SMSF Annual Return: changes to regulatory questions

ATO SMSF Annual ReturnRecently the ATO has been making changes which reduce the severity of the response to reports of contraventions against the SIS Act and regulations by SMSF auditors. This includes a determination of the risk of a contravention as either low, medium or high risk. If the risk is low the response is likely to be only a phone call to the trustees. The ATO is also considering changing the thresholds at which contraventions are reported to the ATO.

However this is not the only, or the first, change by the ATO to limit the reporting of contraventions by SMSFs.

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SMSF trustees fined and banned for loans to members

SMSF trustees - fined & banned, loans to membersA recent decision by the Federal Court has shown the potential consequences of using an SMSF to lend money to members and relatives.

In Deputy Commissioner of Taxation (Superannuation) v Graham Family Superannuation Pty Limited [2014] FCA 1101 an SMSF was found to have breached a number of sections of the SIS Act , with the trustees fined and banned from being trustees of a super fund.

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Sole Purpose Test for self-managed super funds

Sole Purpose Test section 62 SMSFs The Sole Purpose Test is one of the cornerstones of superannuation regulation. Generally the superannuation legislation, though extensive, does not directly control how an SMSF invests. Instead there are general rules which steer the SMSF trustees towards providing retirement benefits, instead of providing current benefits to the members or other parties.

According to the ATO the sole purpose test is most commonly breached because of:

  • “investments that offer a pre-retirement benefit to a member or associate”
  • “providing financial help or a pre-retirement benefit to someone, to the financial detriment of your fund”

The sole purpose test is set out in section 62 of the Superannuation Industry (Supervision) Act 1993 and comprises Core Purposes and Ancillary Purposes. The purpose of a SMSF must be one or more of the Core Purposes, or one or more of the Core Purposes and one or more of the Ancillary Purposes, which include:

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Super safety net under threat from changes to default super

Industry Super Australia Chief Executive David Whiteley has used a speech to the National Press Club to argue that the superannuation safety net is under threat.

The National Press Council on Wednesday was the latest forum for the continuing fight between the Financial Services Council and Industry Super Australia over default superannuation funds.

Opening the speeches David Whiteley said that “the heart of our super system has been the default super safety net.”

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Low Income Super Contribution (LISC)

Low income super contribution (LISC)The Low Income Superannuation Contribution, or LISC, was brought in by the previous government to help people on low-incomes to save for retirement by offsetting contributions tax paid on their concessional super contributions, including superannuation guarantee paid by their employer. However, it may be short-lived, as the current government has passed legislation which will stop the LISC after the 2016/17 financial year.

Update: the Government has proposed the Low Income Superannuation Tax Offset (LISTO), which would replace the LISC.

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Australia’s retirement system ranked second best globally

Australia superannuation system, retirement systemAustralia’s retirement system has been ranked as second best globally, and first globally in terms of adequacy, in the Melbourne Mercer Global Pension Index 2014.

The index ranks the retirement systems of 25 countries in adequacy, sustainability and integrity. These 25 countries account for 58% of the world’s population.

Australia received a score of 79.9. the second highest, behind Denmark with 82.4 and in front of the Netherlands at 79.2. Denmark received a grade of A, with Australia receiving a B+.The three lowest ranked countries were Japan, South Korea and India.

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SMSFs an exciting new professional career path: SPAA

SMSF professionals, SPAASMSFs provide a new professional career path for young Australians, according to SPAA CEO Andrea Slattery.

“Built on the solid foundations of the $560 billion SMSF sector, this profession is providing exciting opportunities for those who have accounting, legal, tax and financial services backgrounds, for example, and are now extending their skills and training to become specialist SMSF advisors,” said Slattery

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Refund excess non-concessional contributions: draft rules

Refunding excess non-concessional contributionsThe treasury department has released an exposure draft of the new rules for refunding excess non-concessional contributions to super fund members.

This change was announced alongside the 2014 federal budget. Currently there is an option to have excess concessional contributions refunded, but not excess non-concessional contributions.

Under the new rules super fund members will have the option of having excess non-concessional contributions refunded, along with ‘associated earnings’.

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37% of life insurance advice doesn’t comply with the law: ASIC

ASIC research life insurance doesn't comply lawResearch by ASIC into financial advice for life insurance has shown a worrying level of non-compliance with the law, and conflicts of interest for advisers to the detriment of clients and insurance companies.

Quality of life insurance advice

ASIC’s survey of life insurance advice found that 37% of clients had received advice which “failed to comply with the law”.

Upfront commission appears to be a particular issue in the qualify of advice. “Where an adviser is paid under an upfront commission model it has a statistically significant bearing on the likelihood of that adviser giving advice that did not comply with the law,” said ASIC. 45% of upfront commission advice failed ASIC’s tests, whereas only 7% of non-upfront commission advice failed.

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What is the best superannuation fund?

Best superannuation fundUnfortunately for Australians trying to save for retirement there likely is no such thing as the best superannuation fund. What appears to be a simple question has quite a complex answer.

While there may be such a thing as a best superannuation fund for a particular person at a particular time, this is highly variable. Such a determination could only be made after considering an individuals financial needs and goals. Even then which is the best superannuation fund for them could change over time.

What qualities would the best superannuation fund have? It would depend on the needs to the member. Does best mean the highest investment return? But then how would this take account of the risk that the fund might have taken to produce the return? Also best performance in the past, as is often said, is no indicator of future performance.

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