The Government has introduced new measures to allow SMSF members to access their super for their first home or make contributions to their super from the sale of downsizing their home.
SMSFs should be aware of the following:
Downsizing
From 1 July 2018, SMSF members who are 65 or over and exchange a contract of sale of their main residence may be eligible to make a downsizer contribution of up to $300,000 into their super without affecting their total super balance or contributions cap for the year.
This contribution will count towards the transfer balance cap and be taken into account for determining eligibility for the age pension.
SMSF members do not have to purchase another home to access this measure. However, the contribution can only be made once; it cannot be used for the sale of a second main residence.
The First Home Super Saver Scheme
SMSF members looking to get into the property market can now use some help from their SMSF under the First Home Super Saver Scheme.
As of 1 July 2018, SMSF members over 18 years of age can apply to release their voluntary concessional and non-concessional contributions made from 1 July 2017, along with associate earnings to purchase their first home.
Voluntary contributions made since 1 July 2017 of up to a maximum of $15,000 from any one financial year, or $30,000 across all years can be applied for.
The Government is introducing a series of new measures designed to help Australians keep a greater portion of their superannuation savings pie.
Insurance opt-in
Insurance within super may not be suitable for everyone, particularly young people and those with low balances. From 1 July 2019, insurance will be offered on an opt-in basis for members with low balances of less than $6,000; members under the age of 25; and members who have not received a contribution in 13 months and are inactive. The changes intend to protect low balances from being entirely eroded and reduce incidences of duplicate cover.
Reuniting lost super
The ATO will have the ability to reunite all inactive superannuation accounts where the balances are below $6,000 with the member’s active account as of 1 July 2019. This will benefit those with inactive low balance accounts, i.e., low-income earners, young members and seasonal workers.
Protecting your super
The Government is banning exit fees on all super accounts to enable Australians to consolidate their super accounts on a more affordable basis. Additionally, a three per cent annual cap on passive fees charged by super funds on accounts with balances below $6,000 will protect those with low balance accounts to grow and maintain their nest egg.
Avoiding unintentional cap breaches
From 1 July 2018, individuals whose income exceeds $263,157 and have multiple employers will be able to nominate that their wages from certain employers are not subject to the Superannuation Guarantee (SG). This will assist in avoiding unintentional breaches to the $25,000 annual concessional contributions cap due to multiple compulsory SG contributions.
Member limit increase
Self-managed super funds and small APRA funds will have the opportunity to increase the maximum number of allowable members from four to six as of 1 July 2019.
Integrity of personal deductible super contributions
From 1 July 2018, additional funding will be allocated to the ATO aimed at improving the integrity of processes for claiming personal superannuation contribution tax deductions. This will enable the ATO to develop a new compliance model and undertake additional compliance and debt collection activities.
Self-managed super fund (SMSF) trustees are reminded that the deadline for their 2016-17 annual return is fast approaching.
The extended due date for annual SMSF returns is 30 June 2018. As the due date falls on a Saturday, the ATO is allowing returns to be lodged the next business day, Monday 2 July 2018, without penalty.
The extension also applies to reporting the 30 June 2017 value of any retirement phase income stream to the ATO using the transfer balance account report (TBAR).
To remain compliant, SMSF trustees are encouraged to ensure they have all the right records and engage with an SMSF auditor for their annual SMSF audit.
Trustees are also reminded that this is the last chance to elect transitional CGT relief for eligible SMSFs. If electing this relief, trustees must do so prior to the due date.
Due to new super measures introduced by the Government, Australians will now be able to contribute part of the proceeds of the sale of their home towards their superannuation.
From 1 July 2018, where the exchange of contracts of sale for a ‘main residence’ home occurs on or after 1 July 2018, individuals will be able to access the new downsizer super measure.
Eligible individuals can contribute up to $300,000 from the proceeds of selling their home into superannuation. This is not a non-concessional contribution, therefore, it will not count towards an individual’s’ contributions caps. However, it will count towards an individual’s transfer balance cap, set at $1.6 million.
There is no requirement for individuals to downsize by acquiring a smaller or another property, however, individuals must meet the following requirements to access the downsizer contribution:
You are 65 years or older at the time of making a downsizer contribution
The contribution amount is from the proceeds of selling your home where the contract of sale was exchanged on or after 1 July 2018
Your home was owned for 10 years or more by you or your spouse
The capital gain or loss from the sale is exempt or partially exempt from CGT under the main residence exemption or would be entitled to an exemption if the home was a CGT rather than pre-CGT asset
Your home is in Australia and is not a caravan, mobile home or houseboat
You have provided your super fund with the downsizer contribution form either before or at the time of making your contribution
The contribution must be made within 90 days of receiving the proceeds of the sale, which is usually the date of settlement
You have not previously made a downsizer contribution to your super from the sale of another home.
Eligible individuals may make multiple downsizer contributions from the proceeds of a single sale. However, the total of all the contributions must not exceed $300,000 or the total proceeds of the sale less any other downsizer contributions that have been made by your spouse.
Before making a downsizer contribution, check you first meet the eligibility requirements and contact your super fund/s to check that they accept downsizer contributions.
The ATO may issue false and misleading penalties if an ineligible individual makes a downsizer contribution and incorrectly declares they were eligible to make the contribution.
When a super scheme seems too good to be true, it often is. Many illegal super schemes are operating in Australia, so it is crucial to understand the characteristics of such schemes.
A popular illegal scheme is one whereby an individual is enticed by being told they can access their super early to pay off a credit card debt, go on a holiday, buy a car and so on. Generally, such schemes are illegal as superannuation can only be accessed early by meeting a condition of release.
Those promoting such schemes usually:
– Encourage individuals to transfer super from an existing super fund to an SMSF to access super before they are legally entitled to;
– Target those under financial pressure or who do not understand the super laws;
– Claim you can use your super for anything you want;
– Charge high fees and commissions, and risk losing some or all of the individuals super to them.
Unfortunately, participating in these schemes subject the affected individual to identity theft from the promoter of the scheme. Identity theft is when someone uses another person’s details to commit fraud or other crimes.
Individuals need to be aware that super is usually only accessible once the preservation age is reached and they stop working. The preservation age is currently 55 years old for those born before 1 July 1960 and 60 years old for those born after 30 June 1964.
Superannuation can only be accessed early in special circumstances such as severe financial hardship and for specific medical conditions. There are severe penalties for illegally accessing your super early.
Employers have a legal responsibility to pay eligible employees superannuation to provide for their retirement. And although most employers do the right thing, some do try to bend the rules which can see them facing hefty penalties.
Employees are entitled to superannuation if they are paid $450 or more before tax in a calendar month, this is known as the super guarantee (SG).
To remain complaint, employers must pay SG quarterly using SuperStream. Not paying on time or not paying the right amount may mean you need to pay the super guarantee charge (SGC) and you cannot claim a tax deduction for super payments.
Additionally, employers must report and rectify missed, late or underpaid SG contributions by lodging an SGC statement by the due date.
The ATO reminds employers who are able but unwilling to meet their obligations that they are breaking the law. Firm compliance action is taken for employers who:
– Repeatedly fail to pay the correct amount of SG
– Attempt to obstruct the ATO’s ability to determine an SGC liability
– Repeatedly fail to keep appointments
– Repeatedly fail to supply information that is irrelevant, inadequate or misleading
– Engage in any culpable behaviour to delay the provision of information.
The compliance history of an employer will determine the action of the ATO and the penalties to be applied.
The Australian Tax Office (ATO) will be contacting 80,000 individuals, starting this week, to alert them of unclaimed super.
An email campaign will alert members about ATO-held unclaimed super money from 5 April. On 16 April, 20,000 letters and SMS will be sent.
The ATO currently holds unclaimed super money for around 5.38 million accounts, totalling $3.75 billion as at 30 June 2017. These alerts will form part of a number of strategies used by the Tax Office to reunite individuals with their unclaimed super.
To claim unclaimed super money, individuals must create a myGov account which is linked to ATO online services.
If you need assistance with unclaimed super, do not hesitate to contact our office today.
The ATO is reminding self-managed super funds (SMSFs) of the rules regarding non-arm’s length income from trusts.
The non-arm’s length income rules can apply to investments, transactions and other arrangements undertaken by SMSFs when the terms of the relevant investment, transaction or arrangement are uncommercial in nature.
If income is distributed from a discretionary to a SMSF beneficiary, it is:
– automatically deemed non-arm’s length income of the SMSF (regardless of the nature of the dealings of the relevant parties)
– taxable at the highest marginal tax rate.
Income received by a SMSF that is a fixed entitlement to trust income is also non-arm’s length income if it is:
– income from a scheme where the parties were not dealing with each other at arm’s length
– more than the SMSF might have expected to derive if the parties were dealing with each other at arm’s length.
If you are unsure whether income from trusts is considered arm’s length income, contact our office.
Bitcoin and other cryptocurrencies have become increasingly popular over the past few years. As many keen investors jump on board, the ATO is reminding SMSFs to be aware of the tax consequences.
Cryptocurrencies are classified as capital gains tax (CGT) assets, therefore, upon their disposal they may be subject to capital gains tax (CGT).
It is essential to keep records of cryptocurrency transactions within a SMSF such as acquiring and disposing a cryptocurrency.
An investment within a SMSF must:
– Be allowed under the trust deed
– Be in accordance with the investment strategy of the fund
– Comply with SISA and SISR regulatory requirements
When an SMSF invests in a cryptocurrency it must follow the same regulatory requirements that apply to investments in other assets. For example, super laws pertaining valuation, ownership and separation of assets, related party transactions, pension or benefit payments, sole-purpose test and voluntary disclosures apply to all cryptocurrency transactions.
As of 1 July 2018, the Government will introduce a new measure that allows the contribution of up to $300,000 of proceeds from downsizing a home to be added to superannuation.
The new measure will benefit those aged 65 years and over, provided they meet certain eligibility rules including:
The amount you are contributing is from the proceeds of selling your home where the contract of sale was exchanged on or after 1 July 2018.
Your home was owned by you or your spouse for 10 years or more prior to the sale.
Your home is in Australia and is not a caravan, houseboat or other mobile home.
The proceeds from the sale of the home (capital loss or gain) are exempt or partially exempt from CGT under the main residence exemption, or would be entitled to such exemption if the home was a CGT rather than pre-CGT asset.
You have provided your super fund with the downsizer contribution form either before or at the time of making your downsizer contribution.
You make your downsizer contribution within 90 days of receiving the proceeds from the sale (usually the date of settlement).
You have not previously made a downsizer contribution to your super from the sale of another home.
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