Government delivers SMSF friendly 2018-19 Federal Budget

By Tony Beckett

An SMSF friendly budget is the good news coming out of the 2018-19 Federal Budget. With SMSF members still working through the wide-reaching and complex superannuation changes which took effect from 1 July 2017, this Federal Budget will provide much needed stability while looking to reduce costs for SMSFs and prove additional flexibility. 

The key changes proposed for SMSFs and superannuation are: 

Three‑yearly audit cycle for some self‑managed superannuation funds 

The Government will change the annual SMSF audit requirement to a three yearly requirement for SMSFs with a history of good record keeping and compliance. The measure will start on 1 July 2019 for SMSF trustees that have a history of three consecutive years of clear audit reports and that have lodged the fund’s annual returns in a timely manner. 

Expanding the SMSF member limit from four to six 

As already announced, the Federal Government confirmed its decision to expand the number of members allowed in an SMSF from four to six. Expanding the definition of an SMSF to a fund with a maximum of six members will provide greater flexibility in how funds can be structured. 

Work test exemption 

The Government will provide more time for Australians aged 65 to 74 to boost their retirement savings, by introducing an exemption from the superannuation work test. 

This exemption will apply where an individual’s total superannuation balance is below $300,000 and will permit voluntary superannuation contributions in the first year that they do not meet the work test requirements. 

Life insurance cover in super to be opt-in for individuals under 25 years of age 

The Government will legislate that life insurance cover in superannuation will be opt-in for those individuals under 25 years of age or with account balances under $6000 to ensure that unnecessary fees do not erode smaller balances. Life insurance cover will also cease where no contributions have been made for a period of 13 months. 

Older Australian package 

The Government introduced the following measures to enhance the standard of living older Australians: 

• Increase to the Pension Work Bonus from $250 to $300 per fortnight. 
• Amendments to the pension means test rules to encourage the take up of lifetime retirement income products. 
• Expansion of the Pensions Loan Scheme to allow more Australians to use the equity in their homes to increase their incomes. 

Personal income tax bracket changes 

The Government has provided personal income tax relief to lower and middle income earners. A Low and Middle Income Tax Offset will now be available for individuals with incomes of up to $125,333. 

The $87,000 income threshold, above which a 37 per cent tax rate applies, will increase to $90,000. 

Other changes 

• A surplus of $2.2 billion is expected in 2019-20, one year ahead of schedule. 
• The Government’s planned increase in the Medicare levy from 2 per cent to 2.5 per cent, to fund the National Disability Insurance Scheme, will now not go ahead due to increased tax revenues. 

How can we help? 

If you have any questions or would like further clarification in regards to any of the above measures outlined in the 2018-19 Federal Budget, please feel free to call to arrange a time to meet so that we can discuss your particular requirements in more detail. Our details can be found on the contact us page.

Useful links

• The legal stuff

Event-based reporting for SMSFs

This article has been written by our SMSF expert Tony Beckett 

Before we start, lets review some of the abbreviations you will see throughout the document.

• What is an SMSF – Self-managed super fund 
• What is TBAR – Transfer balance account report 
• What is SAR – SMSF annual return 
• What is retirement phase – Pensions that are paid to members under a full condition of release (over 65 years of age or retired) 

SMSFs will generally not need to start event-based reporting for the transfer balance cap using the TBAR until 1 July 2018. However, an SMSF needs to ensure that it has appropriately documented all income stream valuations and decisions for the 2017–18 year.

An SMSF must report events that affect a member’s transfer balance, including:

• income streams a member was receiving on 30 June 2017 that 
• continued to be paid to them on or after 1 July 2017, and 
• are in retirement phase. 
• new retirement phase income streams 
• some limited recourse borrowing arrangement payments 
• compliance with a commutation authority issued by the Commissioner 
• personal injury (structured settlement) contributions 
• commutations of retirement phase income streams. 

How often and when you need to report

If an SMSF member has a pre-existing income stream, it must be reported via the TBAR on or before 1 July 2018. A pre-existing income stream is an income stream the member was receiving on 30 June 2017 that:

• continued to be paid to them on or after 1 July 2017, and 
• is in retirement phase. 

From 1 July 2018, all SMSFs must report events that affect their members' transfer balances. Timeframes for reporting are determined by the total superannuation balances of the SMSF's members:

• where all members of the SMSF have a total superannuation balance of less than $1 million, the SMSF can report this information at the same time as when its annual return is due, or 
• SMSFs that have any members with a total superannuation balance of $1 million or more must report events affecting members’ transfer balances within 28 days after the end of the quarter in which the event occurs. 

Transfer balance account events that occur during 2017–18 should be reported at the same time as the SMSF's first TBAR is due:

• If the SMSF is reporting annually, this will be the same time as the trustee is due to lodge the 2017–18 SMSF annual return. 
• If the SMSF is reporting quarterly, this will be 28 October 2018. 

An SMSF is required to report earlier if a member has exceeded their transfer balance cap.

Any SMSF can choose to report events as they occur and in some instances are encouraged to do so to avoid incorrect excess transfer balance determinations issuing

The Australia Government website has examples of when you will need to lodge.

If an SMSF does not lodge a TBAR by the required date, the member’s transfer balance account will be impacted, and the member penalised.

If you would like more information regard this above – please contact us (07)4616 9000 or email us at enquiries@dcadvisorygroup.com.au





This information is of a general nature only and has been provided without considering your objectives, financial situation or needs. Because of this you should consider whether the information is appropriate considering your objectives, financial situation and needs.

Franking credits and your SMSF

You may have noticed significant media coverage recently regarding the Australian Labor Party’s proposed policy to stop SMSFs from receiving tax refunds for the franking credits they receive in conjunction with the dividends paid from Australian companies they own. 

First of all, what are franking credits and how do they benefit SMSFs? 

Under the Australian tax system companies pay 30 per cent tax on their profits. When these profits are then passed on to their shareholders in the form of dividends, the company also hands the shareholders a credit for the tax the company has already paid (the “franking credit”). The individual shareholder then pays tax on the profit they received from the company less the credit for the tax the company has already paid. The franking credit ensures that the company profits are taxed at a shareholder’s marginal tax rate. 

For SMSFs in retirement phase which generally have a zero tax rate, this means they can receive a full refund of the tax already paid by the company on their behalf. 

SMSFs who have members in accumulation phase benefit from franking credits reducing the tax they pay on their SMSF’s earnings and may receive partial refunds of their franking credits depending on the fund’s overall tax liability. 

Labor, if elected, will change the law so that SMSFs and other low tax paying entities will no longer be able receive a tax refund for the franking credits they receive. This will affect all SMSFs that own Australian shares, especially funds that have received tax refunds in recent years. 

This could have a significant impact on the retirement income of many SMSF members in retirement. For example, an SMSF with $500,000 in retirement phase with 40 per cent of assets held in Australian shares could lose around $4,285 per year in tax refunds from their franking credits. This impact could be a significant hit to your annual retirement income. 

How can we help? 

SMSF Specialist advisors can help you understand how a change in the tax treatment of franking credits may impact your SMSF portfolio and retirement income. Please feel free to give me a call to arrange a time to meet so that we can discuss your particular requirements in more detail. 

Also, if you are concerned by the franking credit policy and want to ensure your voice as an SMSF trustee is heard in Canberra on this and other important superannuation issues, then I recommend that you consider joining the SMSF Association as an SMSF trustee member to support their advocacy for SMSFs. (http://trustees.smsfassociation.com/). The SMSF Association strongly opposes the proposed change to the tax treatment of franking credits and is looking to resist the introduction of this policy for the benefit of all SMSFs.

If you would like more information about this article please contact us.

Useful Links

• SMSF Myths Busted - Fact Sheet
• Personal Superannuation Contributions - Fact Sheet 

This information is of a general nature only and has been provided without considering your objectives, financial situation or needs. Because of this you should consider whether the information is appropriate considering your objectives, financial situation and needs.

Super Health Check

Before long your baby is an adult

Article first published by Colonial First state - 1 March 2018.  


It’s never too early to start planning for your retirement, so here’s some useful tips to boost the health of your super today for a more comfortable lifestyle in the future.

Even if retirement feels a long time away, it’s important to start thinking about when you’d like to retire, the type of lifestyle you want in retirement, how much debt you have and what assets (including your super) you will have when you finish working.

Are you retirement ready?

If you’re planning your financial future, a great place to start is to understand where you are today.

Our retirement calculator helps you estimate your projected retirement income from your super and other assets, to help you work out if you’re retire ready.

By entering in details such as your age, salary, super balance and other income, the calculator estimates how much income you could have per year when you retire.

You can then compare this estimated income to your desired annual income in retirement. If you have a shortfall, you can learn about strategies to help grow your retirement income.

Take the first step towards becoming retire ready by visiting our retirement calculator today.

While an online calculator can never replace personalised advice from an expert, it will help you get a clearer idea of where you stand today and how you could change your situation for the better.

If you’re planning your financial future, a great place to start is to understand where you are today.

How to boost your super

Want to see your super grow faster? Here’s five ways you might be able to add to your super savings today.

1. Salary sacrificing

Salary sacrifice is when you make additional contributions to your super from your pre-tax salary. These pre-tax contributions can help reduce your taxable income, meaning you can potentially pay less tax.

This portion of your income is generally taxed at just 15 per cent, which can be less than your normal marginal tax rate – helping you save money for your retirement.

Once you have worked out how much of your income you can comfortably contribute to your super, you need to arrange for your employer to regularly redirect this amount to your super instead of your bank account.

But it’s important to keep in mind that there are caps on the amount you can contribute to your super.  To find out more about the cap, contact us on (07) 4616 9000 to speak to our Specialists.

2. Consolidating your super

It’s a good idea to make sure all your super is in the same place. If you’ve changed jobs, different employers might have made your super guarantee payments to different funds over the years. This means you could have ‘lost super’ in accounts you’ve forgotten about.

If your super is in multiple funds, you also have to pay separate administration fees to each fund, which eats into your retirement savings.

On the other hand, if you roll over all your super into a single fund, you’ll not only save on fees but you’ll also find it easier to keep an eye on your money.

If you think you might have lost track of some super from past jobs, search for it online via the Australian Taxation Office website and consolidate it all into one fund to minimise fees.

Before making a decision, it makes sense to compare the costs, risks and benefits of your other funds against your current super fund. You should also consider whether you will lose any existing insurance cover upon rolling over and whether any cover you may have will be sufficient.

3. Don’t forget spouse contributions

If your partner earns less than $37,000 a year, you may be able to claim a $540 tax offset when you make a $3,000 contribution to their super fund.

The offset available reduces as your spouse’s income exceeds $37,000 or if your contribution is lower than $3,000, and phases out once your spouse’s income reaches $40,000.

But, this isn’t just about tax. The spouse contribution – which can also be made on behalf of a de facto partner or same sex partner – is a good way to boost the retirement savings of a partner who earns less or has taken time out of the workforce to care for children.

4. Get government assistance

Also, if you earn income up to $37,000, you may be eligible to receive a low-income super tax offset (LISTO) contribution into your superannuation account. This is a refund on the tax paid on your concessional superannuation contributions up to a cap of $500.

And if your spouse earns a low income, you could receive a tax offset up to $540 by contributing to their super fund for them. Find out more at the Australian Taxation Office website.

5. Know your limits

It’s important to keep in mind that there are caps on the amount you can contribute to your super.

The government imposes different caps on contributions depending on your age and contribution type. Additional tax applies if you exceed the contributions cap.

Find out more about super contributions caps.

Get the right advice - contact us today.

This information is of a general nature only and has been provided without considering your objectives, financial situation or needs. Because of this you should consider whether the information is appropriate considering your objectives, financial situation and needs.

Tax Planning - Why use a "bucket company"

In the lead-up to 30 June 2018, we want you to know why using a “bucket company” can be a great strategy to saving tax on trust profits distributed. 

PROFITS FROM A TRUST?

Do you have a Trust that generates profits? If yes, then read on!

 A “bucket company” allows you to “cap” the tax on profits distributed by a trust to 30% or 27.5% This is much less than the individual top marginal rate of 47%!

Here’s how this works:

Assume a trust earns $250,000 in profits from business or investment.

Option 1: Distribute profits 50 / 50 to Individuals 1 and 2. Total tax (inc. Medicare Levy) payable = $72,764 (29.1%)

Option 2: Distribute $87,000 each to Individuals 1 & 2 and distribute balance of $76,000 to a “bucket” company at a 30% tax rate. Total tax payable = $65,924 (26.4%)

Value of strategy is $6,840 in tax saved!

The cash in a “bucket company” can be used to invest in shares, property, or to lend to other entities at a specific interest rate.

But: You need to discuss this with us BEFORE you do it. There are different tax laws that affect the use of this strategy, and whether your “bucket company” can use a tax rate of 30% or 27.5%.

As Accountants, we are very aware of these tax laws and can make this easy for you.  Contact us  to make your Tax Planning appointment.  

KEYLINKS
Why use a Bucket Company (Graphic)

Tax Planning - Contributing to super and claiming a tax deduction

With all the new contribution cap rules, it’s easy to forget that there is one way the Government has made it easier to save tax and get money into super. 

Before July 2017, only people who were self-employed could contribute money to super and get a tax deduction. 

The only way for employed people to do this was to salary sacrifice and get their employer to divert part of their pay to their super before it had been taxed. The problem with this is that you may decide after the fact that you would like to contribute to super, but the opportunity to salary sacrifice is long gone. 

Here’s the very good news! Since 1 July 2017, people under the age of 75 are now eligible to contribute money from their bank account to their super and claim a tax deduction for it (if certain conditions are met). 

This is especially useful for people who are on higher marginal tax rates or their employer refuses to set up a salary sacrifice arrangement. 

The people who would benefit the most are those who earn above $37,000 per year, as this is where the marginal tax rate plus Medicare Levy rises to 34.5%. Claiming a tax deduction on super contributions effectively makes your tax 15%. That’s a big tax saving! 

Things to remember: 

• There is still a $25,000 concessional contribution cap, which includes any guaranteed contributions your employer puts in and any salary sacrificing you do. 
• Personal contributions are only tax deductible if you ask your super fund to treat them that way. Therefore, there is paperwork to be done. We can help you with this. 
• Anyone over 65 must meet certain conditions to contribute to super, namely the ‘work test’. The ‘work test’ involves working 40 hours in any 30-day period in the financial year in which you plan to contribute. You must be paid for that work. 
• Claiming a tax deduction for your personal contributions means there may be tax payable on the way out of your super.

If you get unexpected bonuses, have a high marginal tax rate, or don’t like to or can’t salary sacrifice – this strategy may be something to consider! 

IMPORTANT 

Please contact us, ASAP for assistance with making your super contributions. There are a few things we need to check for you to ensure you don’t exceed your super caps, plus the timing of your contributions is crucial to get right to entitle you to a tax deduction for them in the 2018 year.