Extension of draw down relief for account based pensions
With the continued volatility and depressed price levels in equities markets, the Government have announced yesterday that the 25% reduction in the minimum payments for account based pensions will be extended to the 2012-13 year.
They believe that around 125,000 self-funded retirees will benefit from this extension, and reduce the need for them to sell assets at a loss in order to meet the minimum payment requirement.
Government announce more super change intentions
The Government announced yesterday some updates to their intentions around changes to super for next year, as part of their mid year economic and fiscal outlook.
1. Low Income Superannuation Contribution
The Government’s low income superannuation contribution (LISC) is aimed at reducing the tax paid on super guarantee contributions (SGC) for low income workers.
Basically, individuals earning up to $37,000 will effectively pay no tax on their SGC from 1 July 2012, as the 15 per cent contributions tax will effectively be refunded into their super fund accounts.
Yesterday the Government announced a few updates:
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Super Guarantee Age Limit Abolished
The Government announced yesterday the abolition of the age limit on Super Guarantee contributions, with the passage of legislation through the parliament.
Basically, eligible employees aged 70 and over will for the first time be able to receive the superannuation guarantee from 1st July 2013. The Government state that this will increase the coverage of the superannuation guarantee scheme to an additional 51,000 Australians aged 70 and over who continue working. These changes also mean that employers will be able to claim income tax deductions for superannuation guarantee contributions made these employees, and hence ensures employers will not bear a higher cost in employing workers 70 and over compared with other workers.
The commencement date of 1st july 2013 was chosen to allow time for employers and older Australians to adjust to these new arrangements.
Amendments to the Superannuation Guarantee (Administration) Amendment Bill 2011 and the Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011 were made to give effect to these reforms and these passed the House of Representatives last week.
ATO ID – SMSFs acquiring an asset with a charge over the asset
The ATO have recently released an interpretative decision (ATO ID 2011/81) around the issue of a SMSF trustee giving a “charge over assets” of the fund and specifically the meaning of “give a charge”.
And we have to say, this is a very interesting one.
Why is it important?
There has generally been a view in the past that a SMSF cannot have an asset in the fund that has a “charge over it”. A “charge” is basically like a mortgage or lien over an asset. Specifically, Reg 13.14 of the SISR states that “the trustee of a fund must not give a charge over, or in relation to, an asset of the fund.”
However, the question has been raised – Does the trustee of a SMSF ‘give a charge’ for the purposes of regulation 13.14 if the trustee purchases an asset subject to a charge that was established before the trustee purchased the asset?
ATO ID – can former step children be dependants for death benefits
The ATO have recently released an interpretative decision (ATO ID 2011/77) dealing with the issue of “former” step children, and the meaning of child and dependants for the purpose of paying out SMSF death benefits.
The Question
Consider the following example:
Jack and Jill were married. Little Bill is Jill’s son from a former marriage.
Hence Little Bill was Jack’s step son.
However, Jack and Jill’s marriage ended a few years ago in divorce.
Now, Jack has died, and did not formally adopt Little Bill under any state or territory law.
So the question is – can Little Bill be classed as a dependant of Jack’s (under the SIS Act, and hence be eligible for a death benefits payout from Jack’s super fund) because Little Bill has previously been a ‘stepchild’ of Jack’s ?
ATO ID – is a former spouse from a same sex couple a death benefits dependent?
The ATO have recently released an Interpretative Decision (ATO ID 2011/83) dealing with the issue of whether or not a former spouse of a same sex couple qualifies as a superannuation death benefits dependent – even though the relationship ended prior to same sex couples being included as “spouses”.
Why is this important?
As you may be aware, if a superannuation death benefit payment is made to someone who qualifies as a ‘death benefits dependent’ of the person who has died, the payment attracts very favorable tax treatment (lump sums are tax free).
Hence, to be treated as a death benefits dependent can mean the difference of many thousands of dollars in the final payout.
Government’s Stronger Super decisions for SMSFs
Way back on the 29th May 2009, the Government commissioned the Super System Review, chaired by Jeremy Cooper. The final report was handed to the Government on 30 June 2010, and the Government responded to the recommendations in December 2010 with a document which outlined which recommendations it supported, which it didn’t, and which required more industry consultation.
Now in September 2011, the Government have come out with its “Stronger Super Info pack”, which outlines the details of the Governments decisions on key design aspects of the reforms.
For SMSFs, this new document outlines the Government’s decisions on a couple of key issues that they were still to decide on, which we outline below:
ATO draft ruling update on SMSF Borrowing
The ATO have released their latest draft ruling which seeks to clarify their position on a number of issues around limited recourse borrowing arrangements (LRBA).
The bottom line is that it’s actually pretty good news, with a common sense and commercial approach being shown by the ATO.
Whilst it’s a fairly involved ruling, the following is a summary of the key points covered:
Consultation opened on change to contribution caps
The Government have recently opened the consultation process for a change to the contribution caps.
This potential change has been mentioned before, and involves the ability for individuals who breach their concessional contributions caps by up to $10,000 for the first time to have the excess concessional contributions refunded to them.
Basically, those excess concessional contributions would be taken out of your SMSF and would then be assessed as normal income at your marginal tax rate, rather than incurring a potentially higher rate of excess contributions tax.
Draft regs on TPD insurance premium deductions
Treasury have just put out the draft regs on how much of each type of TPD definition will be tax deductible when taken out inside a SMSF:
TPD any occupation : 100%
TPD any occupation with one or more of the 100 following inclusions: 100%
(a) activities of daily living;
(b) cognitive loss;
(c) lossoflimb
TPD own occupation : 67%
TPD own occupation with one or more of the following inclusions: 67%
(a)activities of daily living;
(b) cognitive loss;
(c) loss of limb
TPD own occupation bundled with death (life) cover : 80%
TPD own occupation bundled with death (life) cover with one or more of the following inclusions: 80%
(a) activities of daily living;
(b) cognitive loss;
(c) lossoflimb.
Note this updates our previous articles on this subject.
