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. 

With that date fast approaching it is important that SMSF trustees look to rectify any outstanding related party non-commercial LRBA loans in the next couple of weeks.

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). 

The new super laws are the biggest changes to super since 2007. Given that most of the measures commence on 1 July 2017, there are a number of planning matters to consider prior (and after) that date. 

One of the most significant consequences of the transfer balance cap is the effect it has on the payment of death benefits. This will affect all couples who have a combined superannuation balance of $1.6 million. 

Under the transfer balance cap measure market linked pensions (MLPs) are lumped with other defined benefit pensions. Defined pensions are treated differently to account based pensions given the inability to commute such pensions.

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%. 

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.

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.

The legislation for the Government’s changes to the superannuation system has been passed by parliament. 

On the 26th October 2016 Sladen Legal’s Phil Broderick was invited to present a paper at The Tax Institute 2016 VIC Property Intensive event. 

The Government’s second tranche of super changes include the draft laws for the 5 year concessional contributions cap “catch up measure”. 

The Government has released its second tranche of superannuation budget measures.

The Government has released the draft rules for the $1.6 million super pension cap in its second tranche of super measures. The measure to be known as the “transfer balance cap” is to commence from 1 July 2017.  

The Australian Taxation Office (ATO) has released Taxation Determination TD 2016/16 which provides further guidance on its view as to the application of the non-arm’s length income (NALI) rules to the non-commercial limited recourse borrowing arrangement (LRBA) loans from related parties to the trustees of self managed superannuation funds (SMSF). 

Sladen Snippet – Government dumps lifetime $500K NCC cap.  Alternative measures announced

The federal government has released for consultation the first tranche of super changes announced in the 2016 federal budget. 

On 6 September, 2016 Sladen Legal delivered an event titled Complex estate planning in a complex world.

In it the following issues were examined:

Sladen Legal’s Phil Broderick was invited to present at The Tax Institute’s National Superannuation Conference. His topic was titled “SMFSs and Dividend Stripping and Dividend Washing Arrangements”.

Sladen Snippet – ATO gives further guidance on its 2016/17 priorities for SMSFs and recent enforcement actions