Tag: SMSF

Superannuation measures in budget

A very brief summary of items in last week’s Australian budget that affect self managed superannuation funds:

The major revenue measures concerning superannuation proposed in the Budget included:

  • Excess contributions tax: The Government will
    provide eligible individuals who breach the concessional contributions cap by
    up to $10,000 with a one-off option to request that these excess contributions
    be refunded to them. This new refund option will only apply to first time
    breaches from 1 July 2011.
  • Minimum pension drawdowns: The minimum annual
    payment amounts for pensions and annuities will be reduced by 25% for 2011-12
    and will return to normal in 2012-13. In this respect, the Government will
    begin to phase out the 50% pension drawdown relief that has been provided for
    2008-09, 2009-10 and 2010-11 financial years.
  • SMSF regulation: To implement the range of
    “Stronger Super” reforms to the self-managed superannuation fund (SMSF)
    sector, the Government will provide $40.2m to the Tax Office and $8.4m to ASIC
    from 2010-11 to 2014-15. The cost of this measure will be offset by an
    increase to the SMSF levy from $150 to $180 with effect from the 2010-11
    income year and the introduction of SMSF auditor registration fees from 1 July
    2012.
  • Concessional contributions for those 50 and over:
    The Government will set the proposed higher concessional contributions
    cap at $25,000 above the general concessional cap for eligible individuals
    aged 50 and over with total superannuation balances of less than $500,000.
  • Other measures: Other superannuation measures
    announced concerned: SMSF trustee-director a parent or guardian of minor;
    superannuation co-contribution indexation freeze extended; greater use of TFNs
    for superannuation; and superannuation on payslips.

And finally, the annual fees for having your own fund , the supervisory levy, will increase from $150 to $180

SMSF trustee fined $12,500

The Federal Court has imposed a $12,500 civil penalty on a trustee of a self-managed superannuation fund (SMSF) for the illegal early release of benefits in breach of the sole purpose test.

The respondent established an SMSF in August 2005 with a rollover payment of $40,032. Shortly thereafter, he began withdrawing amounts to meet pressing financial needs. In total there were 41 illegal early release payments totalling $64,000 during 2006 to 2010. The applicant, in his capacity as a Deputy Commissioner of Taxation (Superannuation), applied to the Federal Court to impose a civil penalty on the trustee under s 196 of the SIS Act.

The Court held that the trustee had contravened ss 62(1) (sole purpose test) and 65(1)(b) (financial assistance to member) of the SIS Act through at least 30 unauthorised withdrawals. The Court imposed a civil penalty of $12,500, after finding that the contraventions were “serious”. However, the Court agreed to treat the contraventions as a single contravening course of conduct and took into account the respondent’s admissions and cooperative conduct. (Olesen v MacLeod [2011] FCA 229, Federal Court, Barker J, 17 March 2011.)

The details of the case show that the trustee was alerted by the fund’s auditor in 2007 that the withdrawals made in 2006 and 2007 were a contravention of the SIS Act. The ATO audited the fund in respect of 2008 and found further breaches yet the trustee continued to make illegal withdrawals in 2009 and 2010. I believe he got off very lightly.

SMSF’s In-house asset breaches up

The drop in investment values has caused problems for many self-managed superannuation funds with in-house assets.

Partners Superannuation Services research has revealed 11.25 per cent of self managed superannuation funds (SMSFs) breached in-house assets limitations during 2008.

Under the Superannuation Industry Supervision (SIS) Act, an SMSF is not allowed to hold in-house assets that total more than 5 per cent of the value of the fund.

In-house assets include loans to, investments in, or the lease of equipment to businesses owned by the fund or those associated with the fund.

The rule had presented itself as a problem to SMSF trustees in the past, with 10 per cent of funds transgressing in 2007.

However, one of the main reasons for the breaches of the limit last year was the fall in investment markets.

“For example, if your fund previously had $100,000 worth of assets, a 5 per cent loan would be $5000. However, should the value fall to $50,000, $5000 would in effect translate to 10 per cent,” Partner Superannuation Services director Martin Murden said.

Despite these breaches SMSFs were improving their compliance track records, according to Murden.

“Clearly fund trustees are making a much greater effort to truly understand what is expected of them in their roles,” he said.

“They’re reading the literature which is now readily available through the Australian Tax Office and they’re attending seminars … which aim at informing and educating trustees about their rights and obligations.”

The survey was based on a sample size of over 500 SMSFs audited during 2008.