Melissa Colaluca

Sladen Snippet - do super fund deeds and pension documents need to be updated pre 1 July 2017?

Sladen Snippet  - do super fund deeds and pension documents need to be updated pre 1 July 2017?

With the new super laws commencing from 1 July 2017, advisors and trustees of self managed superannuation funds (SMSFs) are starting to consider whether they need to update their SMSF trust deed or their pension documents.

Sladen Snippet – ATO releases FAQs on the LRBA safe harbour rules

Sladen Snippet – ATO releases FAQs on the LRBA safe harbour rules

The ATO has released answers to frequently asked questions (FAQs) on the ATO’s safe harbour rules for related party limited recourse borrowing arrangement (LRBA) loans to super funds. The safe harbour rules are contained in PCG 2016/5 and have been discussed in a previous snippet. 

New super laws – the death of transition to retirement income streams?

New super laws – the death of transition to retirement income streams?

There seems to be some confusion about the fate of transition to retirement income streams (TRIS). TRISs will not be abolished from 1 July 2017. Rather, they will no longer qualify for “pension phase” (or retirement phase under the new terminology). 

New super laws – the transfer balance cap

New super laws – the transfer balance cap

The transfer balance cap is the new limit on how much a member can have in their pension account and accordingly is a limit on how much a super fund can have in “pension phase”. Income and capital gains are tax free to the extent they are in pension phase. To the extent that a super fund is in “accumulation phase” its income is taxed at 15% and capital gains, on assets held for more than 12 months, are taxed at 10%. 

New super laws – non-concessional contributions cap

New super laws – non-concessional contributions cap

The headline items to this measure is that the non-concessional contributions cap will be reduced from $180K to $100K, the “bring forward rule” will be reduced from $540K to $300K and that members with account balances over $1.6 million will not be able to make non-concessional contributions. But like most of the new measures there are additional complexities to the new non-concessional cap measures.

New super laws - transfer balance cap – transitional CGT relief – cost base reset

New super laws - transfer balance cap – transitional CGT relief – cost base reset

The transfer balance cap measure includes a transitional CCT relief via a cost base reset. This relief is designed to ensure that only capital growth post the introduction of all of transfer balance cap (ie from 1 July 2017) is taxed. However, like all of the new measures the relief is complicated and requires careful consideration prior to 1 July 2017.

Sladen Snippet – Foreign person duty surcharge to increase to 7% from 1 July 2016 and related changes

Sladen Snippet – Foreign person duty surcharge to increase to 7% from 1 July 2016 and related changes

The Victorian Government has passed legislation to increase the duty surcharge on purchasers of residential property by foreign persons to 7% for contracts entered into from 1 July 2016. The changes contain a number of other changes to the foreign purchaser duty regime. 

Sladen Snippet - super funds can now qualify for the primary production land tax exemption (s 67 Land Tax Act)

Sladen Snippet -  super funds can now qualify for the primary production land tax exemption (s 67 Land Tax Act)

In in an unheralded move, the Victorian government has extended the land tax exemption for primary production land in an urban zone (contained in section 67 of the Land Tax Act 2005) to include land owned by a trustee of a super fund of which all the members or beneficiaries are relatives and at least one of those members or beneficiaries is normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the land.

Sladen Snippet – Date to fix up non-commercial LRBA loans extended to 31 January 2017

Sladen Snippet – Date to fix up non-commercial LRBA loans extended to 31 January 2017

In an update on our previous Sladen Snippets (see here and here), the ATO has announced that the date for rectifying non-commercial related party limited recourse borrowing arrangement (LRBA) loans made to SMSF trustees has been extended from 30 June 2016 to 31 January 2017. 

Sladen Snippet – super changes in the 2016 Budget

Sladen Snippet – super changes in the 2016 Budget

It’s hard to know what to do with a budget handed down by a Government that will not have enough time to pass any measures before it goes into an election. Do you follow the current laws or the laws as they are proposed to be changed in the future (if the Government is re-elected and if it can pass the measures in the newly constituted parliament)? That is the situation we currently find ourselves in with the proposed super changes and in particular the lifetime non-concessional contributions cap.

 

Sladen Snippet – public trading trust rules here to stay? - changes lapse in Parliament.

Sladen Snippet – public trading trust rules here to stay? - changes lapse in Parliament.

We have previously noted in our Snippets in September and December 2015 that, under the legislation to introduce the new managed investment trust rules, it was proposed that self managed superannuation fund(s) (SMSFs) (and other exempt entities that are entitled to a refund of excess imputation credits) be excluded from the 20% tracing rule for the public trading trust rules. This would have resulted, from 1 July 2016, in the public trading trust rules not applying to unit trusts merely because a SMSF held more than 20% of the units in the trust.

Sladen Snippet - ATO gives further guidance on how related party LRBA loans can be rectified by 30 June 2016

Sladen Snippet - ATO gives further guidance on how related party LRBA loans can be rectified by 30 June 2016

Practical Compliance Guidelines PCG 2016/5 Income tax - arm's length terms for Limited Recourse Borrowing Arrangements established by self managed superannuation funds (Guideline) sets out further guidance as to how existing non-commercial limited recourse borrowing arrangement (LRBA) loans from related parties to self managed superannuation funds (SMSFs) can be put on commercial terms by 30 June 2016. If such loans are on commercial terms by that date and with effect for the 2015/16 year then the ATO will accept that such loans are on commercial terms and that they will not trigger the application of the non-arm’s length income (NALI) rules. The ATO has said that it will not select an SMSF for a review purely on the basis that it had a loan on a non-commercial basis for previous years.

Sladen Snippet – ATO releases safe harbour for related party LRBA loans

Sladen Snippet – ATO releases safe harbour for related party LRBA loans

The ATO has released Practical Compliance Guidelines PCG 2016/5 Income tax - arm's length terms for Limited Recourse Borrowing Arrangements established by self managed superannuation funds (Guideline) which sets out 2 safe harbours for limited recourse borrowing arrangement (LRBA) loans from related parties to self managed superannuation funds (SMSFs). If such loans comply with the terms of the safe harbours then the ATO will accept that such loans are on commercial terms and that they will not trigger the application of the non-arm’s length income (NALI) rules.

Director’s breach of fiduciary duties results in a clawback of super contributions

Director’s breach of fiduciary duties results in a clawback of super contributions

In April 2015, an article written by Sladen Legal's Phil Broderick and Melissa Brazzale, was published in the Tax Institute’s Journal, Taxation in Australia.

This article addresses the need for directors of corporate trustees to beware, as breaches of their fiduciary duties can result in amounts taken out of the trust, including super contributions, being clawed back.