your smsf update – what’s new in self managed super · • the government is amending the...
TRANSCRIPT
Your SMSF update –What’s new in Self Managed Super
SMSF + InvestorEvent
John MaroneyCEOSMSF Association
John Maroney was appointed as the CEO of the SMSF Association in May 2017 and is thrilled to have the opportunity to boost the Association’s reputation as the peak body in the SMSF Sector and its representation of more than one million SMSF trustees. John has developed strong connections with the SMSF sector’s regulators, ATO, ASIC & FASEA, provided substantial input into official inquiries, Productivity Commission, Franking Credits & Royal Commission, and represented the sector extensively to the Government and media.
John’s experience includes extensive senior management, Board and consulting roles in superannuation, insurance, Australian and international financial regulation, actuarial and risk management plus managing professional and industry associations. He has been employed by large and small employers and consultants, within the private and public sectors, within Australia and internationally and he also was self-employed for several years while he developed a successful consulting firm. Key roles include CEO of the Actuaries Institute, Australian Government Actuary and Head of Capital and Solvency at the International Association of Insurance Supervisors, which is hosted by the Bank for International Settlements in Basel, Switzerland.
John MaroneyCEOSMSF Association
SMSF + Investor Event
Your SMSF update –What’s new in self managed super
• 2019 Budget Summary
• 2019 Budget Superannuation changes• Work Test• Exempt current pension income• SuperStream
• ALP Policy
• SMSF legislation
• What is the regulator up to?
• Royal Commission & Productivity CommissionJohn MaroneyCEOSMSF Association
SMSF + Investor Event
Budget Summary
• An election focused Budget with income tax cuts and infrastructure spending the key items
• A forecasted return to surplus
• Superannuation largely out of the spot light• Changes limited to adjusting existing policy and red-tape fixes
• Nothing guaranteed yet as no law has passed
John MaroneyCEOSMSF Association
SMSF + Investor Event
Superannuation Work Test Change
• The Government will amend the super work test to lift the age it applies from 65 to 67
• This will allow members aged 65 and 66 to make concessional contributions and NCCs to super without passing the work test
• 65 and 66 year old will be able to use the NCC bring forward rule 300k contribution
• Work Test Exemption will continue to apply for those aged 67 onwards
John MaroneyCEOSMSF Association
SMSF + Investor Event
Superannuation Work Test Change
• The Government is increasing the spouse contribution age limit to 74, with those 65 and 66 no longer needing to meet a work test
• You can make contributions on behalf of your spouse if the receiving spouse:
• has not exceeded their non-concessional contributions cap for the relevant year, and
• has a total superannuation balance less $1.6 million on 30 June in the financial year in which the contribution was made, and
• is aged
• 66 or younger, or
• between the ages of 67 and 74, pass the work test in FY contribution is made.
• The SMSF Association advocated for a simpler work testJohn MaroneyCEOSMSF Association
SMSF + Investor Event
Exempt Current Pension Income
• The Government is amending the superannuation laws to make calculating “exempt current pension income” (ECPI) easier
• ECPI is the tax deduction which gives tax-free earnings to super funds in retirement phase
• Where SMSFs have all their assets in pension phase but have a member with over $1.6 million in assets, they will no longer have to seek an actuarial certificate for ECPI
• Where an SMSF has both pension and accumulation assets, they will be able to choose how they calculate ECPI rather than follow a more complicated method required by the ATO
• The new rules will apply from 1 July 2020
• The SMSF Association advocated for these changes
John MaroneyCEOSMSF Association
SMSF + Investor Event
SuperStream• SuperStream is the digital framework that allows super funds to
communicate with each other seamlessly
• The Government is given the ATO funding to include “release authorities” in SuperStream
• Will apply from March 2021
• SMSFs were scheduled to join SuperStream for contributions and rollovers from Nov 2019 but this ha been delayed to March 2021
John MaroneyCEOSMSF Association
SMSF + Investor Event
Simplifying Superannuation
1 Amnesty to allow SMSF trustees to convert legacy pensions
2 Simplifying the work test
3 Addressing inefficiencies with residency rules
4 Ensuring a TRIS in retirement phase becomes an account based pension
5 Removing actuarial requirements for fund in 100% pension phase
6 Allows trustees to choose to have segregated ECPI
7 Align superannuation thresholds8 Streamline deductible contribution notice process
9 Simplify child pensions for transfer balance cap
SMSF Association called for a number of simplifications for superannuation
John MaroneyCEOSMSF Association
SMSF + Investor Event
ALP Superannuation Policy
Lower the annual non-concessional contributions
cap to $75,000
Further lower the High
Income Super Contribution threshold to $200,000
Abolish catch-up concessional
contributions
Reverse recent changes to tax deductibility for
personal superannuation
contributions
Disallow refunds of
excess franking credits
Ban LRBAs going forward
John MaroneyCEOSMSF Association
SMSF + Investor Event
ALP Superannuation Policy
Franking Credits
• Horizontal equity• Different outcome for APRA-regulated funds• SMSF pension members one of the only taxpayers to have corporate profits
taxed above their marginal rate
• Pensioner Guarantee – only applies to SMSFs with age pension recipient on 28/3/2018
• Disincentive to save
• Behavioural impacts
• Impact on SMSF market share
John MaroneyCEOSMSF Association
SMSF + Investor Event
ALP Superannuation Policy
Franking Credits
John MaroneyCEOSMSF Association
SMSF + Investor Event
ALP Superannuation Policy
Franking Credits
John MaroneyCEOSMSF Association
SMSF + Investor Event
ALP Superannuation Policy
Franking Credits
John MaroneyCEOSMSF Association
SMSF + Investor Event
ALP Superannuation Policy
Contributions Policy
• Lower NCCs - $75,000 per year
• Division 293 tax to apply from $200,000
• Catch-up concessional contributions to be abolished
• 10% rule change to be reversed
John MaroneyCEOSMSF Association
SMSF + Investor Event
• ALP are committed to banning LRBAs
• Council of Financial Regulator Report on LRBAs released on 22 March 2019
• No systemic risk posed by LRBAs
• Government committed to take no further actionBUT, regulators see significant risks for individual SMSFs – poor advice, spruking, concentration risk, property market risks
• Regulators preferred position is to ban LRBAs, and if not, employ tighter policy restrictions
ALP Superannuation Policy
LRBA Policy
John MaroneyCEOSMSF Association
SMSF + Investor Event
SMSF Legislation Update
With no more sitting days for the current Parliament before the election the following SMSF legislation or policies have not been passed:
1. Increasing SMSFs to 6 members2. Extending non-arm’s length income rules to expenses3. Including unpaid LRBA amounts in a member's total super
balance4. Superannuation Guarantee opt-out rules for individuals with
income over $263k and multiple employers5. Opt-out insurance for individuals aged under 25 or with less than
$6,0006. SMSF three year audit cycle
John MaroneyCEOSMSF Association
SMSF + Investor Event
What is the regulator up to?
• ATO taking a stronger regulatory focus on SMSFs
• Disqualified 257 trustees in FY18• 70% for illegal early release and loans to member
• Non-lodgment• Identified 64,000 lapsed lodgers• Sign of other potential risks• Average had 3.4 years of overdue SARs• Approx $27b fund assets at risk according to last return lodged
• FY18 there were 8,215 SMSFs with 16,909 regulatory contraventions
• The most common contraventions were:• loans (21.1%)• in-house assets (18.7%)• separation of assets (12.8%)
John MaroneyCEOSMSF Association
SMSF + Investor Event
Current key areas of interest:• reserves
• low risk – falling number of SMSFs with reserves• multiple SMSFs
• low risk – no significant increase over time• transfer balance cap compliance
• medium risk – re-reporting and PAYG obligations for legacy pensions
• LRBAs• high risk for affected population – concertation risk and inadequate
investment strategy• ATO to write to trustees to ensure they adequately understand and
mitigate the associated risks
John MaroneyCEOSMSF Association
What is the regulator up to?
SMSF + Investor Event
Productivity Commission
John MaroneyCEOSMSF Association
SMSF + Investor Event
• $500,000 cost effective balance
• ASIC design and distribution obligations• Government has introduced and passed• Little impact on SMSFs
• SMSF specialist training
• Concerns around SMSF trustee knowledge
John MaroneyCEOSMSF Association
Productivity Commission
SMSF + Investor Event
Financial Services Royal Commission
• SMSFs not a direct focus of the Royal Commission• Case studies revealed some poor advice practices
• Advice recommendations will impact provision of advice to SMSFs
• No spruking of superannuation products to assist reducing inappropriate SMSF advice risks
• “Stapling” of default to member follows PC lead
• Limitations on deducting fees from “choice” accounts• Likely to apply to SMSFs – more documentation needed.
John MaroneyCEOSMSF Association
SMSF + Investor Event
For more important SMSF information and resources, visit SMSF Connect.www.smsfconnect.com
SMSF + Investor Event