Younger SMSF entrants are in for the long haul


There’s been a lot of media in recent times about the growth in younger entrants to the Self Managed Super Fund market.  Much of this discussion has come from the recently updated SMSF statistical summary published by the Australian Taxation Office.

Is this simply a ‘spike’ in the statistics or is it a genuine trend in younger people being attracted to SMSFs?   Let’s have a look at some of these quarterly statistics issued by the ATO since June 2009:

Quarter Ended

Under 45         years of age

30 June 2009

35.5%

30 June 2010

35.0%

30 September 2010

35.6%

31 December 2010

35.2%

31 March 2011

39.1%

30 June 2011

34.1%

30 September 2011

37.6%

As you can see from the table, we are seeing a sustained trend in new SMSF entrants under age 45 years of age.

What do you think are the reasons behind this trend?

  • Is it greater control? or
  • Are people taking a greater interest in their super at a younger age? or
  • Have people changed because they are not satisfied with their previous fund (e.g. performance and/or fees)? or
  • Greater investment opportunities, such as limited recourse borrowing to acquire property? or
  • All of the above!!

Are you a younger SMSF entrant? or are you advising younger SMSF entrants?  I would love to hear stories why individuals are being attracted to SMSFs at a younger age?

PS.  I’ll be presenting on the topic of attracting SMSF business your way at the 2012 SPAA National Conference in Sydney, 15-17 February.  Join me for this session as we explore some of these changing trends and how you can leverage new ideas to build your SMSF business…

Can you be remunerated as a Fund Trustee?


You simply can't grab money to act in the capacity of trustee for your SMSF.

One of the conditions of meeting the definition of a Self Managed Super Fund is that trustees cannot be remunerated for their services.

There is a need however to distinguish between services that may be provided  as a trustee for which no remuneration can be provided, against services provided by an individual but not in their capacity as a fund trustee/director.  An example of this is a builder who renovates a property owned by a SMSF where he is the trustee or director of a corporate trustee.

Clarification of this issue has been long overdue, and finally we have seen the ATO through TIES (Tax Issues Entry System) escalate this issue with Treasury to add certainty to the interpretation contained within superannuation law (SIS Act).  Tax Laws Amendment (2011 Measures No. 9) Bill 2011, has been introduced to clarifies that the prohibition on the remuneration of trustees and directors of a corporate trustee of the fund applies only to duties or services performed in:

  • the capacity of trustee or in the capacity of  corporate trustee director; and 
  • connection with the body corporate’s capacity of trustee.

Section 17B will be inserted into the SIS Act, which will place certain restrictions on trustee remuneration for non-trustee duties and services.  The purpose of these restrictions is to ensure that trustee remuneration is not used by trustees to obtain access to their superannuation benefits before they are eligible.

What can trustees/directors be remunerated for?

Trustees and directors may be remunerated for non-trustee duties or services, provided that:

  • they are appropriately qualified and licensed to perform the duties or services;
  • the duties or services are performed as part of a business through which the trustee or director provides the same services to the public; and
  • the remuneration is on an arm’s length basis.

When does this take effect?

Subsection 17B(1), which applies to remuneration of trustees, applies from 8 October 1999 because this is when paragraphs 17A(1)(f) and (2)(c) were inserted.   Subsection 17B(2), which applies to the remuneration of a director of a body corporate that is trustee of the fund, applies to the 2007-08 income year and later income years because those are the income years to which paragraphs 17A(1)(g) and (2)(d) apply.

Attention: SMSF Trustees | share your views, win an iPad2


In February this year, The SMSF Professionals Association of Australia (SPAA) in collaboration with Russell Investments published an inaugural annual study of self-managed super funds (SMSFs) based on an extensive survey of SMSF Trustees.

The intention of the annual study is to understand trustee views on investing, Government regulation, financial advice and managing an SMSF and track the changing and evolving nature of SMSFs. The insights from the report will be used by professionals, regulators, Government and the industry to better understand the superannuation sector’s future intentions.

The research is being conducted by independent financial services research consultancy CoreData across its database of investors Australia-wide.  As many SMSF Trustees as possible are encouraged to participate in the survey and help shape the future direction of the SMSF industry.

The survey will take between 10-20 minutes, subject to your answers.

Win an iPad2

You can fill in your details to go into the prize draw to win an iPad2 with Wi-Fi + 3G 16GB to the value of $729. There will also be 50 runner-up prizes of a $50 gift card to spend at your choice of Coles Group & Myer, Bunnings Warehouse, JB Hi-Fi, Westfield or Rebel Sport.

Begin Inside Superannuation survey.

Full report findings will be published in February 2012 and shared with SPAA members, policy makers, the media and other industry participants.

How troubled investment times can create super opportunities


Watching the current turmoil on the investments markets is a bit like watching a car crash (you can’t look away)…  but in these troubled times, it is important to think about and strategies for members within a SMSF.  In particular, one strategy allows for a member receiving a pension to capitalise on the current down turn by re-wiring their super components to leverage greater tax efficiency.

With the ASX All Ordinaries off around 13% since 30 June, consideration can be given to fully commuting a member’s pension back to accumulation and recommencing the income stream with new taxable and tax-free proportions (refer to TR2011/D3 regarding when a pension ceases and commences).

To demonstrate this, let’s take a look at the following example:

Arthur has a $1,000,000 member balance as at 30 June, with a tax-free proportion of 50%.  Being heavily exposed to the share market, Arthur’s portfolio feels like it is in ‘free-fall’ having dropped 20% since 1 July.  His account balance is now $800,000.  With a 50% tax-free proportion, this means Arthur’s tax-free component now represents $400,000.

However, in trying to take a positive out of the current market turmoil, if Arthur was to fully commute his pension as at 1 July and look to recommence at (or around) the current low point in the market (August), the decrease in his member account balance will be attributed to the taxable component, rather than in proportion to tax-free and taxable components (as originally stated in the commencement of his pension) .

As a result of this commutation, Arthur’s components would now show as:

  • $500,000 tax-free component; and
  • $300,000 taxable component

Arthur can then decide to commence a new income stream, where the tax-free proportion has now grown to 62.5%.  This represents a 12.5% improvement in both the tax-efficiency of any pension amount taken should he be under the age of 60, but also represent further estate tax savings (on the taxable component) when eventually paid to non-dependant beneficiaries.

NB.  Any rollback to accumulation phase would mean that the fund moves back to accumulation and be subject to tax, however the small loss of tax exemption for this period of time could pale into insignificance against the potential tax benefits of commuting and repurchasing the income stream.

It is therefore important in these troubled times to give consideration as to how strategies such as these could make a significant impact to both the current and long-term benefit of an SMSF member.

Webinar on Top10 SMSF strategies for 2011/12


A Happy New Financial Year to all my readers…

To start off the new financial year with a bang, The SMSF Academy in conjunction with Business Fitness invite you to join us for a free webinar on the “Top10 SMSF strategies for 2011/12”.  In this one (1) hour webinar, I will be going through the hottest strategies currently available within Self Managed Super Funds.

With more than 220 people already registered for this event, it is shaping up as one of the most anticipated SMSF web-events for the year.  Don’t miss out, register now.

  • When: Wednesday, 27 July 2011
  • Time: 11am AEST
  • Duration: 1 hour (including question time)
  • Cost: FREE

Register for the Top10 SMSF strategies webinar event.

(C) The SMSF Academy 2012
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