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SMSF Tax Planning Webinar
This presentation by Aaron Dunn from the SMSF Academy provides general advice regarding Self-Managed Superannuation Funds (SMSFs), focusing on contribution strategies, tax consequences, and the importance of timing for both concessional and non-concessional contributions. It highlights the need for trustees to review their investment strategies and other aspects of their funds, along with considering legislative changes and caps applicable to contributions each year. The document also touches on pension obligations, taxation, and the potential for segregation of assets within the SMSF to optimize tax efficiency.
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SMSF Tax Planning Webinar
- 1. Presented by: AARON DUNN THESMSF ACADEMY
- 3. GENERAL ADVICE WARNING Thispresentation provides general advice only. No direct or implicit recommendations are given in this presentation. This means that the general advice provided has not been prepared taking into account any individual’s financial circumstances (i.e. investment objectives, financial situation and particular investment needs). The SMSF Academy Pty Ltd believes that the information in this presentation is correct at the time of compilation but does not warrant the accuracy of that information. Save for statutory liability which cannot be excluded, The SMSF Academy disclaims all responsibility for any loss or damage which any person may suffer from reliance on this information or any opinion, conclusion or recommendation in this presentation whether the loss or damage is caused by any fault or negligence on the part of presenter or otherwise. © The SMSF Academy, 2013
- 4. CONTRIBUTION TIPS, TRAPS & STRATEGIESFOR 30 JUNE
- 5. REVIEW CONCESSIONAL CONTRIBUTIONS Has member Ensure adequate satisfied the ‘work time to make the Be aware of prior test’ where 65-74? contribution – 30 year payments E.g. self-employed June falls on a made up to 28 July contributions? Sunday! 2012 2013 $25,000 CONCESSIONAL CONTRIBUTION LIMIT EXCESS Reserve/Holding Consider timing for Have you identified account allocations completion of notice of any amounts that from previous or intent to claim a may have current income personal tax deduction for super contribution breached the cap? year?
- 6. ONE-OFF REFUND CONTRIBUTION RNING OF EXCESS HOLDING DEMINIM NTRIBUTIONS CONCESSIONAL ACCOUNT RULE CONTRIBUTIONS (RESERVE) WHAT OPTIONS ARE AVAILABLE WHERE A MEMBER BREACHES THEIR CONTRIBUTION CAPS?
- 7. CONTRIBUTION SPLITTING REMAINS APOWERFUL STRATEGY AND TO MANAGE LEGISLATIVE RISK Popular strategy for couples with age discrepancy Expected re-focus with proposed $100k threshold per individual on pension earnings
- 8. REVIEW NON-CONCESSIONAL CONTRIBUTIONS Has member Are any Any excess satisfied the ‘work contributions fund- concessional NCC cap based test’ to make the capped and not contributions count on age at 1 July contribution where be accepted by towards NCC cap? 65-74? the Fund? 2012 2013 $150k/$450k NON-CONCESSIONAL CONTRIBUTION LIMIT Have you reviewed Any amounts from the member’s Are there any items reserve to be previous ‘bring that may constitute allocated against forward’ a contribution (TR NCC cap for requirements? 2010/1)? income year?
- 9. COUNTING AS CONTRIBUTIONS TR2010/1 RESERVE ALLOCATIONS Transferring existing assets into the fund Remember prior year Creating rights in the fund contribution reserve amounts to avoid ECT Increasing the value of an existing asset in the fund Disproportionate allocations Paying an amount to a third party on Amounts allocated that are behalf of the fund more than 5% of value of fund Forgiving a debt owed by the fund assets at time of allocation Shifting value to an asset owned by the Concessional contributions must fund be grossed-up by 1.176
- 10. TIMING OF CONTRIBUTIONS 61 62 63 64 65 66 67 Total $450,000 $450,000 $150,000 $450,000 $600,000 $150,000 $150,000 $450,000 $750,000 IMPORTANT CONSIDERATIONS • Eligible to ‘bring forward’ contributions at age 64 even where no work test to be met beyond 65 • Member turned age 65 during year? • Utilise for contributions & re-contribution strategies with cash and/or in-specie contributions
- 11. MEET JENNY Self-employed doctor with no concessional contributions made YTD Net capital gain of $100,000 from sale of investment property Wants to reduce CGT bill as far as possible Contributes $50,000 $21,250 in (2 x payments) Contribution Grossed-up Holding Allocated to amount reported $25k Fund pays Account member prior as contribution in allocated to income tax to 28 July following year Jenny’s on $5ok account contributions 1 June 2013 30 June 2013 28 July 2013
- 12. CONTRIBUTION HOLDING ACCOUNT APPLIESEQUALLY TO Contributions (cash or in- NON-CONCESSIONAL specie) must not CONTRIBUTIONS be fund-capped Cannot split a contribution (SISR 7.08(2)) Off market transfer of listed shares into SMSF before 1 July 2013 change?
- 13. OTHER CONTRIBUTIONS • Low Income Super Contribution – ATI < $37,000 • Maximum earnings test (10% rule) • Additional contributions tax for high income earners – Income threshold of $300,000 • Expected to be legislated in remaining sitting days before Federal Election • Consider timing of bonuses & contributions for threshold calculation • CGT cap amount • Lifetime cap $1,255,000 (inclusive of Retirement Exemption $500,000) • Spouse contributions • Co-contribution
- 14. PENSION TIPS, TRAPS & STRATEGIESFOR 30 JUNE
- 15. BENEFIT PAYMENTS Has theclient met In what form does Does the condition What are the tax a condition of the member wish of release have a consequence of release during the to take the benefit cashing restriction? the withdrawal? financial year? payment?
- 16. PENSION OBLIGATIONS • 10% TRIS maximum – no pro-rata Minimum % Age Later Years applies 2012-13 • GPA concession available where Under 65 3% 4% shortfall may exist 65-74 3.75% 5% • What level of pension is the client 75-79 4.50% 6% withdrawing? 80-84 5.25% 7% – More than minimum? Multiple pensions allows you to decide which income 85-89 6.75% 9% stream to take the above minimum 90-94 8.25% 11% amount – Don’t need to take the minimum? Can 95 or more 10.50% 14% elect to make a partial commutation lump sum (in-specie transfer benefit payment)
- 17. PENSION OBLIGATIONS • TR 2011/D3 discusses the concept of any form of benefit payment from income stream (whether pension or as lump sum for tax purposes) counts towards minimum pension – Under 60 – tax driven in drawing against LRT – Over 60 – management tool in shifting wealth 2012/13 2013/14 Age 64 65 Minimum Pension % 3.0% 5% Account Balance $1,500,000 $45,000 $75,000 • Solution may be to in-specie transfer assets to deal with ‘surplus’ cash flow needs • Expect to be common property strategy for members which to retire in existing SMSF property or shifting listed shares in-specie as benefit payments
- 18. PENSION STRATEGY OPTIONS SEPARATE RUN MULTIPLE ASSET PENSION FOR PENSIONS -TAKE SEGREGATION UNPRESERVED ADVANTAGE OF IN RISING MONEY WITHIN THE INVESTMENT TRANSITION TO PROPORTIONING MARKETS RETIREMENT RULE PENSION
- 19. SEGREGATION • Abilityto segregate specific assets within an SMSF to a member or ‘pool’ of members – Pension Pool / Accumulation Pool / Reserve Pool – Class of Membership • ATO’s views (NTLG Super Technical Group – March 2010) – ATO typically expects total segregation of an asset • not half a property or part of a bank account • Refer to ATO website, “SMSFs and tax exemption on pension assets”
- 20. WHY SEGREGATE? Tax exemption / Members have tax deduction different risk (e.g. LRBAs) tolerances Accelerate the tax-free Improve the tax proportion of an effectiveness or of income stream a TRIS (under 60)
- 21. MEET ELLA 57 yearsold Account Balance of $420,000 Wishes to commence TRIS (includes $20k TFC) She has the ability to make in- specie share transfer of $330,000 as NCC contribution Combine or setup two pensions (multi-pensions)?
- 22. SEGREGATION EXAMPLE If setuptwo pensions: • Can elect to segregate to each pension account • Can assign ‘aggressive’ assets (i.e. shares) to TFC pension ($330k) • Share market rebounds 30%; overall fund portfolio increases 15% TRIS #1 TRIS #2 $391,500 $396,000 $420,000 X 1.032* $330,000 X 1.30 TRIS#2 has a (growth) - $42,000 (growth) - $33,000 100% TF (pension) (pension) proportion WHAT HAVE WE ACHIEVED? • Increased balance and tax efficiency of TRIS #2 as 100% tax-free • Not assessable even through <60
- 23. REVIEWING THE FUND’SINVESTMENT STRATEGY Consideration of a contract of insurance for the CHANGES EFFECTIVE FROM 1 JULY 2012 members & regular review FUND ASSETS RECORDED AT MARKET VALUATION ATO guidelines available for assets where an underlying market does not exist DEATH BENEFIT NOMINATIONS Do they need to be reviewed? Binding, Non- binding, lapsing or non-lapsing? TRUST DEED Are there strategies looking to be undertaken that an out-dated deed does not allow?
- 24. SUMMARY • Important tomanage contributions, but take advantage of caps available each year (use them or lose them!) • How are income streams structured - one or more pension? • How is the client going to take those benefit payments for the financial year? • Think about your best approach to tax exemption for the financial year – does segregation have a role to play? • Do the trustees need to review other aspects of their fund including investment strategy, member death benefit nominations, insurance arrangements, SMSF loans, etc… • There’s lot of work to be done with your SMSF clients!
- 25. NEXT WEBINAR SMSF101- Changing Face of SMSFs • Quarterly Technical & Regulatory Update – including budget summary • Members - free • Non-members: $99 (incl. GST) – Keep a look-up for special offers! Tuesday, 21 May 2013 11am AEDST
- 26. www.smsf101.com.au No. Module A RG146 Knowledge Refresher B Adviser Skills 1 Introducing Super & SMSFs 2 Establishing an SMSF 3 Introducing Estate Planning 4 SMSF contributions 5 SMSF investment rules 6 SMSF investment strategies 7 SMSF taxation 8 Paying SMSF benefits 9 Tax effective SMSF benefit and estate planning Register online to watch our sample module strategies
- 27. Any final questions? Podcast created with webinar questions Link to SMSF Tax planning checklist in follow up email PLEASE COMPLETE SURVEY TO PROVIDE FEEDBACK, FUTURE TOPIC SUGGESTIONS AND OBTAIN YOUR SPAA CPD CERTIFICATE
- 28. Aaron Dunn The SMSFAcademy www.thesmsfacademy.com.au SMSF Dunn Right, http://thedunnthing.com FOLLOW, LIKE OR CONNECT WITH US Follow, Like or connect with Aaron and the SMSF Academy:
Editor's Notes
- #8 Contribution splitting is handy tool for spouses with varying ages, in particular as one individual nears retirement.However, the Labor Govt’s proposed reforms has put the spotlight on the need to potentially manage legislative risk a little better with the proposal to introduce a $100,000 threshold per individual on fund earnings supporting income streams.