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Welcome to the April edition of SuperNews.
Make the most of your Super
First, find your lost super
One of the most simple things you can do is find your lost super.
You can find your lost super by searching SuperSeeker:
Make voluntary contributions
If you’re eligible and make a voluntary contribution to your super, the government will make a ‘co-contribution’ depending on your total income (you must earn less than $58,980).
You do not need to apply for the co-contribution. All you need to do is:
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Make personal super contributions during the year to your superfund or retirement savings account (RSA) for which you do not claim an income tax deduction, and
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Lodge your income tax return
The super co-contribution has also been extended to the self-employed.
Provide your TFN
Make sure your superfund has your tax file number (TFN). If your fund does not have your TFN:
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Your fund will have to pay an additional 31.5% tax (including Medicare levy) on top of the normal 15% contributions tax that applies to certain contributions made to your account
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You will not be able to make personal after-tax contributions to your superfund, and
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You could miss out on receiving the super co-contribution
Keep track of your super
When changing jobs, be sure you keep track of your super.
Self Managed Fund and Residency
Legislation requires that for an SMSF to be a resident superfund (and therefore a complying fund) the:
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Central management and control of the fund is ordinarily in Australia
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Total accumulated entitlements of resident active members are 50% or more of the total accumulated entitlements of active members of the fund if the fund has at least one “active member” at the relevant time
Central management and control
Case law has defined central management and control as the place where the day to day running of the fund (including making investment decisions) occurs. It is generally accepted that the majority of trustees must reside in Australia.
It is clear that where the majority of trustees move overseas permanently or indefinitely the control would “not be ordinarily in Australia”.
Active Member Test
An “active member” includes a member who contributes, a member who has a contribution made on their behalf or a member who receives rollovers.
Strategic Considerations
Where trustees are considering moving overseas for an extended or indefinite period of time, it’s important they don’t breach the central management and control requirement. Instead, they could consider resigning as trustee and rolling their benefits into a public offer fund.
This newsletter is not intended to be personal financial advice. People intending to act on information in this newsletter should contact Macquarie Partners first.
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Clients with a terminal illness can now access their Super
Effective 16 February, a client who has a terminal medical condition may now access their preserved and restricted non-preserved benefits.
A terminal medical condition exists if two medical practitioners (at least one of them a specialist in the area of the illness or injury) certify the member is suffering from an illness, or has incurred an injury, which in the normal course would result in death within 12 months from the date of certification.
There are no restrictions on the amount or the form in which benefits can be paid. However, for members under the age of 60, the tax free treatment will only apply if they take the benefit as a lump sum.
Lump sum terminal illness benefits will be tax-free
To give effect to the previous government’s policy on tax-free terminal illness benefits from 12 September 2007, the ATO introduced a tax variation which allowed super funds to stop withholding PAYG tax on lump sums paid to terminally ill members under the age of 60.
As the variation expires on 1 July 2008, a Bill has been introduced to ensure the tax-free treatment is continued.
When passed, the Bill will ensure that lump sum super benefits paid on or after 1 July 2007 to clients with a terminal medical condition are tax-free. The tax-free treatment applies to both the taxed and untaxed elements of a lump sum super benefit.
SMSFs bloom and grow
Self-managed superannuation funds (SMSFs) continue to bloom and grow with the sector reaching $300 billion, according to the latest figures from the ATO.
According to the figures, an average of 2,000 SMSFs were established each month. There ere 372,589 funds with an average balance of $805,576 in assets as at December 2007.
The number of SMSF members continues to rise. As at 31 December 2007, there were 718,878 members.
The average SMSF member now holds $417,524 in assets.
Control and flexibility were the key drivers behind the growth. People in SMSFs have the flexibility to buy assets such as property. Administration costs are also getting cheaper as they are getting bigger in size.
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