APRA super funds underperform investment benchmarks

APRA industry/retail super funds best return 2013/14 - Telstra Super, investment benchmarksAccording to data published by SuperRatings, APRA regulated super funds fell short of the relevant benchmarks for investing in Australian and international shares in 2013/14.

Recently published rankings of APRA-regulated Industry and Retail funds by SuperRatings shows that Telstra Super had the best performing ‘balanced investment option’ in the 2013/14 financial year, with 15.8%. Second place was held by Intrust Super at 14.0% and Unisuper and Australian Super tied for third at 13.9%. This compares to the median for a balanced option of 12.7% over the same period.

However, as noted by SuperRatings founder Jeff Bresnahan, the returns over a longer period are much lower, “over a 22 year period since the introduction of compulsory superannuation, Australian funds have returned 7.2% per annum”.

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Is a loan by a SMSF to a property trust an in-house asset? – ATO Ruling

The ATO has issued a ruling considering the in-house asset status of a loan to a property trust which the SMSF has invested in via a related unit trust. The ruling, ATO Interpretative Decision 2014/23, addresses the following scenario:

  • The SMSF has a holding in a unit trust, which is a related party of the SMSF
  • This unit trust holds less than 10% of the units in a Property Trust
  • The SMSF makes a loan to the Property Trust
  • This loan is subject to a “commercial loan agreement”

ATO ID 2014/23 SMSF loan to property trust with investment in unit trust

The question answered in the ATO ID is:

“Will a loan from a Self Managed Superannuation Fund (SMSF) to a Property Trust be treated as an in-house asset?”

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Government considers ways to improve income streams

Retirement Income Streams - deferred lifetime annuities (DLAs) and minimum pension draw-down paymentsThe Government has released a discussion paper which raises the option of changes to the minimum annual pension payments and the introduction of new types of income streams to improve incomes in retirement.

With the release of the discussion paper, Review of Retirement Income Stream Regulation, Acting Assistant Treasurer Mathias Cormann says the Government is delivering on the election commitment to “review regulatory barriers restricting the availability of retirement income stream products”. At a time that “Australians are looking for more options to better manage their retirement income” Cormann says that the Government wants to “encourage greater product innovation” in retirement income streams.

The Financial System Inquiry panel also seems to be thinking in similar directions, given the following observation was made in the interim report:

“There are regulatory and other policy impediments to developing income products with risk management features that could benefit retirees.”

The focus of the reforms the Government is considering seems to be changes to the minimum annual pension payments the introduction of Deferred Lifetime Annuities.

Minimum Annual Pension Payments

One option to raised in the discussion paper is the change the minimum annual pension payment requirements of account-based pensions – the currently 4%-14% minimum that needs to be withdrawn each year in order to meet the conditions of a pension.

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ATO points to emerging risks for SMSFs

Australian Taxation Office - ATO SMSF emerging risksThe ATO Assistant Commissioner with responsibility for SMSFs, Matt Bambrick, has highlighted emerging risks that concern the ATO in the SMSF sector.

The speech, Update from the ATO on recent compliance activity, areas of concern with SMSFs and the ATOs future priorities, was given to the CPA Learn from the Masters SMSF Conference and Expo 2014.

SMSF Overseas Seminars

The ATO is concerned about promotors advertising “questionable SMSF conferences in overseas destinations”. It appears these seminars may be of limited value to the SMSF as they include “minimal training related to SMSF activities”. However the promotors claim the that the full costs of the trip can be claimed as a tax deduction. The ATO warns that:

“Trustees contemplating attending such events should be aware of the potential to contravene the sole purpose test.”

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Departing Australia Superannuation Payment: What is it?

DASP: Departing Australia Superannuation PaymentThe Departing Australia Superannuation Payment, or DASP, allows temporary Australian residents to be paid any superannuation that has accumulated from their employment while in Australia when they leave.

Update: the Government intends to increase the tax on DASPs for backpackers to 95%.

Claiming a Departing Australia Superannuation Payment

There are several requirements for a Departing Australia Superannuation Payment:

  • The member was on a temporary visa, excluding some visa-types, and
  • The visa has ceased, and
  • The member has left Australia

If you think you may be eligible for a Departing Australia Superannuation Payment you should confirm the process with the ATO, as it can change if the benefit is more or less than $5,000. The Departing Australia Superannuation Payment application can only be submitted after leaving Australia, but can be prepared beforehand. The application can be made online online or via a paper form, with the ATO.

The ATO says that, generally, a Departing Australia Superannuation Payment will be made within 28 days of the application for payment.

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SuperSeeker: Finding lost and unclaimed superannuation

Update: The SuperSeeker online service is currently unavailable and is unlikely to be restored. The ATO has announced that SuperSeeker will be decommissioned earlier than expectedThe ATO is directing people to the ‘Check your super using myGov’ page.

SuperSeeker is a service run by the ATO for people to search and find their lost and unclaimed superannuation.

There are many reasons why someone might have lost or unclaimed super, including:

  • Default funds from old jobs
  • Change of name
  • Change of address
  • The super fund has not been able to contact you and has transferred your superannuation to the ATO

Finding lost super is usually recommended to reduce multiple administration fees applying and to ensure that unclaimed super is receiving an investment return.

SuperSeeker Full Search

A full search of SuperSeeker allows people to check their super accounts and find lost super held by super funds, or by the ATO where it has been marked as ‘unclaimed’. You may then request that the super be transferred to another superannuation fund.

SuperSeeker received an update in 2013, so people can now request a consolidation of super funds from within SuperSeeker instead of having to contact the super funds directly.

These features of SuperSeeker now requires the use of a myGov account – like many other online ATO services, including myTax and Etax.

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Only 62 applications for accountants limited AFSL says ASIC

ASIC accountant limited AFSLs, SMSF auditor, compliance actionASIC has received only 62 applications from accountants for limited AFSLs up to the end of May, 7,500 people have been registered as SMSF auditors and ASIC is concerned by advertising of SMSFs and property promotion.

These are some of the things to take from the speech, The Regulator’s Perspective on the Regulation of SMSFs, that the Commissioner of ASIC, Greg Tanzer, recently gave to the CPA Australia SMSF Conference 2014. Addressing the accounting body Tanzer said:

“We think that accountants and other gatekeepers have a critically important role to ensure that:

  • at an individual level, only those investors for whom an SMSF is suitable go into the SMSF sector and, in doing so, they are fully informed, and
  • at an aggregate level, the overall health of the SMSF sector is sound ”

Accountants Limited AFSL

Tanzer revealed a number of interesting statistics which show the lack of take-up of limited AFSLs by accountants, between 1 July 2013 and 27 May 2014:

  • ASIC has received only 62 applications for limited AFSLs
  • Only 27 limited AFSLs have been approved
  • One application is likely to be refused
  • 25 applications have been withdrawn or returned as they are “materially deficient in respect of the documentation and information which had been submitted in support of the application

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ATO SMSF trustee videos: investment strategy & loans

The ATO has published two new videos aimed at educating SMSF trustees. Given the ATOs goal of providing “new online tools and resources for SMSF trustees and auditors” contained in the recently published ATO Corporate Plan we can expect to see more of these videos, and other similar projects, to explain the super rules to trustees.

SMSF investment strategy

This video is aimed at explaining the requirements of a SIS-compliant SMSF investment strategy to SMSF trustees:

 “Your SMSF’s investment strategy is the framework that guides your investment decisions. It pays to have a good investment strategy that is regularly reviewed. Watch this video to learn what factors your SMSF’s investment strategy needs to take into account.”

 SMSF loans and early access

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