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12th Feb, 2020
With all the pandemonium of the new year, your super is probably the last thing on your mind. However, this is precisely the right time to think about implementing some strategies to increase your super for the coming year.
Currently, 5.8 million people in Australia have two or more super accounts. Every year the ATO runs a postcode “lost super” campaign to help raise community awareness. As a consequence of the 2018 campaign, more than 66,000 people consolidated over 105,000 accounts worth over $860 million. For the latest campaign, the ATO has created tables of lost and unclaimed super per state and postcode that anyone can access.
Finding and consolidating your lost super with your active account means you’ll pay fewer management fees and other costs, saving you in the long term.
Another easy way to grow your super is to make sure the super fund that you’re putting your money into is performing well. Recently, the regulator of super funds, the Australian Prudential Regulation Authority (APRA), released “heatmaps” that provide like-for-like comparisons of MySuper products across three key areas: investment performance, fees and costs, and sustainability of member outcomes. While the ultimate purpose of the heatmap is to have trustees with areas of underperformance take action to address it, they can also be an invaluable resource in choosing the right super fund.
12th Feb, 2020
To be eligible for superannuation fund tax concessions, self managed super funds (SMSFs) must be maintained for the sole purpose of providing retirement benefits to members. This is known as the sole purpose test. Failing the test could expose trustees to civil and criminal penalties in addition to the SMSF losing concessional tax treatment.
Previously, it was thought that any benefit provided directly or indirectly to members or related parties of an SMSF from an investment would contravene the sole purpose test. However, a recent Full Federal Court decision will provide some flexibility to trustees on certain investments. The Court decided that an SMSF investment in a fund to acquire a fraction interest in a property to be leased at market rent to the member’s daughter did not breach the sole purpose test.
While the Full Court found the SMSF had not breached the sole purpose test, it ultimately ruled against the trustee, finding that the investment was an in-house asset and breached the 5% limit. Crucially, the ATO warned it may still apply compliance resources to scrutinise whether an SMSF investment in fractional property investments contravenes other legal requirements.
12th Feb, 2020
The proposed $10,000 economy-wide cash payment limit has understandably elicited some confusion. While the proposal is not yet law, once enacted it will be a criminal offence for certain entities to make or accept cash payments of $10,000 or more. This is intended to combat the use of cash in black economy activities.
Chief among the questions is to what extent personal transactions will be included in the limit. The government has now released information outlining the circumstances in which the limit would not apply in relation to personal or private transactions.
Among other categories, payments relating to personal or private transactions (excluding transactions involving real property) would not be subject to the limit. Cash gifts to family members (as long as they are not donations to regulated entities such as charities) and inheritances are likely to be exempt. In other words, it is unlikely you will be prosecuted if you give your family members a lavish cash wedding gift or help your kids with a house deposit that happens to be over $10,000.
However, if you occasionally sell private assets (eg a used car) you may need to be careful and take reasonable steps to ascertain whether the other party is acting in the course of an enterprise.