Monthly Archives: March 2017

Why valuers and actuaries are going to have a field day


If you see someone happy about these super changes, then you can safely presume what they do for a job as valuers and actuaries are going to have a field day.

The importance of being above or below the transfer balance cap and/or the pension balance cap requires that those members who are borderline need to have accurate numbers within their self managed super fund (SMSF) both before 30th June and thereafter each 30th June.  Yes, the trustees of a SMSF are entitled to determine the value a fund’s property(ies), but no doubt the ATO will question those that appear to have a favourable outcomes from changing property values.  In such cases, it may be prudent to pay for a valuation from a licenced valuer to remove any doubt and to stop any ATO enquiry in its tracks.

Actuaries’ workloads will increase more so. There will be a number of funds that stop and/or start pensions before 30th June and for which they will need an actuarial percentage should the fund be unsegregated.  And then there will be those large funds that can no longer remain segregated after 30th June 2017 with the excess of any members’ balances over the $1,600,000 pension cap thereafter required to be moved into pension mode.  The wonderful days of the fund being entirely in pension mode will cease in just over 100 days.  Accounting fees will increase with the actuarial tasks and tax refunds from imputation credits will fall with large funds no longer having 100% of their income being tax free.

If you are affected by these and indeed other super changes, you are best supported by:-

  • An accounting firm who can provide you with real time numbers for your SMSF (as Maggs Reid Stewart Pty Ltd can).
  • Financial planning advice from a licenced financed planner (as accountants are prohibited from advising you on what actions you should undertake). So Maggs Reid Stewart can’t advise you as to what to do, but Maggs Reid Financial Planners Pty Ltd can.


The $1,600,000 pension cap

The most complex of the super changes are in respect of the $1,600,000 pension cap & associated CGT relief rules.

If you have more than $1,600,000 in pension mode come July 2017 then the ATO will force you to:-

  • Withdraw the excess amount,
  • Pay a penalty tax,
  • Lose any entitlement to Capital Gains Tax relief, and
  • Not allow you to access any future indexation increases in the transfer balance cap?

So what do you need to do? There is no one right answer for everyone as what is best for you depends on your individual circumstances and goals. It is, to say the least, tricky as there are a number of inter-related decisions to be made.

Following the removal of the accountants’ exemption, an accountant can only make factual statements about tax law and limits. Advice as to amounts to be held inside and outside pension mode, amounts to be contributed and assets to be sold is financial planning advice. Such advice is only given by way of a Statement of Advice (financial plan). It will soon be July and with many seeking advice and with strategies to be formulated and implemented, the time to act is now.

A super asset protection story

I have just read an interesting super asset protection story.

Most people understand that super is a low tax rate environment and one of the strongest forms of asset protection. The extent of that asset protection now seems to be much stronger than previously thought.

Put simply, one can have their pants sued off, but one’s super will be protected except for last minute contributions made to defeat creditors.

In the case of The Trustees of the Property of Morris (Bankrupt) v Morris (Bankrupt) 2016, a widow received two lump sum payments out of her late husband’s super.  Her late husband was a bankrupt and she was also declared bankrupt after his death.  It was held that those lump sum amounts could not be paid over to her trustee in bankruptcy and shared with creditors.  So the asset protection of super lasted beyond the deceased’s lifetime as the lump sums were held to be a crystallised interest in his super fund.  Arguably this protection would also extend to reversionary pensions and binding death benefit nominations.

Perhaps this court case is a timely reminder of the benefits of super when recent changes have some re-evaluating how much they hold within super whilst others may find it harder to accumulate super given the upcoming reduction in the contributions caps.  As has always been the case, a specialist estate planning lawyer can guide you through all of the important matters.

At MRS, we will spend today planning for your success tomorrow.

Debts, snails & the ATO

One has two obligations to the ATO – lodge any required return and pay any associated tax. Those in financial trouble or difficulty often fail to do both.  This is a pity as the ATO is quite reasonable in dealing with paying off taxes owed. 

If you are in financial difficulty, you should ensure that the activity statement or return is lodged on time. If they are lodged late, then late lodgement penalties will be levied and the ATO will be far more reluctant to agree to any deferred payment arrangement.

Non-lodgement is particularly an issue for employers as unreported and unpaid PAYG withholding (tax from wages) and SG super become a personal liability if they remain unreported and unpaid for three months. The ATO routinely issue what are called Director Penalty Notices (DPN) and actively chase amounts owing.

A word of caution though. Entering into a payment arrangement with the ATO could be a breach of your loan terms or possibly even your franchise agreement.

The ATO may reverse fines for late lodgement of a Tax Return(s) where there are extenuating circumstances. In an article in The Age on 13th February 2017, a list was provided of reasons that the ATO rejected as not constituting extenuating circumstances and which included:-

  • Snails eat our mail, so your lodgement demand letter must have been eaten.
  • I had a fight with my wife and she works my tax agent so I couldn’t meet with him.
  • My client can’t lodge because she is currently of the North Pole.
  • I could lodge my 2003 Tax Return because suffering from trauma from a serious car accident I had in 2007.

At MRS, we will spend today planning for your success tomorrow.