Review of early-release conditions
The federal government’s review of financial hardship and compassionate grounds for early release of superannuation is continuing, with a consultation paper issued in November 2018. This included proposals to:
- allow victims of family and domestic violence to access up to $10,000 within a 24-month period,
- specifically include dental treatment in the definition of treatments for life-threatening and acute and chronic pain conditions,
- allow the purchase of disability aids and modified vehicles where appropriately certified by a medical practitioner,
- amend the definition of severe financial hardship to receiving a qualifying social security benefit for a cumulative total of 26 weeks within a 40-week period, rather than for 26 consecutive weeks,
- allow approved early-release withdrawals that are subject to the $10,000 cap to be taken in several instalments rather than all at once,
- restrict withdrawals under the mortgage foreclosure release to $10,000 within a 24-month period, and
- transfer approval of financial hardship release to the ATO instead of the fund trustee.
Work test exemption for recent retirees
Treasury Laws Amendment (Measures for a later sitting) Bill 2018
Draft legislation has been released with proposals to give a one-year exemption from the work test rules for a person aged 65 to 75. This was first announced in the 2018 federal budget.
It is proposed to change the rules from 1 July 2019, to allow a person over 65 who does not meet the work test to still make contributions provided they:
- meet the work test in the previous financial year,
- have a total superannuation balance less than $300,000 as at 30 June of that previous year,
- have not used this measure in a prior year, and
- are under the age of 75.
This effectively gives clients with lower superannuation balances one year after retirement to organise finances to contribute to superannuation. The ability to make these contributions may be subject to trust deed rules, which should be reviewed if passed.
Aussiegolfa and the sole purpose test
ATO Decision Impact Statement
The ATO has decided not to appeal the full Federal Court decision on Aussigolfa, which found an SMSF did not breach the sole purpose test, despite leasing underlying residential property to the daughter of the fund’s member.
The court found the sole purpose test had not been breached because the property was leased at market value and there was no evidence leasing the property to the related party had influenced the investment decision. The property had previously been rented to a non-related party.
The ATO issued a decision impact statement in December 2018. In this statement, it expressed the view that this case does not open up the opportunities to avoid breaching the sole purpose test by merely leasing the asset to a related party at market value. The facts of each case need to be assessed and the investment intention is still key.
ATO online services for agents
The ATO’s online services for agents system is being rolled out during the first quarter of 2019, providing tax and business activity statement agents with better access to information about the superannuation funds held by clients. Among other things, they will be able to view the client’s contributions, total superannuation balance and amounts counted against the transfer balance cap.
Financial planners and administrators who do not have access to this service may need to still rely on clients accessing information through their personal myGov accounts.
CRT Alert 086/2018
The CRT alert issued by the ATO’s superannuation client relationship team includes reminders on trustee obligations for commutation authorities issued to SMSFs when the transfer balance cap has been exceeded and an excess determination has been issued.
Auditor role in verifying asset values
Cam & Bear Pty Ltd v McGoldrick  NSWCA 110 and Ryan Wealth Holdings Pty Ltd v Baumgartner  NSWSC 1502
These two cases highlighted that SMSF auditors have a duty of care to clients and an obligation to check that assets are valued at reasonable market value. Auditors need to ensure they obtain sufficient documentation from trustees to evidence how an asset was valued, the method used and data relied upon.
If evidence is unavailable, the audit report should be qualified in the financial and compliance report sections, and an auditor contravention report lodged. The auditor should also notify the trustees in writing.