SMSF Times

The important stuff first:

The hair is short again. I am still not happy with the style so we shall continue the Bad Hair Life journey.
I went to Surfer’s Paradise in December and learned from my 8 year old son Charlie how to get the courage to ride the roller coasters.
- How is Charlie already 8?
- It’s fun being open to learning things from your kids. They are full time learners. They are always getting told what to do and how to do it. Flipping this and letting them be the teacher gives them a sense of achievement, and pushes you to do things you normally wouldn’t.
- I’m still not doing the upside-down ones though. That’s just crazy

Now on to the Super update…

Lodgement Date – 15 MAY

By now we have contacted everyone to get your docs in so we can get your fund completed and lodged by the due date – there are some of you we still haven’t received source docs from. Lodgement date is 15 May – and we have a 5 week turn around time once we receive everything… which effectively means we can’t guarantee your fund will be lodged on time unless we receive all your source docs by the start of April. So if you are one of those people… chop chop.

If you’re not sure what you need to send in just send it what you’ve got… we’ll review it and let you know what else we need.

Contribution Caps for 2025FY

The contribution caps for 2025FY have gone up to $30,000p.a. (from $27,500) – what a time to be alive!!

This makes the non-concessional caps go up to $120,000p.a. – and the 3 year bring forward rule go up to $360,000

This means we can get more in super… music to my ears 😊

The Transfer Balance Cap and Total Super Balance Caps Haven’t Changed

Because nothing in super is easy, for some reason they have pegged the indexation of caps to different things… contributions is indexed by reference to AWOTE (average weekly ordinary time earnings), but the caps on if you can put money into super (Total Super Balance), and if you can put that money into pension (transfer Balance Cap), are indexed by reference to CPI. Weird.

This throws up some weird stuff (like the limit where you can use your bring forward non concessional caps have actually dropped… but I won’t bore you with that… The take away is..

Woo Hoo! We can get more into super
If you are thinking of putting a lot into super, we need to be chatting to make sure it will all work

Estate Planning and Binding Death Benefit Nominations, Fund Structure

Is your estate planning in order? But is it really???

Most people have planned out what is to happen if they die. But have you planned what is to happen if you are mentally incapacitated? Do you have a Power of attorney (both medical and financial)?… For what type of decisions? Is your financial POA for the SMSF only… or does it extend to everything?

This may seem remote, but it is possible to end up in a situation where no one can run the SMSF.

Do you have individual trustees? If you do, you should be thinking about what you will do if one of you passes away (i.e. – you can’t just have one individual trustee), and part of that consideration should definitely be setting up a corporate trustee.

If you need to address any of this stuff, give me a call. I can talk you through some initial things to think about and how they relate to your SMSF, and put you in touch with a legal professional if needed.

DIV 296 (The $3M Cap) Update

Not much to report, except the federal government seem to be determined to push this tax through. They have flat out refused to change to an ‘actual’ method (i.e. – taxing the taxable income of the fund at a higher rate. This is apparently because it’s too hard for the big super funds to change their reporting systems (they literally have billions of dollars so it doesn’t really make sense but that’s what we’re hearing).

The ATO want to use their current data to implement the tax… and they already have Total Super Balances (TSB) so this is what they want to use. The SMSF Association (SMSFA) have suggested using a ‘deeming rate’ instead of using the different in TSB (the ATO’s current approach). We think the ATO’s approach is silly because it taxes unrealised gains. The SMSFA will continue to lobby the cross benchers to try and get some amendments to the legislation.

We are also trying to get them to index the $3M… $3M today is very different to $3M in 2050!!!

The silver lining is they’ve extended the timeframe for the Economic Legislative Committee to report back to the Senate so maybe they are listening to what we’ve been saying!!! They are now due to report back on May 10.

At the moment we are in a bit of a holding pattern, where we will continue developing plans as if the legislation goes through unchanged, but won’t enact any of these plans until we know what the actual passed legislation is. When it is passed, we will be in contact with everyone it effects. With you, we will tailor individual plans for each and every one of you… because each case will be different. For some of you, pulling money out of super and putting it your own name will be best. For others, leaving it where it is will be best. For others, you may end up using family trusts, companies or a combination of everything.

Stats

Who doesn’t love some stats. The latest statistical report is out:

Key Takeaways:

far fewer SMSF wind ups… people are staying in their SMSFs longer
in the 2021-2022 Financial year, SMSFs as a whole outperformed the APRA fund sector by 4.1%!! (the ASX 200 fell 10%, APRA funds were down 5.1% and SMSF were down 1%).
There are rising numbers of SMSFs – more and more people are discovering how awesome SMSFs are
Funds with 5 & 6 members are increasing… in most instances this is to build generational wealth.

Non Arms Length Income and Non Arms Length Expenses

This is:

Too long;
Too technical;
Too boring;

To go into in detail for everyone but me, but this is potentially a big issue. If you do stuff for your SMSF like:

Subdivide your property (if you’re as solicitor),
Manage your investment property (if you’re a real estate agent),
Do your own tax (if you’re an accountant)
Or, do a renovation on your property and not charge market rates*

you could have the expense classed as non arms length expense (NALE), which then makes the income related to that non arms length income (NALI)… this is bad. You get taxed at 45%. Not good.

* This is complex… give ma call if you might fit into this and we can chat about the rules specific to what you’re thinking of doing

Illegal Withdrawals

Don’t do it.

I know it can be tempting when you have cash flow issues but the penalties are severe. We are also seeing the ATO crack down on this more harshly than they have in the past. It was not uncommon from the ATO to effectively look the other way if you put the money back. Now they are giving penalties to people (over $13K per withdrawal!!) and taxing the withdrawal at your marginal rate – even if you return it to the fund!

If you are thinking of doing it call me. I will talk you down off the ledge and sometimes we can figure out an alternative solution that doesn’t involve breaking the law.

Speak soon,

Daniel