smsf trustee masterclass 2015

SMSF Trustee

Masterclass

DisclaimerThis seminar and the information provided is for General Information only and should not be relied upon without first seeking advice from an appropriately qualified professional.

This General Information does not take into account any individual’s personal circumstances and is not Personal Advice.

What is a SMSF?

Trust

Deed

Trustees “run” and “manage”

Members: at least 1 and less than 5

Hold assets on behalf of the members for their retirement.

What’s Involved with a SMSF?

Who can be a Trustee?

What is a Trustee?

All members must be trustees

Single member funds

Trustee requirements

SMSF Trustee ComparisonIndividual Trustees

Corporate Trustees

Establishment costs Can be lower than corporate trustee

More costly than individual trustees

Estate planning flexibility

New trustee must be appointed if fund is to continue

Trustee does not need to change on death of member

Administration of investments

Name changes required for investments where change in trustees

Member/director changes do not affect investments

Separation of Assets Not clear who owner is for some investments (e.g. property)

Clear distinction between member and fund investments

Sole member SMSF Must have 2 trustees Can have sole director company as trustee

Lower Penalties ATO penalties to each individual trustee

Penalties issued to company – directors jointly liable

The Role of Trustees

Your Trustee obligations are:Act in the best interests of all fund membersManage the fund separately from own affairsSecure the assets of the fundEnsure money/assets in the fund only accessed where the law allows it

The Role of TrusteesPurpose of FundInvestment StrategyInsuranceContributions and BenefitsApproval of AuditorAdministrative requirementsMust not allow early access to fundsMaintain records and minutes for at least Ten years.

Trustee ObligationsReporting to the Australian Taxation Office

Change of trustees or Directors of Corporate TrusteeContact details for TrusteesAddress for service notes The Fund is wound up

Failure to comply with your obligationsIf as a trustee you do not comply with your obligations the following can occur:

Administrative penalties – these penalties are imposed on you personally

Rectification agreements and education undertakings on the trustees

Make the Fund non-complying

Disqualify the Trustee

Prosecute in the most serious of cases

Investment Restriction and Rules

Investment Rules

Property – residential and business real propertyCollectiblesAcquiring from a member prohibited (with some exceptions)In house assets Off market transfers of listed securities ValuationsSecuring the assets of the fund

Taxation of Funds

Accumulation PhaseIncome 15%Capital Gains 10% or 15%

Pension PhaseIncome 0%Capital Gains 0%

Div 293 TaxAdditional 15% on contribution if members income and low tax contributions exceed $300K

Accepting ContributionsTypes of contributions

Concessional Contributions

Super Guarantee Contributions from an employer (rate now 9.5%)

Other employer e.g. Salary Sacrifice

Personal contributions where individual is eligible to claim a tax deduction

Caps for 2015/16Under 49 $30,000

49 or over $35,000

Age limits for contributions

Accepting Contributions

Types of ContributionsNon-Concessional Contributions

Personal contributions for which no tax deduction has been claimedCaps for 2015/16

Under 65 $180,000 (or $540,000 in 3 year period)Over 65 $180,000 but must satisfy the work testOver 75 No non-concessional contributions can be made

Preservation RulesTo be able to access your Superannuation you must meet a following condition of release before taking money out of your fund:

Has reached preservation age and retiresHas reached their preservation age and begins a Transition to Retirement Income Stream (Ages 55-60 per the handout)Ceases an employment arrangement on or after the age of 60Is 65 years of age (even if they have not retired)Has died

Preservation RulesIn some circumstances you can access some of your superannuation before you reach preservation age these special circumstances are:

Permanent Incapacity

Temporary Incapacity

Severe Financial Hardship

Terminal Medical Condition

Estate Planning Considerations

Review Binding Death Benefit Nominations

Ensure your will is up to date

Re-contribution Strategies

Transition to Retirement Pensions

Insurance Considerations

Personal Insurances & SMSF

Types of Insurance that can be held in Super & tax benefits

Term Life Insurance

TPD (Total and permanent disablement)

Own Occupation (no new policies from 1 July 2014

Any Occupation

Trauma Insurance (no new policies from 1 July 2014)

Income Protection (temporary incapacity)

ATO Penalty RegimeSection and Rule Administrative Penalty Amount

Prescribed Operating Standards – Failure to comply with the general provisions of the SIS Act.

$3,400

Prepare Accounts and Statements – failure to prepare Financial Statements. $1,700

Lending to Members – prohibition on lending or providing financial assistance to members & relatives

$10,200

Fund Borrowing – prohibition on super fund borrowing (including bank account going into overdraft position) except as permitted, e.g. limited recourse borrowing arrangement

$10,200

In-house asset rules a loan to, or investment in: A related party of the fund In a related trust of the fund An asset of the fund subject to a lease or lease arrangement between

the trustee of the fund and a related party of the fund.

$10,200

Failure to keep records and minutes for 10 years $1,700

Failure to keep Sec. 71E election for 10 years – where applicable, in relation to a fund with an investment in a pre August 1999 related unit trust.

$1,700

Failure to keep change of Trustee records for 10 years $1,700

Failure to keep Trustee Consent for 10 years $1,700

Failure to keep members statements for 10 years $1,700

Failure to notify Regulator if unable to pay benefits $10,200

Failure to Notify Regulator if fund no longer SMSF $3,400

Failure to appoint Investment manager in writing $850

Non-compliance with education direction $850

Failure to give required info to Regulator $850

Failure to complete regulator survey $850

Tips and Traps of an SMSFContravention Type (based on contraventions reported to ATO between 2005 to 2012)

Incidence Proportion of Assets

Loan to members/Financial assistance 20.9% 14.4%

In-house Assets 18.3% 27.2%

Administrative-type contraventions 12% 1.8%

Separation of Assets 12.9% 26.2%

Operating standard-type Contraventions 8.3% 6.5%

Borrowings (including Bank Overdraft) 8.0% 7.8%

Sole Purpose 7.8% 5.7%

Investments at Arm’s length 7.5% 7.4%

Other 2.8% 0.7%

Acquisitions of assets from related parties 1.5% 2.3%

Common Mistakes and how to avoid them

Accidentally withdrawing funds from

your SMSF bank account.

Allowing the SMSF to invest without

getting proper advice.

Letting your bank account go into

overdraft position

Common Mistakes and how to avoid them

Exceeding Contribution Caps – having

multiple Superfunds

Exceeding Contribution Caps –

employers super guarantee being paid

early

Exceeding Contribution Caps –

contributing more than you cap limits

Failure to meet Minimum Pension

Payments

Accidently withdrawing funds from your SMSF bank account

How it occurs – SMSF Bank account to

pay private expense

Consequence – Reportable breach,

significant penalties to trustees

Solution – keep accounts separate

Allowing SMSF to invest in an asset without getting proper advice

How it occurs – not obtaining correct

advice

Consequence – breach of invest rules

Solution – speak to your accountant

before investing

Bank Account in Overdraft

How it occurs – writing a cheque without

having sufficient funds

Consequence – Reportable breach, can

result in penalties for trustees

Solution – ensure a “buffer” in main

account

Exceeding Contribution Caps

How it occurs – multiple superfunds and

contributions made to both

Consequence – you have exceed cap,

amount exceeded is added to assessable

income taxed at marginal rates

Solution – Rollover balance into one fund

Exceeding your Contribution Caps – Employer Contributions

How it occurs – Employer makes final

contribution before 30 June.

Consequence – exceed cap, amount

exceeded is added to your assessable

income and taxed marginal rate.

Solution – Confirm with Employer

Exceeding your Contribution Caps – Incorrect Utilisation of Bring Forward Option

How it occurs – failure to review

contributions made in previous years

Consequence – exceeded contribution

caps amount exceeded is added to

income and taxed at marginal rates

Solution – contact your accountant to

review previous 2 years of contributions.

Members not Meeting Minimum Pension Payments

How it occurs – members fail to

withdraw minimum pension payments

for year.

Consequence – Fund loses its tax

exemption status for the financial year.

Solution – Contact your accountant and

confirm whether you have taken your

minimum pension.

Actuarial Certificates

Benefit of certificateNeed for certificateWhat is certified

Future Risks

Shadows and startingCoalitionALPASFASMSF Association

Questions??

SMSF Trustee

Masterclass