Loans to a property trust
ATO Interpretative Decision ID 2014/23
Loans to related parties are captured under in-house asset rules. This limits the value of these loans to less than 5 per cent of the fund’s balance.
When a trust is involved, the relationship between the trust and fund members needs to be examined to determine whether the trust is a part 8 associate, and therefore a related party.
In this Australian Taxation Office (ATO) ID, examination of the circumstances found a loan made to a property trust was not classified as an in-house asset because the SMSF and related parties held less than 10 per cent of the units and had no control over the trust.
Excess non-concessional contributions
Superannuation Laws Amendment (2014 Measures No 7) Bill 2014
Draft legislation has been released, which if passed will allow members to avoid excess contributions tax by withdrawing excess non-concessional contributions and the associated earnings.
Associated earnings will be calculated by the ATO using the general interest charge rate. This earnings amount is added to assessable income and is taxed at the member’s marginal tax rate. Contributions are withdrawn tax free.
Wholesale or retail investors
ASIC QFS 150 withdrawn
The Australian Securities and Investments Commission (ASIC) has withdrawn QFS 150, removing uncertainty over whether an SMSF trustee is a retail or wholesale investor. SMSF trustees with less than $2.5 million are now automatically classified as retail investors.
If balances are higher, the adviser can determine whether to classify the trustee as a wholesale or retail client.
Advisers should make any classifications carefully and ensure appropriate compliance provisions are followed when providing advice to trustees.
Deeming on account-based pensions
The start of the new calendar year is fast approaching and with it comes the introduction of deeming on account-based pensions, unless grandfathering provisions apply for existing Centrelink/Department of Veterans’ Affairs (DVA) clients or Commonwealth Seniors Health Card (CSHC) holders.
This provides an opportunity to review arrangements for these clients before 1 January to:
- switch providers (including setting up or winding down an SMSF) if required,
- consider whether to establish an automatic reversionary pension (Centrelink/DVA clients),
- commute and restart the pension to reset the deductible amount, and
- apply for a Centrelink/DVA payment or the CSHC.
New data standards for employer contributions
SMSFs that receive employer contributions need to meet the new data and payment standards from 1 July 2014. This requires electronic transmission of employer contributions and messages with information about these payments. However, if the employer has less than 20 employees, a 12-month deferral until 1 July 2015 applies.
SMSFs will be required to provide employers with its:
- Australian business number,
- bank account details, and
- electronic service address (not an email address).
It is likely the SMSF will need to engage a service provider to obtain an electronic service address.
Lost super accounts
Have you checked whether clients have lost super amounts? The ATO recently identified over 37,000 SMSF members with lost super amounts being held by the ATO at a value of over $19.1 million.
Over August and September, the ATO sent communications to identified clients who had email addresses or mobile phone numbers on record.
But as not all clients have these details on record, clients should be reminded to check the Super Seeker portal to check for lost amounts.
Auditor details
All SMSF auditors are now required to be registered with ASIC and the registration number should be recorded on the annual return.
As a result, details of the auditor’s professional body and membership number do not need to be recorded on the 2014 annual returns.
