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Can a deposit into a SMSF made in error be withdrawn in the next financial year without a tax penalty if both members of a fund were over sixty-five when the deposit was made and the fund was in accumulation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


What lies ahead for SMSFs in 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…



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!

SPAA conference challenges all professionals to consider the future direction of SMSFs

A record number of professionals (1,185) attended the SMSF Professional’s Association of Australia (SPAA) National Conference, arguably Australia’s leading superannuation and financial services conference.  Recognised for the quality of its speakers and technical content, this year it was the discussion and  focus on the future direction of the SMSF industry and behaviour of trustees that provided advisers with the most ‘food for thought’.

The conference saw the release of the 2012 “Intimate with Self Managed Superannuation” report prepared by SPAA and Russell Investments, which showed levels of insecurity and uncertainty of SMSF trustees due to the global financial crisis.  Statistics also supported the continued use of mainstream media, websites and other publications to educate and seek advice regarding SMSF and investments, rather than seeking professional advice.  All this appears to be consistent with the broader views held by Government that people are looking to single-event or piece-by-piece advice when dealing with superannuation.  Rather than taking a wholistic approach to providing advice, businesses will need to consider how they are going to provide scaled advice solutions to existing clients, but more importantly to target new clients.  Combining the high use of mainstream media, with the ‘controller’ behaviour of SMSF trustees, many of us within the profession need to re-think how to best deliver our services in the future.  My session on Day 1, in how to use social media to attract new business, showed how powerful the use of web and mobile technology has become and how it can be used to help deliver education and ‘coaching’ to SMSF trustees.

Well known demographer, Bernard Salt further painted the picture of Australia and SMSF members with his presentation on “New Market & New Customer Behaviour For The Next Decade.”  It was an amazing insight into changes in our population landscape, key services and cultural change, all of which us as SMSF professionals needs to consider in providing advice and financial services into the future.

The conference attendees eagerly awaited the address from Minister Bill Shorten’s at lunch on the final day, especially in light of the full-page advertisement taken out by CPA Australia and the ICAA regarding the proposed new licensing regime for accountants to advise on superannuation and SMSFs.  There has clearly been a line drawn in the sand by both Government and two (of the three) major accounting bodies, with details of these new reforms including the auditor registration to be released in the next fortnight (as announced by Minister Shorten).  We wait with interest to see the ‘devil in the detail’…  These proposed reforms meant the conference session on this topic was overflowing with attendees who are trying to better understand the options available to them.

The proposed licensing regime is expected to impact as many as 10,000 accountants that may require some form of conditional license.  Add to this a further 7,000 – 10,000 accountants requiring ASIC registration to be an SMSF Approved Auditor, the next 6-12 months will be both challenging and game-changing for the industry.  ASIC chief, Greg Medcraft provided some insight into this advice issue, outlining advice being provided will most likely be at the ‘class-of-product level’.  At this class-of-product level, accountants with the relative experience could provide advice on things such as:

  • SMSFs, including recommending an SMSF if it’s in the client’s best interest;
  • superannuation, broadly at the class-of-product level;
  • general insurance quotes broadly;
  • life insurance quotes within a client’s super fund at class-of-product level; and
  • basic deposit products at class-of-product level
The two and a half days provided some great technical content and updates on emerging issues impacting SMSFs.  Some of the key themes I took away from the the conference were:
  • The need to appropriately manage life and estate risks.  With a significant amount of wealth within the SMSF sector, it is critical to ensure appropriate succession has been built to deal with funds assets within incapacity and death.
  • Limited recourse borrowing whilst growing in popularity, has many intricate issues that require specialist attention across a range of professions including legal, advice and banking;  Further licensing issues announced before the conference only highlight the importance of understanding what you’re doing when dealing with these types of investments;
  • The active advice role required within pension phase, including managing longevity risk; and
  • Recalcitrant trustees are not popular with the ATO and are seeing the full face of the law!!
Twelves months seems like a long-time in the profession at the moment, so it will be interesting to see where the industry is at for the SPAA conference when professional converge in Melbourne in 2013.

Watch interviews with speakers from the 2012 SPAA National Conference

Did you attend the SPAA conference?  I would love to hear your thoughts on sessions you attended…

SMSF Quarterly Wrap webinar

The 2012 year is going to be a significant one for the SMSF industry, so it is important that you keep up-to-date with the latest issues, news, and changes impacting self managed super funds.

The SMSF Academy is pleased to announce the first webinar for 2012, the SMSF Quarterly Wrap. This is a new addition to the regular monthly training for SMSF professionals after seeking feedback from members and webinar attendees.

This webinar is being conducted on Wednesday, 1 February 2012 at 12pm AEDST.

Find out more about this session and to register.

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


30 June 2010


30 September 2010


31 December 2010


31 March 2011


30 June 2011


30 September 2011


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…

(C) The SMSF Academy 2012
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