Dunno? Dealing with contributions made in error [VIDEO]


I regularly get asked questions from readers through my blog on issues and strategies relating to self managed super funds, so I thought why not bring these questions to ‘life’ by starting a new regular weekly blog, “Dunno: ask a question”.

Each week I will hand-pick a reader question and respond with a video, audio (blogcast) or written response.  Look out for these each and every Thursday.  If you “dunno” an answer, don’t be afraid to ask Aaron the question!

Reader Question:

Can a deposit into a SMSF made in error be withdrawn in the next financial year without a tax penalty if both members of a fund were over sixty-five when the deposit was made and the fund was in accumulation mode? How would such a deposit be described by the auditor of the fund?

Tell us what you think about the “Dunno?” blog posts

Disclaimer

What lies ahead for SMSFs in 2013?


2013

A Happy New Year to all my readers…

With the SMSF industry growing strongly, 2013 is likely to provide one of the most challenging and competitive (yet rewarding) periods for SMSF professionals. The year ahead will require practitioners to ‘step-up to the plate’ and be ready for many of the reforms that will reshape the advice and compliance landscape – many that I see as ‘game-changing’ – not only for SMSFs, but for superannuation and financial services in general.

This year will see the culmination of Government reforms, with the introduction of many of the changes related to Future of Financial Advice (FoFA) and Stronger Super. These will have a wide-ranging impact on financial advisers, accountants and auditors, who will all be required to demonstrate increased competency as service providers within the SMSF industry.

So what else will we see in 2013?

There will be no shortage of news and changes when it comes to superannuation… here are just a few that I expect will make some noise this year:

  • With the Mid-Year Economic & Fiscal Outlook (MYEFO) announcing that the Government will amend legislation to extend the tax exemption after death when paying pensions, it is likely that we will see the finalisation of draft ruling, TR 2011/D3. This final ruling is expected to provide much-needed clarity to a range of issues related to when a pension commences and ceases.
  • Outcomes from the Inspector General of Taxation’s (IGT) review of excess contributions – the ATO’s approach to excess contributions has come under significant attack from individuals and practitioners, which has led the IGT to launch a review. This review is designed to address concerns around:
    • ECT administration, such as the timeliness, clarity and comprehensiveness of ATO advice (including where discretion is to be applied),
    • the quality of communication; and
    • the adverse impacts of the ATO’s administration on taxpayers and tax practitioners.
  • There has been a lot of recent discussion and activity around limited recourse borrowing arrangements (LRBAs), with both the ATO and ASIC having issued warnings about the correct structuring of arrangements and promoters schemes with property investing in super.  This year we are likely to see some action on bringing sections 67A & 67B into the financial consumer protection framework by making any LRBA acquisition a financial product. It is not a unanimously agreed decision within industry, but unless some action is taken, the next likely step might be to remove the ability to borrow using limited recourse arrangements altogether.

Election “super” promises or dealing with a changing landscape?

With the Labor Government having recently withdrawn from their commitment to delivering a budget surplus, this year’s Federal Budget could see the delivery of a few superannuation ‘sweeteners’ – in particular, an increase to the concessional contribution cap for those over 50. Subject to being re-elected, the Labor Government still appears committed to their concessional contribution cap extension for those 50 and over with super account balances of less than $500,000. But will there be something more to grab votes?

The opposing view to vote-grabbing was highlighted last year in a speech titled “Future Challenges: Australia’s Super System” given by Dr Martin Parkinson, Secretary to the Treasury, at ASFA’s conference (28 November 2012). Dr Parkinson shared some valuable insights about the challenges that face Australia’s superannuation system. He mentioned that the future direction of the retirement income system must be characterised by Australian’s having adequate income in their retirement, through a system that has integrity and is sustainable over the long-term.

But what does this mean for the year ahead?

The issue of adequacy will evolve in 2013, with the commencement of increases to compulsory superannuation from 9% to 12% by 2020. From 1 July 2013, a further 0.25% in compulsory superannuation (SGC) will be required to be paid on behalf of employees. With changes to compulsory super levels expected to provide up to 90% replacement income for an individual who is currently 30 years old, much of the attention now needs to focus on the management of various retirement phases and risks such as longevity. This issue has been at the forefront of discussions with the Government’s Superannuation Roundtable and will continue throughout 2013 and beyond.

Sustainability appears to be one of the Government’s greatest challenges, due to global uncertainty and an ageing population. A key question is whether the current framework for our superannuation system will be sustainable into the future. Continued budgetary pressures may put a further ‘squeeze’ on superannuation policy, rather than affording to offer some incentives in an election year. Dr Parkinson noted in his speech that “…scrutiny will be even more important to the extent that existing concessions are seen to favour some at the expense of the majority”.  Do you remember some of those recommendations in the Tax Review by Dr Ken Henry?  I don’t think we’ll see any courageous decisions in retirement policy an election year!

The growth of SMSFs certainly wasn’t lost on Dr Parkinson and will continue to be closely scrutinised by Treasury as an emerging issue of integrity for the superannuation system. It is clear that Government wish to see greater transparency on the implications of operating an SMSF, along with increased accountability requirements for SMSF trustees. The ‘stepped’ administrative penalty system to be introduced as part of the Stronger Super reforms from 1 July 2013 will certainly offer a greater level of accountability to fund trustees, as it provides the ATO with additional powers including potential mandatory training subject to the severity of the breach.

What does it all mean for SMSF professionals?

An exciting opportunity lies ahead for those who are prepared to embrace change and look to further develop their SMSF business model to attract new and existing trustees. More than ever, you will need to think about effective ways to deliver your services, content and education as many self-directed trustees continue to build knowledge through the web and social media.

I look forward to exploring these issues with you in the year ahead…

Regards,

Aaron

PS. We will also see the one millionth member of a self-managed super fund in 2013. I suspect this will happen in either the September or December quarter this year. An amazing milestone that shows the sector is flourishing!

A Christmas Message


I’d like to take this opportunity to wish all my readers a very Merry Christmas and Happy New Year.  I trust you have enjoyed my posts throughout the year and look forward to an even bigger and better 2013.

Next year will see a fresh new look for the blog, along with some exciting new initiatives around content to further engage with the SMSF community.  I’m also very excited about the launch of our new SMSF online course, SMSF101 in early February 2012, a joint initiative of The SMSF Academy and Money101.  With the course having recently received 49 CPD points from the SMSF Professionals Association of Australia (SPAA), I believe it will be a ‘game-changer’ for the industry in the delivery of education and training.  Most importantly,  it will provide individuals with a fantastic pathway towards becoming an SMSF specialist.

I look forward to you joining me again in 2013.

All the very best,

Aaron Dunn

 

Join me for the SMSF Quarterly Wrap webinar


Join me for the next SMSF Quarterly Wrap webinar, where in this one hour session I will be discussing at the latest technical and regulatory issues impacting self managed super funds.

The last quarter has been another busy one for SMSFs with changes announced from the Mid-Year Economic & Fiscal Outlook (MYEFO), in particular around the continuation of tax exemption after the death of a member.  In addition, there have been a range of ATO interpretative decisions, recent cases impacting SMSFs and details of the technical issues of the September 2012 ATO National Tax Liaison Group (NTLG) Super technical sub-group meeting “hot off the press”.

SPAA CPD points are available for members, with 1-2 CPD points typically available for these webinars.

Find out more and register here

 

Launching the Top10 SMSF strategies for 2012-13


I’m pleased to announce the launch of my Top10 SMSF strategies for 2012-13 webinar to be held at 11am AEST, Thursday, 23 August 2012.  With more than 410 attendees to last year’s session, this is the most anticipated SMSF webinar for 2012!!

In addition to the webinar, all attendees will receive a free copy of the Top10 SMSF strategies eBook, which will be available in flip-book for the first time, allowing for users to read on PC, iPad, iPhone and android devices.  Last year’s eBook had more than 1,000 downloads, with this year’s book providing more than 70 pages of content on each strategy, their the key issues and considerations when implementing.

This year’s Top 10 includes a diverse range of strategies across the entire life-cycle of SMSFs – from contributions, to investing including using borrowings, running pensions, reserves and estate planning.  This year sees a growing emphasis to pension strategies as more baby-boomers move into draw-down phase in their SMSFs.  There are however some fantastic strategy opportunities right across the superannuation spectrum for both accumulators and retirees.

Find out more and register

Numbers are strictly limited. 

I look forward to you joining me for this session.

Sponsors

Proudly supported by the following sponsors:


   
(C) The SMSF Academy 2012
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