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The Tax Office has written to 3,122 trustees of self managed super funds offering them a new tax file number (TFN) for their funds.

The funds’ existing tax file numbers were on a CD of scanned letters being sent to the Tax Office via an authorised (door to door) courier from the company contracted to print the letters. The courier received the CD but it was not delivered to the Tax Office and has gone missing.

Tax Commissioner Michael D’Ascenzo said he wanted to assure the community the Tax Office takes the privacy of their personal details very seriously.

“Nothing is more important to the community and fundamental to good tax administration than the security of taxpayer information,” Mr D’Ascenzo said.

“I am concerned that this parcel containing taxpayer information has failed to be delivered, even though the courier believes the parcel is still within their warehouse facilities.

“While there is no evidence the information has fallen into the wrong hands or been misused, I am taking the matter seriously.

“As there is a risk the information could be misused if the courier is unable to locate the CD, we are providing the relevant trustees the opportunity to ensure that there is no unauthorised use of their funds’ relevant tax records.

Tax office Media release 2008/53

The level of lost superannuation assets and lost member accounts in the Australian superannuation system increased in the 2007-08 financial year.

The Lost Members Register increased from $11.9 billion in superannuation assets on 30 June 2007 to $12.9 billion on 30 June 2008, an increase of 8.4 per cent.

The total number of lost member superannuation accounts rose by 315,325 or 5.2 per cent, from 6.1 million accounts on 30 June 2007 to 6.4 million accounts at 30 June 2008.

The Superannuation (Unclaimed Money and Lost Members) Act 1999 requires super funds to report to the ATO twice a year on the details of member accounts that meet the definition of lost member. The information is retained in a register of accounts called the Lost Members Register.

From press release no.66 Minister for Superannuation & Corporate Law

Jocelyn Furlan, Acting Chairperson of the Superannuation Complaints Tribunal, has reported a significant increase in the number of complaints received by the Tribunal.

In the June 2008 quarter, complaints were up by 23.6% when compared to the same quarter in 2007.

The number of complaints within jurisdiction relating to fund administration continues to rise as a percentage of total complaints received and now comprises the largest category of complaints. Complaints about delays in rollovers or benefit payments and investment option changes comprised over 27%, and disputes regarding account balances representing a quarter of administration complaints.

Ms Furlan said that whilst this increase may or may not be a direct result of negative investment returns, in a falling market trustees should review any undertakings given in relation to the processing time for benefit payments, rollovers, investment switches and other transactions impacting on the member’s account balance.

Falling markets may have implications for death benefit payments.

The Tribunal encourages trustees to review their policies regarding the investment of pending death benefit payments (and any insurance proceeds) during the period of the claim staking process (and resolution of a dispute by the Tribunal if a complaint is lodged) and ensure that this has been disclosed to members.

An explanation to the potential beneficiaries/legal personal representatives of how the account will be invested during the period between confirmation of death and the payment of the death benefit may help to reduce the number of complaints to the Tribunal about any unexpected change in the value of the benefit. The Tribunal is aware that some funds have adopted the policy that any investment choice in place at the date of death continues until the benefit is paid. The Tribunal has received complaints that the trustee will not accept a request to change the investment option, on the basis that, in the Trustee’s view, no one (including a surviving spouse or a legal personal representative of the deceased member’s estate) is authorised to request such a change.

The tribunal has now merged with the Banking Industry ombudsman to form the Financial Ombudsman Service.

This is what may still be available.

Last Minute Contributions

There are two types of contributions that can be made to superannuation – concessional and non-concessional contributions. Concessional contributions to super are those which are eligible for a tax deduction. These include employer contributions, Superannuation Guarantee contributions and salary sacrifice contributions. For anyone younger than age 50 the concessional contributions cap is $50,000 and for anyone age 50 and above it is $100,000.

Non-concessional contributions are personal contributions, spouse contributions and child contributions for which no tax deduction has been claimed. The non-concessional contributions cap is $150,000, however, for anyone under age 65 it is possible to make non-concessional contributions of up to $450,000 over a three year set period. Any concessional and non-concessional contributions which are in excess of the cap are taxed at penalty rates.

Don’t forget that once you reach age 65 contributions can only be made to superannuation if you meet the work test of 40 hours within 30 consecutive days during the financial year. Once you reach age 75 contributions cannot be made to superannuation as a general rule.

Contributions to self managed funds can be made in cash or via in-specie contributions of certain property, listed and non-listed investments. Don’t forget there may be capital gains tax and stamp duty implications relating to the transfer to take into consideration.

Salary Sacrifice

Salary sacrifice is a great way of making tax effective contributions to superannuation. Remember that these agreements need to be made in advance and 1 July is not that far away so planning your salary sacrifice to superannuation now is a good strategy. Talk to your employer to see whether salary sacrifice is available and how much of your income can be salary sacrificed.

Co-contribution

For anyone who earns less than $58,980 making an after tax contribution to superannuation can have a number of advantages if they qualify for the co-contribution.

The main qualification is that you must be under 71 and at least 10% of your total income must be earned from salary and reportable fringe benefits and make an after tax contribution to superannuation of at least $1,000 during the year.

The maximum amount of the co-contribution is $1,500 if you earn less than $28,980. Once you earn more than $28,980 the co-contribution reduces by $0.05 per additional dollar of income and cuts out when you earn $58,980 or more.

If you have children who have just commenced working the co-contribution may provide an incentive to introduce them to superannuation if they earn less than the maximum income threshold of $58,980.

Personal Tax Deductible Contributions

What many people don’t know is that they may be eligible to claim a tax deductible personal superannuation contribution where they are not working or earn a small amount from employment. This is available to people who are self-employed, anyone who earns most of their income from investments or as a pension.

Providing you earn less than 10% of your income and reportable fringe benefits from employment then you may qualify. Until 30 June the amount you can claim as a tax deduction depends on your age. If you are under age 50 the maximum amount taxed at concessional rates is $50,000 and if you are 50 or older it is $100,000. Don’t forget once you reach age 65 you need to meet certain work tests if you wish to contribute to super,

Contributions Splitting with Your Spouse

This can be an attractive financial planning strategy as the superannuation rules allow you to split your contributions with your spouse.

The amount that can be split depends on the type of contribution and when it was made. To split the contribution you need to apply in the financial year after the contribution was made.

Spouse Contributions to Super

For those who have a spouse who earn less than $10,800 making a contribution of up to $3,000 can have some tax advantages. By making an after tax contribution to superannuation for your spouse you can receive a tax offset (rebate) of up to $540. This offset (rebate) reduces down to $0 once your spouse earns greater then $13,800.

Combining Your Superannuation Benefits Before 1 July

Prior to 1 July you may find it useful to combine your superannuation benefits if you have an amount in at least one fund that relates to your membership or employment as far back as June 1983. The reason is that by combining your superannuation benefits you may end up with a greater tax free amount from super. This is important if you will be taking a superannuation benefit prior to reaching 60 or for any death benefits from superannuation to ‘non-dependants’.

Of course, it can be worthwhile to combine your superannuation benefits at anytime to reduce the costs of keeping your money in super.

Tax File Numbers

It is important that your superannuation fund has a record of your tax file number. The reason is that if the fund does not have your tax file number it may deduct tax of 46.5% from the contribution made on your behalf. Also, without your tax file number it is not allowed to accept contributions made by you from after tax amounts. This will mean less in your superannuation account and you may miss out on the generous concessions available.

Thanks to Superconcepts for this summarywww.superconcepts.com.au

I’m pretty skeptical every politician promises to “slash red tape”. This particular item is something I recall asking for years ago so I hope it comes off.

As a part of the budget previews last week the minister of superannuation made the following announcement (I have edited out the bits where he praises his government and criticises the previous one):

The Rudd Government will provide funding of $16 million over three years to set up an optional superannuation clearing house facility to cut the red tape burden on businesses across Australia, Senator the Hon Nick Sherry, Minister for Superannuation and Corporate Law, said today.

“With the introduction of super fund choice, businesses can be required to make compulsory superannuation contributions into numerous funds, potentially imposing a significant burden of paperwork and time, especially on small businesses.

Where employees can choose their own superannuation fund from the many hundreds available, an employer may be required to pay superannuation into a large number of different funds, a process that can be highly onerous.

A superannuation clearing house will allow an employer to pay their contributions to a single location. The clearing house will then distribute them to the relevant superannuation funds as selected by their employees.

“The optional clearing house facility will manage employers’ obligations under Superannuation Choice, including the time consuming task of checking details entered on the Choice form and distribution of contributions to the nominated funds,” Minister Sherry said.

“For small businesses we’re not just reducing red tape but we’re also making sure that no new costs are imposed as the clearing house facility will be offered free of charge to businesses with less than 20 employees,” said Minister Sherry.

Businesses that use the clearing house facility will have their legal obligation to make superannuation contributions discharged when payment of the correct amount is made to the clearing house. The facility will be available from 1 July 2009.

The Government will consult with industry prior to implementing this measure.

The Federal Government has formally approved the establishment of the First Home Savers (FHS) Accounts scheme. It is anticipated that eligible first home buyers will benefit from the scheme. The scheme will be offered through banks, building societies, credit unions and life insurers.

Although the detailed features of the scheme have not been finalised, key features include:

• co-contribution from the government of a minimum of 15% on after-tax contributions of up to $5,000;
• individuals aged between 18 to 65 will be able to open an account with an initial contribution of at least $1,000, so long as they comply with the eligibility criteria for the First Home Owners Grant;
• the minimum savings period for the scheme is four years;
• interest earned will be taxed at a rate of 15%; and

withdrawals will only be permitted for the purchase of an eligible first home and will be tax-free. Alternatively, individuals can roll over the full amount of the account to their superannuation fund at any time

From Thomson Tax & Accounting Insights

Amendments on super and same-sex couples soon, says Minister

The minister for superannuation and corporate law, Senator Sherry, has indicated that amendments to public sector superannuation funds in respect of same-sex couples recently are likely to be finalised by the end of 2008. He said that an announcement as to the legislative process to deal with the issue will be made ’shortly’. Senator Sherry made his remarks during debate in the Senate on the Superannuation Legislation Amendment (Trustee Board and Other Measures)(Consequential Amendments) Bill 2008 on 17 March 2008

During March the Australian Tax Office will be running seminars for trustees of self managed superannuation funds in regional locations throughout Australia.

They will be covering information that is relevant to SMSFs.

Stephen Hall, Superannuation partner at Thomson Hall recommends that all trustees attend.

Topics covered will include:

• Tax obligations for SMSFs, and
• Recent changes to super and how these changes relate to SMSFs.
• What is a SMSF?
• Trustee obligations
• Investment restrictions
• Contribution and benefit payment rules
• Recent changes to super
• Our compliance program
• Where to go for help

Also, new topics that the ATO will be covering in these seminars include:

• SMSF annual return
• Instalment warrants (which are a way that super funds may borrow money for the purchase of investment assets)
• In-house asset transitional arrangements
• Trust deeds
• Crystallisation calculator
• Benefits calculator

Details of locations, dates and registration information are at the ATO Super website

The trustees of a self managed superannuation fund have been issued penalties of $30,000 and ordered to pay $32,500 in costs for breaching the rules relating to their fund.

On 15 October 2007 the Federal Court declared that the trustees for the Axent Group self managed superannuation fund (SMSF) had breached superannuation legislation by selling a property belonging to the fund and using the proceeds of nearly $150,000 to pay a private debt.

The couple had accessed assets in the superannuation fund before meeting any conditions of release such as retirement or reaching preservation age.

Deputy Commissioner Raelene Vivian said the action was part of an increased compliance focus on SMSFs by the Tax Office.

“The main purpose of SMSFs is to provide for retirement. Trustees who access their superannuation without meeting a condition of release are breaking the law and risking their retirement savings.

“The Tax Office provides a range of educational material to ensure trustees are aware of their roles and responsibilities.

“It’s vital SMSF trustees make sure they understand their legal and regulatory obligations as they are legally responsible for managing their fund.

“SMSFs which do not comply with the legislation are at risk of prosecution, penalties and additional tax,“ Ms Vivian said.

ATO press release
For more information about SMSFs, whether they are right for you and an SMSF checklist visit www.ato.gov.au or contact Stephen Hall or Gavin Thomson at Thomson Hall