Safe harbour interest rate
Official interest rates have recently fallen, but the ATO announced an increase in the SMSF lending rate set under the safe harbour terms (as per Practical Compliance Guideline 2016/5).
For 2019/20, the safe harbour interest rates are set at:
- real property assets – 5.94 per cent a year, and
- listed shares or units – 7.94 per cent a year.
SMSFs that borrow from a related party need to meet the safe harbour provisions for the loan or be able to prove commercial terms have been applied to avoid an assessment of income under non-arm’s-length income provisions.
ASIC media release – 19-135MR
The Australian Securities and Investments Commission (ASIC) has commenced civil penalty proceedings in the Federal Court in relation to an advice business accepting conflicted remuneration.
The case may have implications for other advice businesses where referral arrangements are in place.
In this case, the advice business advised clients to set up SMSFs to buy real property. The advice business had a referral arrangement with a real estate agent. Each time a referred SMSF trustee purchased a property from the estate agent, a payment was made by the estate agent to the advice company.
In ASIC’s view, these payments may have reasonably influenced the advice given and, as such, fall under the Corporations Act provision for banned conflicted remuneration (section 963G). It is contended by the corporate regulator that the act was contravened 259 times with a potential civil penalty of up to $1 million for each contravention.
New labels on annual return
Several new labels have been included in the 2019 annual return for SMSFs.
- the need to record whether Part A of the audit report has been qualified (not just Part B),
- in the member section, the balance of any outstanding limited recourse borrowing arrangement (LRBA) is to be reported for each member (captured for statistical purposes),
- cryptocurrencies will now be reported at a dedicated label, not just as part of ‘other overseas assets’, and
- downsizer contributions and the date they are made are to be reported in the member section.
New super minister
Liberal Senator Jane Hume has been appointed as Assistant Minister for Superannuation, Financial Services and Financial Technology following the coalition’s federal election win.
Hume previously worked in financial services, including roles in investment policy and research, as well as private banking.
Anti-detriment now completely dead
Anti-detriment benefits can no longer be paid in any circumstances.
The rules changed to abolish the payment from 1 July 2017, but trustees had until 1 July 2019 to pay benefits for members who passed away before 1 July 2017.
What else is dead?
With the return of the coalition government, other measures with potentially negative impacts for SMSFs that we no longer have to worry about (at least for now) include:
- banning refunds of unused franking credits,
- tightening of contribution caps,
- banning LRBAs, and
- negative gearing changes.
Rollovers of inactive accounts
Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019
The measures in the Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019 aim to protect small and lost funds from erosion due to fees and insurance premiums.
Australian Prudential Regulation Authority-regulated super funds are required to report and pay inactive low-balance accounts to the ATO from 1 July 2019. These amounts are paid as a new category of unclaimed super money (USM).
This reporting does not impact on SMSFs, but from November, the ATO will be able to proactively consolidate eligible USM into eligible active accounts. This includes the possibility of rolling USM into an SMSF for members.
Super fund members, including those in an SMSF, who do not fully use their concessional contribution cap in the previous five financial years (commencing 1 July 2018) may be able to carry forward the unused amount to make higher concessional contributions in the current year.
As it is now one year since this rule commenced, the 2020 financial year is the first year in which the higher contributions can be made. To qualify, the member must have a total superannuation balance of less than $500,000 on 30 June of the previous financial year.