smsf trustee masterclass 2015
TRANSCRIPT
SMSF Trustee
Masterclass
DisclaimerThis seminar and the information provided is for General Information only and should not be relied upon without first seeking advice from an appropriately qualified professional.
This General Information does not take into account any individual’s personal circumstances and is not Personal Advice.
What is a SMSF?
Trust
Deed
Trustees “run” and “manage”
Members: at least 1 and less than 5
Hold assets on behalf of the members for their retirement.
What’s Involved with a SMSF?
Who can be a Trustee?
What is a Trustee?
All members must be trustees
Single member funds
Trustee requirements
SMSF Trustee ComparisonIndividual Trustees
Corporate Trustees
Establishment costs Can be lower than corporate trustee
More costly than individual trustees
Estate planning flexibility
New trustee must be appointed if fund is to continue
Trustee does not need to change on death of member
Administration of investments
Name changes required for investments where change in trustees
Member/director changes do not affect investments
Separation of Assets Not clear who owner is for some investments (e.g. property)
Clear distinction between member and fund investments
Sole member SMSF Must have 2 trustees Can have sole director company as trustee
Lower Penalties ATO penalties to each individual trustee
Penalties issued to company – directors jointly liable
The Role of Trustees
Your Trustee obligations are:Act in the best interests of all fund membersManage the fund separately from own affairsSecure the assets of the fundEnsure money/assets in the fund only accessed where the law allows it
The Role of TrusteesPurpose of FundInvestment StrategyInsuranceContributions and BenefitsApproval of AuditorAdministrative requirementsMust not allow early access to fundsMaintain records and minutes for at least Ten years.
Trustee ObligationsReporting to the Australian Taxation Office
Change of trustees or Directors of Corporate TrusteeContact details for TrusteesAddress for service notes The Fund is wound up
Failure to comply with your obligationsIf as a trustee you do not comply with your obligations the following can occur:
Administrative penalties – these penalties are imposed on you personally
Rectification agreements and education undertakings on the trustees
Make the Fund non-complying
Disqualify the Trustee
Prosecute in the most serious of cases
Investment Restriction and Rules
Investment Rules
Property – residential and business real propertyCollectiblesAcquiring from a member prohibited (with some exceptions)In house assets Off market transfers of listed securities ValuationsSecuring the assets of the fund
Taxation of Funds
Accumulation PhaseIncome 15%Capital Gains 10% or 15%
Pension PhaseIncome 0%Capital Gains 0%
Div 293 TaxAdditional 15% on contribution if members income and low tax contributions exceed $300K
Accepting ContributionsTypes of contributions
Concessional Contributions
Super Guarantee Contributions from an employer (rate now 9.5%)
Other employer e.g. Salary Sacrifice
Personal contributions where individual is eligible to claim a tax deduction
Caps for 2015/16Under 49 $30,000
49 or over $35,000
Age limits for contributions
Accepting Contributions
Types of ContributionsNon-Concessional Contributions
Personal contributions for which no tax deduction has been claimedCaps for 2015/16
Under 65 $180,000 (or $540,000 in 3 year period)Over 65 $180,000 but must satisfy the work testOver 75 No non-concessional contributions can be made
Preservation RulesTo be able to access your Superannuation you must meet a following condition of release before taking money out of your fund:
Has reached preservation age and retiresHas reached their preservation age and begins a Transition to Retirement Income Stream (Ages 55-60 per the handout)Ceases an employment arrangement on or after the age of 60Is 65 years of age (even if they have not retired)Has died
Preservation RulesIn some circumstances you can access some of your superannuation before you reach preservation age these special circumstances are:
Permanent Incapacity
Temporary Incapacity
Severe Financial Hardship
Terminal Medical Condition
Estate Planning Considerations
Review Binding Death Benefit Nominations
Ensure your will is up to date
Re-contribution Strategies
Transition to Retirement Pensions
Insurance Considerations
Personal Insurances & SMSF
Types of Insurance that can be held in Super & tax benefits
Term Life Insurance
TPD (Total and permanent disablement)
Own Occupation (no new policies from 1 July 2014
Any Occupation
Trauma Insurance (no new policies from 1 July 2014)
Income Protection (temporary incapacity)
ATO Penalty RegimeSection and Rule Administrative Penalty Amount
Prescribed Operating Standards – Failure to comply with the general provisions of the SIS Act.
$3,400
Prepare Accounts and Statements – failure to prepare Financial Statements. $1,700
Lending to Members – prohibition on lending or providing financial assistance to members & relatives
$10,200
Fund Borrowing – prohibition on super fund borrowing (including bank account going into overdraft position) except as permitted, e.g. limited recourse borrowing arrangement
$10,200
In-house asset rules a loan to, or investment in: A related party of the fund In a related trust of the fund An asset of the fund subject to a lease or lease arrangement between
the trustee of the fund and a related party of the fund.
$10,200
Failure to keep records and minutes for 10 years $1,700
Failure to keep Sec. 71E election for 10 years – where applicable, in relation to a fund with an investment in a pre August 1999 related unit trust.
$1,700
Failure to keep change of Trustee records for 10 years $1,700
Failure to keep Trustee Consent for 10 years $1,700
Failure to keep members statements for 10 years $1,700
Failure to notify Regulator if unable to pay benefits $10,200
Failure to Notify Regulator if fund no longer SMSF $3,400
Failure to appoint Investment manager in writing $850
Non-compliance with education direction $850
Failure to give required info to Regulator $850
Failure to complete regulator survey $850
Tips and Traps of an SMSFContravention Type (based on contraventions reported to ATO between 2005 to 2012)
Incidence Proportion of Assets
Loan to members/Financial assistance 20.9% 14.4%
In-house Assets 18.3% 27.2%
Administrative-type contraventions 12% 1.8%
Separation of Assets 12.9% 26.2%
Operating standard-type Contraventions 8.3% 6.5%
Borrowings (including Bank Overdraft) 8.0% 7.8%
Sole Purpose 7.8% 5.7%
Investments at Arm’s length 7.5% 7.4%
Other 2.8% 0.7%
Acquisitions of assets from related parties 1.5% 2.3%
Common Mistakes and how to avoid them
Accidentally withdrawing funds from
your SMSF bank account.
Allowing the SMSF to invest without
getting proper advice.
Letting your bank account go into
overdraft position
Common Mistakes and how to avoid them
Exceeding Contribution Caps – having
multiple Superfunds
Exceeding Contribution Caps –
employers super guarantee being paid
early
Exceeding Contribution Caps –
contributing more than you cap limits
Failure to meet Minimum Pension
Payments
Accidently withdrawing funds from your SMSF bank account
How it occurs – SMSF Bank account to
pay private expense
Consequence – Reportable breach,
significant penalties to trustees
Solution – keep accounts separate
Allowing SMSF to invest in an asset without getting proper advice
How it occurs – not obtaining correct
advice
Consequence – breach of invest rules
Solution – speak to your accountant
before investing
Bank Account in Overdraft
How it occurs – writing a cheque without
having sufficient funds
Consequence – Reportable breach, can
result in penalties for trustees
Solution – ensure a “buffer” in main
account
Exceeding Contribution Caps
How it occurs – multiple superfunds and
contributions made to both
Consequence – you have exceed cap,
amount exceeded is added to assessable
income taxed at marginal rates
Solution – Rollover balance into one fund
Exceeding your Contribution Caps – Employer Contributions
How it occurs – Employer makes final
contribution before 30 June.
Consequence – exceed cap, amount
exceeded is added to your assessable
income and taxed marginal rate.
Solution – Confirm with Employer
Exceeding your Contribution Caps – Incorrect Utilisation of Bring Forward Option
How it occurs – failure to review
contributions made in previous years
Consequence – exceeded contribution
caps amount exceeded is added to
income and taxed at marginal rates
Solution – contact your accountant to
review previous 2 years of contributions.
Members not Meeting Minimum Pension Payments
How it occurs – members fail to
withdraw minimum pension payments
for year.
Consequence – Fund loses its tax
exemption status for the financial year.
Solution – Contact your accountant and
confirm whether you have taken your
minimum pension.
Actuarial Certificates
Benefit of certificateNeed for certificateWhat is certified
Future Risks
Shadows and startingCoalitionALPASFASMSF Association
Questions??
SMSF Trustee
Masterclass