The best questions (and answers) from our Super Seminar

Here are some great SMSF questions (and answers from our super experts) asked during our superannuation seminar that just wrapped up.

What is the position if the client asks for the SMSF to be set up but does not want the statement of financial advice?

Ultimately clients will make the decision but being clear about the importance of the advice up front, before they jump into a decision is crucial. Ultimately the regulators want to make sure we are not providing advice unless we are appropriately qualified – there is nothing preventing you from executing the client’s instruction, however, if none of your clients receive financial advice to set up a fund then that does indicate a risk the regulators will not like.

Some clients just won’t have a bar of it. We should be recommending they receive advice but ultimately it can still be executed on their instruction. Is a super fund the best spot for the purchase? The costs of unwinding a mistake would far outweigh the cost of obtaining advice.

You should document the recommendation of seeking financial advice and their ultimate decision.

Is catch up super contribution available to a non-resident member for income tax purpose?

The SIS Act doesn’t make a distinction between resident and non- tax residents and ability to make contributions. The same rules apply. A non tax-resident could use catchup contributions, yes.

If they were a non-resident, then we have to be mindful of the active member test to make contributions into the fund.

I have a client who doesn’t have any intermediary advisor or financial planner for his SMSF. He decided to make a personal contribution to his SMSF and claim it in his tax return. Who can issue the Notice of Intent for his situation? I am a registered tax agent only. How is this reported to the ATO?

If no advice has been given, then I would have no issue in providing the documentation to the client for the notice of intent. Bear in mind that if the client is claiming a deduction there are timing requirements to submit the form, particularly if the contribution is being used to start a pension.

It doesn’t get reported or provided to the ATO, it just needs to be held on file. The individual, in their tax return, needs to disclose that they have provided the intent to claim forms to their super fund (among other requirements). In the super fund it is reported as a personal concessional contribution.

What is the benefit of adding kids to your SMSF?

The gradual transfer of wealth to children, as pre-death estate planning (eliminating or reducing death benefits tax); having a greater pool of monies to invest; generating additional cashflow for retirees, to name a few.

Can you clarify if a member withdraws more than the minimum pension, you can treat any additional over the minimum as a lump sum (TBAR reporting requirements). However, you can also treat any excess over the minimum as part of the pension to eliminate TBAR reporting.

You can do this (treat the excess withdrawal over the minimum pension as a lump sum) if the member had a standing direction in place that directed the trustees/administrators to do this. If not, then you cannot change the nature of the transaction. Especially where the recurring nature, amount and description indicates the withdrawals are specifically pensions. Only partial commutations from pensions are TBAR events to be reported. Accumulation lump sum payments are not reportable as it doesn’t impact the TBC. There is no TBAR reporting when just classified as pensions only.

Can you outline the taxation issues with the following. SMSF in pension mode. Pensioner dies say 30/9. Benefits to be paid out to non-dependant beneficiaries. For the period to 30/9 what is the taxing position of SMSF? Do we prepare a set of financial statements to 30/9? Given that in previous year it was 100% tax exempt. Realising assets to pay benefits will attract CGT? What strategies are available? Is it better to transfer assets to the Estate to deal with (will this attract CGT?)?

If in pension mode it is essentially deemed to continue in pension mode through to the death benefit payout. The transfer of assets is a CGT event and so would likely create a CGT event that would be mitigated by the pension mode (and ECPI). Benefits going to the estate defers the tax obligation on the death benefit to the estate. Benefits paid direct to the beneficiaries places the withholding obligation on the death benefit with the super fund (could pose liquidity issues. Often where the benefit is going will depend on the BDBN if there is any.

If a super fund owns crypto currency, can it pay crypto currency as pension payments?

No, pensions can only be paid in cash. This has been in place since 1 July 2017. A transfer of assets can only be done as a partial commutation (lump sum) and will not satisfy the pension payment standards of SIS.

Please advise what the CGT implications are when transferring assets out as in specie transfer? 1. When the member is in fully pension phase. 2. When the member is in accumulation and pension phase? Thanks

If we need to include part of the pension balance, then we technically need a partial pension commutation first (converting part of the balance to accumulation mode) before the lump sum can be “paid” in specie. As for the CGT impact to the fund there will still be ECPI to consider and reduce the gain – the “sale” is occurring at the market value of the asset at the date of transfer.

Where a member of a super fund passes away and their BDBN indicates payment to the LPR and the deceased’s Will indicates that all assets are to be split evenly between adult children (non-financial dependants), is the tax rate on the taxable component of the deceased members benefits that should be withheld by the super fund 15% or 17%?

It should be 15% as the BDBN states payment to the estate – the estate being the beneficiary; then distributed from there. The benefits are not going directly to non-financial dependant adult children from the SMSF – where the withholding would be 17% (to include the Medicare Levy). In addition, it’s the estate that withholds the tax when the death benefit is paid to the deceased’s estate.

If you have any questions, please contact us on 03 9886 0800 or via email.

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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2023. Please do not reproduce without the expressed written consent of the author.