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Superannuation Update and SMSFs

Clive Todd

November 2016

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New Changes to Superannuation

Concessional contribution cap cut to $25,000 per year

Introduction of a superannuation transfer balance cap of $1.6 million on the amount of superannuation an individual can transfer into pension phase

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The tax exemption on earnings for assets supporting Transition to Retirement Income Streams has ceased

Access to concessional contributions increased allowing employees to make personal concessional contributions

The income limit lowered to $250,000 for the extra contributions tax

Catch-up of concessional contributions allowed

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Except catch-up concessional contributions which will be effective from 1 July 2018

Effective 1 July 2017

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What didn’t change?

Tax-free withdrawal for over 60’s

Maximum tax rate on earnings still 15%

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What is happening to non-concessional contributions? Annual limit reduced to $100,000 from 1 July

2017 “Bring forward” rule available for under 65’s

No NCC once Total Superannuation Balance (TSB) is $1.6 million

Current limits of $180,000 remain for 2017 financial year

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Non-Concessional ContributionsTSB on 30 June

2017Non-concessional contributions cap for the first year

Bring forward period

Less than $1.4 million

$300,000 3 years

$1.4 million to less than $1.5 million

$200,000 2 years

$1.5 million to less than $1.6 million

$100,000 No bring forward period, general non-

concessional cap applies

$1.6 million or more Nil N/A

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Transfer Balance Cap (TBC) Legislation introduces 23 new definitions

Available capacity tracked via Transfer Balance Account (TBA)

$1.6m limit a member can transfer into a tax-free pension

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Transfer Balance Cap (TBC) (cont) If cap exceeded then notional earnings

taxed Excess can remain in accumulation

TRIS’ don’t count

Will be indexed (but apportioned if already used)

CGT Relief will apply to amount converted to accumulation

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Self Managed Superannuation Funds (SMSFs)

Q: How many members can a SMSF have?A: Up to 4 members Typically, 2 members “Mum & Dad”Q: Who else can be a member?A: Adult children? Yes, but consider: superannuation(in any fund) is a marital

asset, that can be split on divorce or de-facto separation.

Children cannot “inherit” their parents superannuation. On death of the last surviving member who is not a “tax dependant”, all remaining benefits must be paid out of the fund, typically to their Estate. Note: “tax dependant” means a spouse, or child under age 18 or any person in an inter-dependency relationship with you .

A: Your business partners?Yes, but consider divorce risk

and business/partnership breakdown

A: Your unrelated employees?

No.

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Self Managed Superannuation Funds (SMSFs)

Q: What can a SMSF invest in?

A: Most investments!Subject to some restrictions like including lending the SMSF’s money to yourself, your relatives or your business.

Real Estate

Typical SMSF investments: Cash Fixed interest e.g. bonds term deposits

Listed Shares

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Can a SMSF be used for Angel Investing?

Yes, but there are considerations:

Acquisition from related parties

In-house asset restrictions

Ongoing audit requirements

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DisclaimersThis document contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgement. It does not purport to be comprehensive or to render professional advice. The reader should not act on the basis of any matter contained in this publication without first obtaining specific professional advice.

We believe that the statements made by us in this document are accurate but no warranty of accuracy or reliability is given. Our conclusions are based on interpretations of accounting standards and other relevant professional pronouncements and legislation current as at the date of this document. Should the interpretations, accounting standards, other relevant professional pronouncements or legislation change, our conclusions may not be valid. We are under no obligation to update the matters considered in this document after its publication.

© Hanrick Curran, November 2016All rights reserved

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Any questions?

Thank you

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