TAX: Superannuation

2018

Need actuarial certificate when – both contributions + pension payments are made ​​​

CONTRIBUTIONS

PER MEMBER

Concessional superannuation contributions cap $ 25K

• All ages - $25K per member per annum ** work test applies to those aged 65+**

Non-concessional superannuation contributions cap (over 3 years) $ 100K (tax free contributions)

• Age 64 or less on 1 July 2017 - $100K per member per annum (if the member’s total super balance is <$1.6m at the end of 30 June of the previous FY)

• Or $300K over a 3yr period (if member’s total super balance is <$1.4m),

• Or $200K over a 2yr period (if member’s total super balance is >+ $1.4m and <$1.5m)

• Age 65+ on 1 July 2017 <$100K per annum **work test to be satisfied.

​ ​ PENSIONS

When commencing/closing a pension account > need TBAR report

Account based pension (ABP)

• This is the most common type of pension. The pension is paid from a super account held in your name. 

• Allocate the most pension payment to the account with the least tax-free pension percentage

• Lower the tax-free percentage = higher the taxable pension percentage

• Exempt current pension fund - cannot accrue capital losses (CG/losses disregarded)

• When can you start an ABP

  • You have reached the age of 65

  • You have reached the preservation age (see below) and permanently retired

  • You have ceased employment after age 60 or

  • You are permanently incapacitated

• Your preservation age depends on where you were born

• Payments and investment returns in pension will be tax free

​ ASIC Filing fee

• Division 293
  

  • Members – Accum – Payments – New record – Release authority 

  • Calculated: Date

  • Benefit Label: Voluntary release authority 

OR 

• Allocate to – Member: Benefit payment - Release authority 

​ TRIS (Transition-to-retirement income streams)

• This is a pension you can commence if you have reached your preservation age but are still working. You must start a TTR prior to turning 65. 

• If you have reached your preservation age but still currently in the workforce

• commencing a pension whilst you salary sacrifice surplus income into a new superannuation fund

• 100% TAXABLE (FROM 2018) = exempt current pension income is no longer applicable 

• Can use CGT Cost base reset

• 1.6million TRANSFER BALANCE CAP

TRANSFER BALANCE CAP

Excess transfer balance = Total member balance - $1.6 mil

Daily Excess Transfer Balance Earnings

= Excess Transfer Balance x  (90 Day Bank Bill Rate + 7 % Points)

                                  (number of days in calendar year) 

• The above earnings are subject to 15% tax for the first offence and 30% for the second and subsequent offence.

Commutation request for estimated excess over transfer balance cap (2017)

• in accordance with Practical Compliance Guideline PCG2017/5, wish to comply with Division 294 of the Income Tax Assessment Act (1997).

• I elect to commute such portion from my superannuation income stream(s) to be rolled over as an accumulation interest so as to avoid exceeding the $1.6 million transfer balance cap.

Member account balance

• Opening balance

• Income stream payment

  • transfers & tax free contributions

  • Taxable contributions

  • Transfers to pension membership

  • Less: contribution tax

  • Less: member expenses

  • Less: withdrawals

• Allocated earnings/losses

  • Distributions

• Closing balance

LRBA (Limited recourse borrowing arrangements)

SMSF trustee taking out a loan from a third party lender.

The trustee then uses those funds to purchase a single asset (or collection of identical assets that have the same market value) to be held in a separate trust.

Loan per statement  

Opening balance 43K

Repayments        33K Closing balance  10K

Interest 15K

DR Instalment warrant 33K

CR Debtors 33K

DR Interest expenses 1K   (deductible amount)

CR Instalment warrant 1K

Personal loan component: Non-deductible Interest 14K

Letters

Minutes:

• Super input form

• Year end minute (individual / corporate trustee)
  

  • ROI - Check against member balance report

START OF YEAR NET ASSETS

NET PROFIT AFTER TAX 

Less: Employer concessional contributions

Add: 15% tax on taxable contributions

Add: Member insurance premium fully deductible

Less: 15% tax on deductible insurance

= RETURN ON INVESTMENT%

Audit:

• Trustee representation letter (client -> auditor)

• Auditor management letter (auditor -> client)

• Audit engagement letter 

PROVISION FOR INCOME TAX

When the provision for income tax account is negative for two subsequent years, then allocate the total amount in the provision account to asset account (i.e. income tax receivable account). Because the liability balance will be negative for both years. (This applies especially for pension account as they will most likely have tax refundable for following years).