Archive for 'Super'

Spousal Contributions: The Filler For Super

Depending on your relationship, you may have discussed with your partner the prospect of marriage. Or you might be more comfortable remaining in a long-term de facto relationship (especially since many de facto relationships have similar rights as those of a marriage).

You might share a lot of things with your partner (such as a mortgage, a family, or a car), but did you know that you might be able to boost their super for them?

Specifically, if you (or your partner) were unable to work for a length of time, such as during maternity/paternity leave, unemployment or are a single income household, the super fund of the non-working part of the pair might not be increasing. As a result, the retirement savings held in super for one member of these households may not be increasing as exponentially fast as the working member.

The good news is that when in a relationship, a spouse can boost their non-working partner’s super fund with their own contributions. The best part? It could be a tax write-off for the working spouse.

Under Australian superannuation law, a spouse can be a legally married partner with whom you live or your de facto partner. That gives additional benefits to those in de facto relationships, who can choose (if one member of the relationship isn’t working or earns less) to boost their partner’s super fund. A spouse must also be younger than 75 years old when you make the contribution.

One of the primary losses of super gains that can occur is a result of maternal or paternal leave. If you and your spouse are thinking about starting a family and may have to take time off work during the pregnancy, spousal contributions can be a great way to continuously inject funds into super so that the gap from the pause in employment can be mitigated.

If you are looking to help your spouse’s super grow, there are two ways that you can go about it.

  • Making a Spouse Contribution to their super account
  • Arranging for Contribution Splitting (also known as Super Splitting)

Spouse superannuation contributions can now be made for spouses earning up to $40,000 per year. If a spouse earns less than $37,000, the maximum tax offset of $540 can be claimed when contributing a minimum of $3,000 to their super. Anything contributed that is more than $3 000 will not receive the spouse contribution tax offset.

You will not be able to claim the tax offset if:

  • A spouse has exceeded their non-concessional contributions cap for the financial year or,
  • Their super balance is $1.6 million (for 2020/21) or more on 30 June of the previous financial year in which the contribution was made.

Another way to inject funds into your spouse’s super is to choose to have some of your own super contributions put into their super account. This is fine as long as they have not reached their preservation age yet, or are between their preservation age and 65 years and not retired.

Super contributions can only be split in the financial year immediately after the year in which the contributions were made or in the same financial year as the contributions were made. This is only if your entire benefit is being withdrawn before the end of that financial year as a rollover, transfer, lump sum or benefit.

Contributions can be split in two different ways.

  • Employer contributions – the most common form of super contributions to split
  • Personal tax-deductible contributions – money that you deposit into your super and claimed a tax deduction.

Spouse contributions are generally treated differently to contributions your spouse splits with you.

If your spouse makes a contribution for you, it counts towards your non-concessional contributions cap – not your spouse’s contribution caps. If you are currently employed by your spouse, any contributions that they may have made in this role are reported as employer contributions (not spouse). They may also include amounts transferred from your spouse’s or ex-spouse’s FHSA under a family law obligation.

If you are looking into spousal contributions into super, it is best to seek the advice of your financial advisor or superannuation provider, to best determine what path you should take.

Posted on 12 October '21 by , under Super. No Comments.

Changes To Employers & Super When Stapled Funds Come Into Effect 1 November 2021

This year has seen a lot of amendments and changes to the rules governing superannuation funds and their providers by the Federal Government that may have an impact on how you as an employer deal with super.

Are you aware of the changes to “choice of fund” rules that you might need to be aware of as an employer of new to the workforce employees?

Currently, as an employer, you may be paying contributions to your new employees into a  default superannuation fund of your choice if they have failed to provide you with their own choice of superannuation fund details. This may be due to not having a superannuation fund (as in, the employee is new to the workforce), or as a result of other circumstances.

As an employer, you must provide all new employees with a Superannuation standard choice form within 28 days of their start date. They may also be provided with one if:

  • They as an employee request one
  • You are not able to contribute to their chosen fund, or it is no longer a complying fund
  • You change the employer-nominated fund into which you pay the employee’s contributions.

If the employee holds a temporary working visa or their super fund undergoes a merger or acquisition, they will not be able to choose their super fund themselves.

From 1 November 2021, if you have new employees start and they don’t choose a specific super fund, you may need to request their ‘stapled super fund’ details from the Australian Taxation Office.

A stapled super fund is an existing account that is linked, or ‘stapled’ to an individual employee, so it follows them as they change jobs. This change aims to reduce the number of additional super accounts opened each time they start a new job. If a new employee does not have a stapled fund and they do not choose a fund, the employee’s super can be paid into the employer’s default fund.

With fewer superannuation funds being opened, employees are less likely to generate ‘lost super’ as they transition through their employment periods and various careers leading up to their retirement.

As an employer, you’ll be able to request stapled super fund details for new employees using the ATO’s Online services for business.

To get ready for this change, you can check and update the access levels of your business’ authorised representatives (such as your accountant or bookkeeper) in Online services. This will mean you’re ready to request stapled super funds if needed. It will also assist in protecting your employees’ personal information.

As an employer, you legally cannot provide your employees with recommendations or advice about super unless you are licensed by ASIC to provide financial advice. You can give your employees information about choosing a fund however, including:

  • Why do they need to choose a super fund?
  • The process of choosing a super fund.
  • Your obligations as an employer to pay the super guarantee and provide a default fund to pay into
  • How they can nominate their chosen fund

Remember, registered tax agents and BAS agents like us can help you with your tax and super queries. Come and speak with us about your options, and to ensure that you are compliant with your super requirements as an employer.

If you are a new employee entering into the workforce, and you’d like to know more about your options when it comes to superannuation, you should have a serious discussion with providers and conduct your own independent research on the funds available.

Posted on 21 September '21 by , under Super. No Comments.

Breaching The Complex Laws That Surround SMSFs Could Land You In Hot Water

There is a proverb that says that it is better to ask for forgiveness than to ask permission.

Generally speaking, the idea behind this saying is that if you ask for permission and you do not receive it, then the punishment will be a lot harsher than if you do the thing that you asked to do and get caught afterwards.

For example, if your children were to ask you if they could go to the local pool, and you deny them that request, the chances are that they would be in more trouble than if they simply circumvented you, and went anyway. It may also be said that you may never get caught doing the wrong thing, but asking for permission to do the act could have someone keeping watch over you.

The same cannot be said for Self Managed Superannuation Funds.

It is never a good idea to break the rules and then ask for forgiveness in that instance (or at least not intentionally). SMSF laws are complex. Breaking the rules could be thought of as being quite easy, but is not an excuse.

The Australian Taxation Office (ATO) makes each and every person appointed as a trustee sign a declaration that they are aware of the rules and enforce that that declaration must be witnessed.

Then, after signing a declaration that you are aware and know the rules, they also force you to appoint an independent auditor to thoroughly check everything you have done and to make sure that you have not breached any of the rules.

If they find out that you have breached the rules then that auditor must then report the breach to the Tax Office.

Once it has been reported, this breach must be addressed as quickly as possible. It is even better if you rectify the breach before the auditor reports the breach. Your attitude towards rectifying the breach has a lot of impact on the action that the Tax Office will take against you as a trustee.

Where you can show that this was an inadvertent breach and you fixed it immediately upon realising you made the breach then most likely you will not receive any type of punishment.

Conversely, where the breach was made knowingly and you show hesitancy in rectifying it you should expect to feel the full wrath of the regulator. The ATO does not take lightly to a person not administering their super to the letter of the law.

What Punishments Can The ATO Give You?

There are a number of sticks the ATO has to punish wayward SMSF trustees. The most common punishment used is a direction to do something. For example, you might have acquired an asset off a member that was against the rules. In this case, the ATO would direct you to sell that asset back to the members.

Further on the next level of punishment would be education directives. The ATO has the authority to force you to do some formal SMSF Trustee training. There are a number of providers of these training courses.

That is the extent of the punishments that do not incur monetary penalties. However, the next level of punishment is significant fines for each individual trustee or director of the corporate trustee. These fines can be up to $10,000 per person.

The biggest punishment that can occur is to classify the SMSF as “non-complying,” where the cost of this will be 47% of the accumulated taxable component of the whole fund.

Essentially, that’s half of your super taken from you.

That’s why we always recommend complying with the rules. When you are unsure of the rules, then you should seek further clarification from an expert (and keep off of the ATO’s naughty list while you’re at it).

Posted on 31 August '21 by , under Super. No Comments.

How Much Super Should You Have To Retire?

Retirement might seem like a far off dream for many in the workforce, but it’s never too early to start thinking about how much money you might require to live comfortably in your golden years.

Your super balance will most likely fund your retirement, so knowing how well it is performing at your current age is a critical way to address performance issues and optimise its path going forward. You want to make sure you’ll be getting the most out of your super so that when it comes to retiring, you can afford the lifestyle you want.

The amount of super that you may need to live comfortably during your retirement may depend on a range of factors, such as expenses that you may incur, outstanding debts you may have and whether you will be eligible for other types and forms of income (such as through investments, savings, an inheritance or the Age Pension).

According to figures set out in March 2021, those who are looking to retire today (regarding individuals and couples around the age of 65) would need an annual budget of around $44,412 or $62,828 to fund a comfortable lifestyle. For a modest lifestyle, they would need an annual budget of $28,254 or $40,829 respectively.

Everyone’s situation is different, and their super balance will likely reflect those differences.

Men and women may have different super balances due to pay gaps, salary differences and potentially the amount of time they have actually spent working (maternity leave, working part-time versus full-time etc, taking time off work for travel, etc.). As an example, a woman in the 20-24 age bracket may have an average super balance of $8,051, while a man in the same bracket is expected to have an average balance of $9,481. In the 40-44 age bracket, the average super balance for men is $134,992, while women in that same age group may only possess $98,572.

So how can you make certain that your superannuation gets the boost it needs to fund your retirement? We can suggest the following:

  • Track down lost super to make sure that you’re not paying for multiple fees on different accounts.
  • Consider whether consolidating your funds might be a worthwhile option, to keep easier track of them.
  • Review your investment options (you may want to consider switching to a more growth-focused super investment option, for example).
  • Review your super at least once a year, and check the fund’s performance, fees that you are paying, what insurance you might have inside your super and if it is still suitable for your current needs.

If you’re looking towards your future, and want more advice on how to plan for your retirement with regard to your superannuation, you can speak with us or your super provider.

Posted on 10 August '21 by , under Super. No Comments.

Using A Corporate Trustee Instead Of Individuals For A Family Trust

A family trust is a great structure.  It provides tax flexibility whilst giving you asset separation in two directions.  But what does asset separation in two directions mean? And why might we suggest it to you as a recommendation?

First of all, why do you want asset separation? If there are multiple assets, you want to make sure that if someone makes a claim against the owner of a particular asset that your other assets can be quarantined from that claim. This isolation will mean that they can’t gain access to the assets that are yours and separate from the claim.

If you own a business and have a successful financial claim made against your business where the claim is for an amount that is more than the assets of the business, you will first need to use the business to cover the claim, and then find something additional to supplement the shortfall. In this case, if you also own your own home, and its worth is enough to cover that shortfall, it may be used to meet the claim by combining the business assets’ worth and the family home’s value. You could lose your family home!

However, if we structure your business in a particular way then the person making that claim will only have access to the assets in the business and you will be able to keep your family home.

This is what is called asset separation. Generally, it’s a good thing to employ, but it does have one flaw – it usually only goes one way.

If someone claims on your business, they won’t get the house but if they successfully make a financial claim against you, they will successfully get all of the assets that you own, including those of your business.  This is a risk that you must be willing to take if you own a business.

When you operate a business through a family trust instead of owning that business, you will merely “control” it, and have but a “mere expectancy” of being considered in the distribution of any profits or capital from that business.

The good part here is that although you only have a mere expectancy to be considered, we would set it up so it is YOU that “considers” who gets the money.  This means that if someone makes a claim against you then they can’t get access to assets in the family trust. What this does is give you two-way asset protection.

There is a bit of an issue with family trusts though – although you will see the debts of the trust as debts of the trust at law, they are in actual fact the debts of the trustee. If you are the trustee, all of the debts of the trust are your personal debts. You can use the trust assets to pay down those debts, but if the trust assets are insufficient to pay the debts, it will be up to you to pay off the rest.

When you’re an individual trustee of a trust, you lose the perk of asset separation, which is why a company may be used as a trustee, as the company does nothing other than act as the trustee of the trust. If there are insufficient funds in the trust to cover the debts of the trust, then those debts fall on the trustee and the creditors have no access to your personal assets because you have no individual debts owing.

Want to know more about asset separation? Interested in trusts? We’re here to help.

Posted on 20 July '21 by , under Super. No Comments.

Recent Changes To Your Superannuation That You Need To Know

 

There were a few changes to superannuation that were passed by the Senate recently.

 

You can now use the bring-forward rule to make three years’ worth of non-concessional contributions (where you don’t claim a tax deduction) up until the age of 67.  

 

Last year the rules had changed to permit a person to make non-concessional contributions up to the age of 67 but the use of the bring forward rule had stayed at an age limit of 65 years old, as it required a full Bill to be passed by both Houses of Parliament.  

 

This new age limit will apply to contributions made on or after the 1st July 2020.  This is particularly good news for people that turned 67 during the year and utilised the three year bring forward rule in anticipation of the law being passed.

 

From the first quarter after receiving royal assent (most likely to occur from 1st July), Self Managed Superannuation Funds will be allowed to have up to six members.  The limit is currently four members. For larger families, this will be of particular use and relevance, as the parents involved in the fund may wish to include more than two children (this could potentially be up to four children involved in this case). 

 

Pauline Hanson’s One Nation Party also passed through an amendment into the changes that will remove a charge on excess concessional contributions. Concessional contributions are those where you or your employer can claim a tax deduction on a contribution. 

 

If you or your employer currently contribute over the allowable caps (usually limited to $25,000 but moving to $27,500 on 1 July) to your super, you are charged an amount of around 3% of the excess you contributed and it is calculated from the 1st of July in the year that you made the contribution up until the day your assessment is due.  

 

There are still other charges that will apply to exceeding contribution allowable caps, such as Shortfall Interest Charge and General Interest Charge. The biggest is usually the Excess Concessional Contributions Charge.

 

This change was never announced and was not part of government policy but made it through anyway.  One Nation also tried to increase the maximum allowable tax-deductible contributions for persons aged over 67 years old, but that amendment did not go through.

 

Another change that had not been previously announced was that if you had an amount released from super under the Covid Relief package ($10,000 per year for two years) then you will not be able to claim a tax deduction for the same amount that you contribute back into super up until 2030. 

 

For example, Peter took his $20,000 under the Covid Release package.  Peter contributes $1,000 per month into his superannuation fund and usually claims a tax deduction for that amount.  

 

The first $20,000 that Peter contributes after 1st July 2021 will not be able to be claimed as a tax deduction. This only applies to personal contributions, so if your employer contributes on your behalf this will not impact you.

 

Want more information about super contributions, but not sure where to start? Come speak with us – we can help you with any questions you may have about superannuation

Posted on 7 July '21 by , under Super. No Comments.