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Sladen Snippet – Super contribution caps, rates and thresholds for 2016/17 year released

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Sladen Snippet – Super contribution caps, rates and thresholds for 2016/17 year released

The Australian Taxation Office (ATO) has released key super contribution caps, rates and thresholds for the 2016/17 year. These include:

  • Concessional contribution caps – for persons aged less than 49 on 30 June 2016 the cap will remain at $30,000 -  for persons aged 49+ on 30 June 2016 the higher cap of $35,000 will apply;
  • Non-concessional contributions cap- will remain at $180,000, while the “bring forward” cap will remain at $540,000;
  • CGT contributions cap - will increase to $1,415,000.
  • Super guarantee maximum super contribution base- will increase to $51,620 per quarter, while the super guarantee rate will remain at 9.5%;
  • Lump sum low rate cap- will increase to $195,000.

Sladen Snippet – non-commercial LRBA loans must be rectified with effect from 1 July 2015

Sladen Snippet – non-commercial LRBA loans must be rectified with effect from 1 July 2015

In our previous Sladen Snippet, we confirmed that the Australian Taxation Office (ATO) will not take active steps to review non-commercial limited recourse borrowing arrangement (LRBA) loans prior to 30 June 2016, but that such LRBA loans should be put on arm’s length terms by 30 June 2016. If that occurs then the ATO has stated that it will not actively review such non-commercial LRBAs in prior years.

Sladen Snippet – concept of unit trust clarified for the public trading trust rules

Sladen Snippet – concept of unit trust clarified for the public trading trust rules

The Full Federal Court has provided some welcome clarification as to what constitutes a unit trust when it upheld an appeal by the Commissioner of Taxation, in the decision of CoT v ElecNet (Aust) Pty Ltd (Trustee). In the original decision (discussed in a previous Sladen Snippet) the Federal Court found that a trust established for the purpose of assisting workers when they are retrenched was a unit trust, on the basis of the expanded definition of “unit” in the public trading trust rules.

Sladen Snippet – public trading trust rules no longer to apply for super funds - transitional rules announced

Sladen Snippet – public trading trust rules no longer to apply for super funds - transitional rules announced

The Government has released the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Bill 2015 which, if enacted, will mean that, from 1 July 2016, the fact that self managed superannuation fund(s) (SMSFs) hold more than 20% of the units in a unit trust will not cause the unit trust to be a public trading trust.

The public trading trust rules result in a unit trust being treated as a company in certain ways (for example, it is taxed at the corporate rate and its distributions can be franked). These changes are to apply to existing unit trusts (that are public trading trusts) as well as unit trusts set up after 1 July 2016. 

Sladen Snippet – Non-commercial LRBA loans must be rectified by 30 June 2016

Sladen Snippet – Non-commercial LRBA loans must be rectified by 30 June 2016

The Australian Taxation Office (ATO) has confirmed that it will not take active steps to review non-commercial limited recourse borrowing arrangement (LRBA) loans prior to 30 June 2016.

Self Managed Superannuation Fund (SMSF) trustees are being encouraged to rectify their non-commercial LRBA loans by putting them on arm’s length terms by 30 June 2016. If that occurs then the ATO has confirmed that it will not actively review such non-commercial LRBA loans in prior years. Although not expressly stated on the ATO’s website, the ATO has indicated that such rectification does not need to be retrospective.

SMSFs and Asset Protection

SMSFs and Asset Protection

When people think of self managed superannuation funds (SMSFs) they mostly think of a vehicle to provide retirement benefits and their concessional tax treatment. In contrast, the asset protection benefit provided by SMSFs is often not considered.

This topic was addressed by Sladen Legal’s Phil Broderick, who delivered a presentation on SMSFs and Asset Protection, as part of the Television Education Network’s 3rd Annual Asset Protection Conference, on 15 October 2015.

SMSFs and Real Estate Upon the Death of a Survivor

SMSFs and Real Estate Upon the Death of a Survivor

A typical Self Managed Superannuation Fund (SMSF), being the classic “mum and dad” SMSF, generally transitions pretty smoothly through the lifecycle of its members. This includes the accumulation of assets in the growth/accumulation stage and managing benefit payments through the pension stage. It also usually transitions smoothly on the death of the first with the ability to pay a death pension to the survivor.

However, there is one event that can create significant transition issues for SMSFs, being the death of the surviving spouse, particularly in instances where the fund holds lumpy assets such as real estate.

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Sladen Snippet – SMSFs, unit trusts and the public trading trust rules – the end is nigh?

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Sladen Snippet – SMSFs, unit trusts and the public trading trust rules – the end is nigh?

The draft legislation of the Government’s proposed new tax system for managed investment trusts proposes that super funds (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.

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Sladen Snippet - Another SMSF civil penalty case

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Sladen Snippet - Another SMSF civil penalty case

The Federal Court has handed down another civil penalty decision for breaches by self managed superannuation fund (SMSF) trustees of the Superannuation Industry (Supervision) Act 1993 (SIS Act).

In the case of the Deputy Commissioner of Taxation (Superannuation) v Ryan [2015] FCA 1037 the Federal Court fined the two trustees of an SMSF $20,000 each for breaching the sole purpose test, the prohibition against providing members with financial assistance, the in-house asset rules and the requirement to make investments on an arm’s length basis. This was as a result of the SMSF lending to the members over $200,000. Most of these loans were never paid back to the SMSF ultimately leaving the SMSF with about $6,000 in assets. In addition, the members were disqualified as trustees.

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Sladen Snippet - “Look through” LRBAs now law – ATO extends administrative approach to pre 24 September 2007 LRBAs

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Sladen Snippet - “Look through” LRBAs now law – ATO extends administrative approach to pre 24 September 2007 LRBAs

The income tax look-through treatment for limited recourse borrowing arrangements (LRBAs) is now law with the Tax and Superannuation Laws Amendment (2015 Measures No 2) Act 2015 receiving royal assent on 16 September 2015. This means that, effective from 1 July 2007, a super fund under a LRBA will generally be treated as the owner of an asset bought under the arrangement for income tax purposes (including for capital gains tax purposes). This includes that the bare trust under an LRBA does not need a tax file number and does not need to lodge a tax return.

Transferring Real Estate In and Out of SMSFs

Transferring Real Estate In and Out of SMSFs

On 20 August 2015, Sladen Legal’s Phil Broderick delivered a presentation on Transferring Real Estate In and Out of SMSFs, as part of The Tax Institute’s National Superannuation Conference.

Phil’s presentation considered a number of issues in relation to the holding of real estate in SMSFs and the transfer of real estate in and out of SMSFs.

Seamlessly Integrating Superannuation into Effective Estate Planning

Seamlessly Integrating Superannuation into Effective Estate Planning

On 1 September 2015, Sladen Legal’s Phil Broderick delivered a presentation on Seamlessly Integrating Superannuation into Effective Estate Planning, as part the Legalwise seminar topic of Estate Planning: Maximising Asset Protection.

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Transferring Real Estate In and Out of SMSFs

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Transferring Real Estate In and Out of SMSFs

Real property is a popular investment for SMSFs (self managed superannuation funds). However, there are a number of unique issues that come with SMSFs receiving, holding and disposing of real estate. In this paper I have examined a number of those issues in great detail.

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Sladen Snippet – “Look through” Bill released for limited recourse borrowing arrangements

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Sladen Snippet – “Look through” Bill released for limited recourse borrowing arrangements

The Government has released the Tax and Superannuation Laws Amendment (2015 Measures No. 2) Bill 2015 which, if passed in its current form, will provide for “look through” tax treatment for trusts set up for limited recourse borrowing arrangements (LRBA).

In effect, this means that, from a tax law perspective (except for certain limited exceptions), the asset of the LRBA trust will be deemed to be held by the super fund and the actions of the trustee of the LRBA trust in relation to the asset will be deemed to be the actions of the trustee of the super fund. This will reduce adverse tax consequences (eg capital gains tax on collapsing the trust, losses being trapped in the trust and difficulties of passing franking credits) and result in a reduction to tax administration (eg the trust will not require a TFN or be required to prepare a tax return). It also means that, from a tax law perspective, super funds no longer need a bare trust for a LRBA in order to achieve a look through approach.

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.

Sladen snippet - Turning 55 in 2015/16? You can’t access your super until you turn 56

Sladen snippet - Turning 55 in 2015/16? You can’t access your super until you turn 56

For super purposes, turning 55 has traditionally been the year in which you start to access your benefits (for example under a transition to retirement income stream (TRIS)). However, with the auto-rise of the preservation age coming into effect, as of 1 July 2015, persons turning 55 in the 2015/16 year will have to wait until they turn 56 (ie in the 2016/17 year).

Sladen Snippet - SMSF trust deeds must be QROPS compliant to receive UK pension transfers

Sladen Snippet - SMSF trust deeds must be QROPS compliant to receive UK pension transfers

Newly introduced UK regulations impose additional conditions on SMSFs that are registered, or will be registered as Qualifying Overseas Pension Scheme (QROPS). The new regulations broadly require that in order to be treated as, or continue to be treated as, a QROPS, the relevant SMSF’s deed must now contain provisions that prevents members from accessing benefits prior to age 55, unless they retire as a result of ill health under the UK laws.

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Sladen Snippet – what is a unit trust for the public trading trust rules?

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Sladen Snippet – what is a unit trust for the public trading trust rules?

The Federal Court, in the decision of Elecnet (Aust) Pty Ltd v FCOT, has ruled that a trust established to pay out redundancy benefits for employees of the electricity industry was a unit trust for the purposes of the public trading trust rules.  This was held notwithstanding that the employees’ interest in the trust is not unitised but rather operates in a way that is akin to a superannuation fund. In coming to this conclusion, the Court found, for the purposes of the public trading trust rules, that the employees have a beneficial interest in the property of the trust.

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Sladen Snippet – insurance held in SMSFs for a buy-sell arrangement breaches the sole purpose test

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Sladen Snippet – insurance held in SMSFs for a buy-sell arrangement breaches the sole purpose test

The Commissioner of Taxation has concluded, in ATO ID 2015/10, that using a self managed superannuation fund (SMSF) to hold a life insurance policy for the purpose of a buy sell agreement breaches the sole purpose test and the prohibition against providing a member (or a relative) financial assistance.

So does this mean that superannuation funds cannot be used to hold insurance in buy-sell arrangements? Not necessarily. The position of the Commissioner would appear not to apply to insurance held in public offer superannuation funds and potentially does not apply to SMSFs that don’t have any formal buy sell arrangements.

SMSFs, trusts and property development: Part 2

SMSFs, trusts and property development: Part 2

In January 2015, the first part of a two-part article, written by Sladen Legal's Phil Broderick, was published in the Tax Institute’s Journal, Taxation in Australia. This article considered the tax and regulatory issues of SMSFs undertaking property development either directly or through structures such as trusts.

The second part of this article was published in Taxation in Australia in February 2015, examining various structures under which an SMSF can undertake property development, or invest in an entity which undertakes property development activities.