Many readers will be members of Self-Managed Superannuation Funds (SMSFs) and will understand in general terms the limits imposed on SMSFs with respect to the types of investments they can make.
Superannuation legislation prevents s SMSFs from investments in a related party. This is called the ‘in-house asset test’. There are some notable exceptions including that a SMSF can often purchase land and buildings (including farms) upon which the SMSF’s members can conduct their business.
Another prohibition insures that SMSFs cannot use retirement savings accumulated at favourable tax rates to acquire property, for example holiday houses or fast cars, that can be used beneficially by the SMSFs members or family before retirement.… Read More
Despite common belief, your superannuation fund does not form part of your Estate and is therefore not subject to the terms of your Will. Most superannuation funds allow you to elect to make a binding death benefit nomination which binds the Trustee of your superfund to pay your death benefit to your nominated beneficiaries. If you do not have a binding nomination in place at the time of your death, the Trustee of your fund has the discretion to decide who is to benefit from your super. The Trustee is not bound to follow the directions of your Will, as superannuation is not an asset of the Estate.… Read More
Employers failing to pay superannuation could be hit with Court ordered penalties and even 12 months prison stints under draft legislation released recently.
The legislation aims to protect workers superannuation entitlements, while modernising the way the super guarantee is enforced. The introduction of Single Touch Payroll for employers from 1 July 2019 will make it much easier for the Australian Taxation Office to monitor and identify employers who skip their superannuation obligations, rather than the current regime of self-reporting.
The Single Touch Payroll system allows employers to report salaries, wages, PAYG tax and super directly to the ATO from their payroll systems.… Read More
In 2007 superannuation laws were relaxed to allow superannuation funds (“Super Funds”) to borrow money to acquire assets.
At about the same time, a Global Financial Crisis happened. This resulted in there being very little use of these new laws by Super Funds for a few years but with the return of business confidence that changed . It is now very common for Super Funds to borrow, particularly to purchase real estate.
The rules for borrowing by Super Funds are complex but became well understood by financiers and advisors such as financial planners, accountants and solicitors who practiced in the superannuation area.… Read More
The number of self managed superannuation funds (SMSFs) is increasing exponentially. This growth has been particularly prompted by changed laws allowing SMSFs to borrow to purchase investments such as real estate.
The primary rule of self managed superannuation is a requirement that all the members (a maximum of 4) must either be trustees of the fund or directors of the trustee company if the fund has a corporate trustee.
Normally, trustees must act unanimously. Unless the prospect for dispute or deadlock between trustees is considered and dealt with upfront, disputes will ultimately find their way to the Supreme Court which is all of, very expensive, uncertain and time-consuming.… Read More
Section 67A allows a Self-Managed Super Fund (“SMSF”) to borrow to acquire an asset subject to strict conditions such as holding the asset in a separate Holding Trust, using a nonrecourse loan and the SMSF must only purchase a single acquirable asset.
It has long been known and the ATO has confirmed that a related party to a member of a SMSF is entitled to lend to that person’s own super fund. For example you can personally or an associated entity can lend to your own SMSF to acquire an asset.
In 2010 the ATO issued an interpretative decision indicating that a related party could charge less than a market rate of interest on a loan to their SMSF, but could not charge more than a market rate.… Read More
One of the biggest impediments to transferring property from one party to another is the exorbitant stamp duty costs payable to the State Government on transfer.
Under the current law, it is possible for a member of a self-managed superannuation fund to transfer an asset from his/her personal name into the superannuation fund and only incur nominal stamp duty. That is a significant concession and should be considered.
Once a superannuation fund is placed in pension mode, payments distributed to members are currently treated as tax free and accordingly there can be significant advantages in transferring assets into a self-managed super fund.… Read More
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It depends. It is always important to review the requirements of the Duties Act in each case before assuming that a rural land transfer will be stamp duty free.
Mum and dad have owned a rural property since the 1970s. The farming business is carried on by a proprietary limited company. The shareholders and directors are mum and dad.
As the son and daughter-in-law now run and guide the farming business, mum and dad have decided to transfer part of the farming land to them valued at about $1.5 million. Mum and dad also propose to make the son and daughter-in-law directors of the farming operations company.
Borrowing by Self Managed Superannuation Funds (“SMSFs”) has been allowed under strictly controlled circumstances for over five years. Over that time the “grey areas” have gradually become a little clearer both through legislative change and the issue of very detailed rulings by the ATO.
In May this year the ATO issued a new major ruling. It is a very useful document and contains many examples of what the ATO considers can and can’t be done. Some of those examples are particularly relevant to farming properties.
One of the key concepts of the legislation is the concept of borrowing to acquire a “single acquirable asset”.… Read More
Many business owners involve their self managed superannuation funds (“SMSF”) in their business as owner of or part owner of their business premises.
There can be benefits in doing this but there are also costs associated particularly with –
- transferring the asset into the SMSF; and
- the complex ongoing compliance regime for SMSFs
In the past month I have come across good examples of both points.
A client had heard of the benefits of transferring his business premises into his SMSF and better still, that it could be done for only $50 stamp duty. As usual, the devil is in the detail.… Read More