Archive for 'super'

Expanded super for older Australians

The 2019-20 Federal Budget has placed a strong focus on the growth of the economy whilst also having the intention to look after older Australians.

Older Australians will benefit from the work test exemption age being extended from age 64 to 66. The work test requires an individual to work at least 40 hours in any 30 day period in the financial year in order to make voluntary personal contributions.

This change in age will now allow individuals aged 65 and 66 who previously didn’t meet the work test to contribute three years of after-tax contributions in a single year, meaning up to $300,000 can be injected into an account with less than $1.6 million in super (tax-free pension threshold). This adjustment aligns with the increase for the Age Pension from 65 to 67.

Spousal contributions can now be made until age 74, up from age 65, without having to meet the work test. Under spousal contribution regulations, an individual can claim an 18% tax offset of contributions up to $3,000 made on behalf of a non-working partner. A further $3,000 can be contributed but with no tax offset.

Posted on 12 April '19 by , under super. No Comments.

What is your preservation age?

Superannuation laws can be confusing for everyone. These procedures often make it difficult to work out when you can retire or if there are any special conditions you need to meet before you can claim your funds. Every individual needs to be aware of their preservation age and regulations when accessing their superannuation benefits.

A person’s preservation age differs from the Age Pension. Age Pension is separate to your super and is a scheme which pays out a consistent income to help cope with the costs of living once you have retired. This age in Australia is 65 and not everyone is eligible for this system. Preservation age, however, is the age at which you can retire and access superannuation benefits. This age depends on your birth year.

  • 55 – Before 1 July 1960
  • 56 – 1 July 1960 – 30 June 1961
  • 57 – 1 July 1961 – 30 June 1962
  • 58 – 1 July 1962 – 30 June 1963
  • 59 – 1 July 1963 – 30 June 1964
  • 60 – From 1 July 1964

Normally, accessing super benefits requires an individual to meet two conditions; reaching their preservation age and retiring from the workforce. Those who reach their preservation age but don’t intend to retire must meet other criteria to have access to their benefits

Posted on 1 April '19 by , under super. No Comments.

ATO to monitor high-risk LRBAs and TBARs within SMSFs

The ATO is focusing on risky Limited Recourse Borrowing Arrangements (LRBAs) and failures in Transfer Balance Account Reporting (TBAR) in SMSFs this year. They have announced plans to contact trustees with high concentration risks in their funds and to crack down on misreporting.

Limited Recourse Borrowing Arrangements:
LRBAs allow a superannuation fund to borrow under strict conditions. The existing population of SMSFs that have entered into LRBAs, potentially on the basis of poor or conflicting advice, is a key area of concern for the ATO and has been rated a medium to high-risk. In 2017, approximately 95% of the LRBAs were for the purpose of purchasing property. Due to this prevalence, the ATO has concerns about the risk of members’ retirement savings in the event of a property decline.

Transfer Balance Account Reporting:
TBAR is used to advise the ATO when a transfer balance account event occurs within an SMSF, enabling an individual’s transfer balance cap and total superannuation balance to be recorded and tracked. One area of TBAR arrangements the ATO will be monitoring is the reporting of capped defined benefit income streams. In 2018, approximately 86% of SMSFs reporting a capped defined benefit stream had failed in their reporting obligations.

Where the ATO identifies these areas of risky LRBAs and inadequate TBARs for SMSF members, they will contact trustees to ensure that they have understood and mitigated these risks. It would benefit trustees to have in place an adequate strategy that deals with the potential risks involved in LRBAs and be aware of their reporting obligations for transfer balance accounts.

Posted on 25 March '19 by , under super. No Comments.

Income stream within an SMSF

One of the best ways to ensure regular, flexible and tax-effective income as a pensioner is through an income stream from your SMSF. As a member, you can receive an income stream in a reoccurring series of benefit payments from your super fund.

Income streams from an SMSF are usually account-based, which means that the amount allocated to the pension comes directly from a member’s account. Once an account-based pension commences, there is an ongoing requirement for the trustees of the superannuation fund to ensure the pension standards and laws are met.

Standards that must be met in order for SMSFs to pay income stream pensions include:

  • The minimum amount must be paid at least once a year.
  • Once the pension has started, the capital supporting the pension cannot be increased by using contributions or rollover amounts.
  • When a member dies, their pension can only be transferred to a dependent beneficiary if they have any.

SMSF trustees may need to amend fund trust deeds to meet the minimum pension standards. For more information on how to do this, you should consult a legal adviser. Records must be kept of pension value at commencement, taxable elements of the pension at commencement, earnings from assets that support the pension and any pension payments made.

Posted on 18 March '19 by , under super. No Comments.

Superannuation guide for retirement planning

As the time comes for you to consider leaving the workforce, it is necessary to plan how to make the most of your superannuation in order to strengthen the chances of a financially secure retirement. Careful planning can significantly boost your super and make a big difference to your future lifestyle.

Identify your dependants and non-dependants:
When it comes to planning your retirement and how your super will be used, ensure that you have clear plans about what happens to your super benefits and other assets in the event of your death. Identifying who will receive your super benefits becomes more important if you plan to leave them to a non-dependant for tax purposes, such as financially independent adult children.

Combine your accounts:
Consolidating your super funds could possibly save you thousands of dollars in fees. Other benefits include reducing your paperwork and making it easier to keep track of your super. You could also end up with more superannuation than you realise, as research has found that if all super fund members were to consolidate their multiple accounts, the average Australian account balance would increase by 79%.

Do a financial stocktake:
Another important step when it comes to planning your retirement is to work out what kind of income you would like to have. By planning this ahead of time, you can then calculate how much money is needed to finance your preferred retirement income. This will help in working out how much super and other savings you currently have and estimate what you will have if you continue your current savings strategy.

Posted on 8 March '19 by , under super. No Comments.

SMSF areas being monitored by the ATO

Self-managed super funds are closely monitored by the ATO to ensure regulations are being met across all areas. As SMSF are run by members, it is their responsibility to comply with all related super and tax laws. The independent nature of an SMSF creates an environment that people are confused by or can attempt to exploit.

One area of concern for the ATO regarding SMSFs is that these types of funds are being used to gain access to super before preservation age. Preservation age is dictated by the year in which you were born, super cannot legally be accessed before you reach this age. A growing number of investors in their 30s, far off from their preservation age, are moving their super into an SMSF in an attempt to gain access to their super early. The ATO has noticed an increase in this strategy in the last five years. If found to be doing this, penalties can include funds being wound up, a 45% tax impost being applied, administrative penalties which have a cost attached, or being disqualified from running a fund.

The ATO is also looking into possible problem areas in relation to SMSF contraventions. Loans to SMSF members, in-house assets, investing in related-party assets and failure to keep assets separated account for the bulk of the contravention reports. With that being said, the ATO lists administrative errors, sole purpose breaches, borrowings, operating standards and acquisitions of assets from related parties as categories also seen in contravention reports. To avoid these issues in relation to your funds, make sure your SMSF is accessible in regards to your assets and keep detailed records to help substantiate transactions.

Posted on 1 March '19 by , under super. No Comments.

Do you know where your super is?

If you’re not close to retiring, you may not be thinking about your super or where it is. Even if you are a way off from retiring, you should be keeping track of where your super has gone. $17.5 billion of super was lost in 2017-18, $420 million down from the previous year. If you are not paying attention to your super contributions, accounts and insurances, you may have lost super. You may also have unintentionally lost track of super if you have ever changed your name, address, job or lived overseas.

It is not uncommon for people to have multiple super accounts they have acquired over the years of working at different companies. Having multiple unused accounts can result in high fees that drain your untouched super or you could lose track of it completely. It is in your best interest to consolidate all super into one account that suits your retirement goals. When closing unused accounts, you should be mindful of any termination fees, insurance policies, investment options, and ongoing service fees.

If you have lost track of your super it may be held by either your super fund as a lost account or as an ATO-held account. The easiest way to consolidate super is through the myGov website, linking the ATO to records of your super funds

Posted on 20 February '19 by , under super. No Comments.

Superannuation tips for each stage of your working life

A 2018 study revealed that almost 40% of Australians think they won’t have enough money to retire on – and that number is on the rise. Managing your superannuation fund can be confusing but it was found that 50% of us do not consult a financial planner. As we face different financial challenges at different points in our lives, how do you ensure you have enough to retire on?

20s to 30s:
It is not uncommon for many people in their 20s and 30s to have multiple superannuation fund accounts accumulated through years of youth part-time work or otherwise. Now is the time to chase up on lost super. With one superannuation account, you not only can save on fees but it may also give you better investment returns. When combining and comparing your active accounts, be mindful of any termination fees, insurance policies, investment options, and ongoing service fees.

40s to 50s:
You may find yourself earning more than you’ve ever earned before, but it is also a time where you may be juggling more living costs – from your mortgage to your growing family’s fees. Experts advise against decreasing your mortgage payments and encourage voluntary payments to your superannuation fund. If you have a partner, he or she may be able to help grow your super by making a ‘Spouse Contribution’ to your super account or consider if contribution splitting is viable for you. You may also be thinking about your retirement plan at this stage, and now is a good time to review your superannuation’s insurance and beneficiary policies.

60+:
This is the time many consider leaving the workforce but this decision doesn’t have to be as daunting or finite as it may seem. An alternative to this is the Transition to Retirement (TTR) income stream, where you can concurrently decrease your working hours while withdrawing money from your super once you reach your preservation age. There are a few regulations on how you can access your super and how you will be taxed so it is best to seek financial advice for your situation. In your 60s, you may be eligible to apply for a government age pension or withdraw a tax-free lump sum from your super fund. Your 60s might also be a period where you can consider your estate planning strategies.

Posted on 13 February '19 by , under super. No Comments.

Didn’t pay your employees’ super on time?

How to reduce the hassle of missing your employee’s super payment.

The Super Guarantee Charge (SGC):
The SGC may apply to employers who do not pay the minimum super guarantee (SG) to their employee’s designated superannuation fund by the required date. The non-tax-deductible charge includes the SG shortfall amounts with interest and a $20 administration fee for each employee. You will need to lodge your SGC statement within a couple of months of the respective quarter. While employers are able to apply for an extension to lodge and pay the SGC, the nominal interest will still accumulate until the extension is lodged. From this point, the general interest charge will apply until the SGC is paid off.

What you can do to reduce your SGC:
The nominal interest and SGC shortfall can be offset or carried forward by late contributions against the SGC in certain conditions. This excludes the administration fees, certain types of interest and other penalties. The late contribution is also not tax-deductible, nor is it able to be used as a prepayment for current or future contributions. However, you are able to carry it forward if the payment is for the same employee and is for a quarter within 12 months after the payment date. It is advised to consult a professional to work with your unique situation.

The bigger picture:
Struggling to pay your employees’ super is a sign of financial insecurity for your business. While an employee’s PAYG Withholding tax and super may not be due for a while, not having the funds for them at each payday is a debt that will only accrue. You may have to consider your business’ strategy and operations or consult a financial professional if you feel it is only the symptom of a bigger issue.

Posted on 7 February '19 by , under super. No Comments.

How to get out of a SMSF

Sometimes a self-managed super fund (SMSF) isn’t for you. While that is ok, getting out of an SMSF can be a tricky and complicated process.

Every individual involved in an SMSF is responsible for their part. No decision can be made on their behalf or outsourced to another member or industry professional. Once deciding to leave your SMSF, you must approach carefully to avoid penalties and damages or disruptions to the remaining member funds. To successfully remove yourself you will need to:

  • Notify the ATO within 28 days
  • Remove all assets from the fund, whether paid out or transferred to a new account, leaving it empty
  • Have a final audit of your fund
  • Complete your reporting

Posted on 30 January '19 by , under super. No Comments.