transfer Balance Cap is the maximum amount you can transfer from accumulation phase into retirement phase.  The cap is $1.6 million and will be indexed with CPI in $100,000 increments.

Retirement phase is when the earnings on assets that are supporting the pension are tax-free.  Whilst it is possible for a superannuation fund member to have more than the $1.6 million in superannuation, generally speaking the additional amount will now be held in accumulation phase and the earnings on assets relating to that portion of the members account will be subject to tax.

The transfer balance amount measures net transfers to retirement phase.  Therefore, as an example, the initial amount applied to start a pension will go towards the cap balance.  However, earnings, losses and pension payments do not impact the cap.

If the cap is exceeded, the amount of the excess (plus notional earnings) will be required to be commuted either back to accumulation phase or out of the superannuation environment.  In addition, excess transfer balance tax may apply.

From 1 July 2018, it is proposed that Self Managed Super Fund (SMSF) Trustees will be required to report events impacting an individual members transfer balance on an events basis.  The Australian Taxation Office has not yet advised how often such reporting will occur, but it is likely to be either within a month of a relevant event or at the end of the quarter in which the event occurs.

With the introduction of the Transfer Balance Cap and new event-based reporting requirements, it will be critical that SMSF trustees have appropriate accounting systems that are maintain accurately and on a timely basis.