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All SMSFs trustees are required to appoint an approved auditor to audit the operations of their fund each year.  This annual audit must include both a financial audit and compliance audit.

The auditor is required to report their findings to the trustees in the form of an audit report.  The audit report consists of two parts, Part A and Part B.  The consequences of receiving a qualified audit report are quite different, depending on whether it is a Part A or Part B qualification.

SMSFs can claim deductions for certain expenditure incurred by the fund provided the residential investment property is rented or available for rent.  The types of expenditure which can and can’t be claimed and your record keeping requirements are summarised below.

As part of the 2018/19 Federal Budget announcements, the Government confirmed that they intend to legislate to increase the maximum number of members that can belong to a single SMSF from four to six. This change is to apply from 1 July 2019 but has not yet been legislated.

This announcement has prompted many to think about whether it can be beneficial to add adult children as members of their parent’s SMSF or is this a strategy to be avoided.

From 1 July 2017 it became much harder to build up more superannuation thanks to a tightening of the limits on contributions.  The maximum “concessional contributions” (employer, salary sacrifice contributions or contributions made by someone who claims a tax deduction for them) reduced to $25,000 pa.  At the same time caps on “non-concessional contributions” (contributions made from someone’s own money for which they do not claim a tax deduction) reduced from $180,000 pa to $100,000 pa and even $nil for anyone with more than $1.6m in superannuation.

Quirkily, at the same time, legislation was underway to introduce a brand new type of contribution that provides far more freedom for older Australians to make contributions.  These new contributions are known as “downsizer contributions” and they started from 1 July 2018.

In the May 2018 Federal Budget, the Government announced plans to extend the ability for recent retires to make contributions to superannuation from 1 July 2019.  This change has now been legislated.

In a nutshell, the rules in the current year only allow superannuation contributions for someone over 65 if:

• the contributions are legally compulsory (eg required by an award or the Superannuation Guarantee rules), or
• the member has met a “work test”.  (The work test is, broadly speaking, completing 40 hours of paid work over no more than 30 consecutive days at any time in the financial year and before the contribution is made).

What’s the change?

With a new financial year upon us, you may be thinking about what contribution caps apply for the 2018/19 financial year.

With the 1 July 2017 introduction of the $1.6m Transfer Balance Cap (or “pension cap” as some people call it) came a new obligation on superannuation fund trustees to report certain member “events” to the ATO.  These events are reported using a “Transfer Balance Account Report” or TBAR. 

Prior to 1 July 2017, as a general rule, where an individual was age 60 or over and wanted to draw monies from their pension account in excess of their minimum pension requirements, the excess was simply treated as an additional pension payment.  This is because, whilst the payment was tax free regardless of whether the amount was treated as a pension payment or a lump sum commutation, pension payments didn’t necessitate any additional paperwork whereas lump sum commutations did.

In the May 2018 Federal Budget, the Government proposed that SMSFs with three years of clean audit reports and returns lodged in a timely manner would be eligible to move to a three-yearly audit cycle rather than being audited every year. 

Not unexpectedly, this announcement led to a number of questions by SMSF trustees and their auditors.  Thankfully, the Government has now released a discussion paper on this proposed change which gives us a bit more of an idea of how it may work.

A great many retired SMSF members with large superannuation balances adjusted their pension accounts back to $1.6 million on 30 June 2017.  This was done to reflect new rules at the time that placed a limit, called the Transfer Balance Cap, on pension accounts.

Twelve months on, at least some of these pension accounts have grown above $1.6 million.  It’s a natural consequence of taking as little as possible out of the pension account and investing in assets that produce a lot of income, growth or both.  Particularly for younger retirees, it is entirely possible that the combination of income and growth can be enough to completely replace (and more) the amounts that have been drawn out as pension payments.

As the Bank Inquiry dominated news headlines in recent days the government announced a change that will certainly be very welcome for some families with Self Managed Super Funds (SMFS). Until now the most people allowed in an SMSF fund was four – the government has announced it intends to allow the limit move to six people.  The timing is especially useful since some families are reviewing their SMSF arrangements in the light of the ALP plans to scrap cash refunds for franked dividends.

One way to mitigate the impact of the ALP proposal is to include adult children in the SMSF so that the franking credits generated by the parents’ share portfolio can at least be used to pay the tax generated by the children’s super rather than being wasted.

But there are some problems with this idea

With all the recent focus on new limitations on super, it’s easy to forget that there is also at least one new rule that helps those still saving to put more into their super account with the best possible tax treatment.

Until this year, there were really only two ways for most people to voluntarily make extra superannuation contributions.

Why is there so much focus on SMSFs and Bitcoin?

Mainly because it’s new and sexy.  Whenever there is a new and exciting investment, early movers want to get started.  These days, the largest pot of potential investment cash is often an individual’s superannuation.  Thanks to compulsory superannuation at a relatively high level for a long time now, even youngsters in their 30s and 40s potentially have large sums locked up for retirement.

(Did you know that someone with a salary of $50,000 ten years ago who has experienced wage increases of only 3% each year could have grown their superannuation to around $50,000 today if their fund earned even just 2% more (ie 5% pa) over that period?)

But how does one invest superannuation money in Bitcoin?

The Bills necessary to make both the above measures law have now received Royal Assent.

Both were May 2017 budget measures and will take effect from 1 July 2018.  (Further changes to the Superannuation Industry (Supervision) Regulations 1994 will be required but these do not require a vote in parliament and are expected to progress smoothly.

Is something funny happening on MyGov for those with large contributions before 1 July 2017?

In short, yes.

It’s not popular to voice support for the very wealthy, particularly retirees with very large super balances.  But they have just been shafted big time in the latest round of super changes.

I’m not a huge fan of scaremongering around trust deeds.

The new superannuation legislation flew through both houses of Parliament so quickly that I expect most people are still catching their breath about their scale rather than focusing on what next.

But there are some important things to be thinking about right now if you are affected by the changes or advising people who are.  Here are just six.