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Phone Paul – 0407 361 596

 

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CASE STUDY – Property purchase in Super by finance expert and wife, Jack and Melissa

Case Study - Property purchase in Super by finance expert and wife, Jack and Melissa

Property purchase in Super by finance expert and wife, Jack and Melissa

To make a property purchase in super, the finance expert and wife, Jack and Melissa, after assisting his own clients to purchase in super, were ready to do it themselves.

  1. WHERE it was at – Jack and Melissa had over $130,000 each in super and to purchase property around $600,000 to $800,000, there was a good chance they could get finance to assist, based on the lender criteria at the moment. They had stable salary and business income as well.
  2. WANT to have – The goal was to self-fund retirement, with enough to be comfortable, to allow the chance to live without struggle and afford holidays, but keep administration low and simplify the process.
  3. COST of that lifestyle Estimated in today’s values, the annual income aimed for at retirement they wanted, would be at least $80,000. That would be well over the $62,000 (Dec 2019) reported by ASFA definition of “Comfortable”, where “comfortable” enables “…an older, healthy retiree to be involved in a broad range of leisure and recreational activities and1 to have a good standard of living through the purchase of such things as: household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel.”
  4. NEEDhow much you need invested to cover the income requiredTo be safe, if a conservative investment return of 5% is used, (one 20th of 100%) this means at least 20 times the income goal – which rounds to approx. $1,600,000 of income-producing assets other than the family home. There was also the need of administration assistance as they did not fancy doing themselves!
  5. NOW what to do After researching and talking to several services, they met with Paul the Administration Manager of SuperBenefit who supplied a detailed list of what would be included in the service. Once the structure of the bank and investments was clearly mapped out to ensure all components involved were covered, it was a simple matter to start organising the collection of documents required and have the accounts processed.

What was liked best of all – that the SuperBenefit Programme made it easy – SuperBenefit manages compliance from the annual documents, storage of records electronically and additionally, has a CONNECT-ASSIST service which provides co-ordination as well as help – with who to talk to for advice and any other help besides the financial advisor.

There was other value in our property investment specialists and private-client share broker, if required.

There is also peace of mind because any queries or compliance issues, could simply be given to the SuperBenefit administrator, who would CONNECT them to the right advisors as required (Connect/Assist Service)

The advisors had put these components in place –

Strategyto take control of the retirement plan, and build their super

Structure use an SMSF and the SuperBenefit Programme administration

Support with resources and all compliance taken care of by SuperBenefit, as well as a team of specialist professionals that the SMSF Connect/Assist service provides, working with the client advisors in unison.

NoteThis is a simplified summary of one client – it is not to be taken as advice, as your specific circumstances are not considered – we recommend asking for a consultation and/or seeking further professional advice with our recommended advisors or your own advisor.

(There are 5 easy steps to planning anything – start where you are at, decide what lifestyle you want to have, what that lifestyle state or position will cost in money (to maintain the living costs) what you need invested to meet that cost of having what you want, and what action we need to take now to get there. Here is how it works with one of our clients.. )

(Get the FREE Resource: 5 Easy Steps to Plan your Retirement).

If you have any questions, why not give us a call – it’s FREE! No obligation. 0407 361 596, Paul

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MASTERCLASS Investment – How to understand company reports – Part 1

MASTERCLASS Investment – How to understand company reports – Part 1

How to understand company reports – Part 1

All companies in Australia must report at least twice Annually – for a small business, the minimum is annually with the Financial Reports, and larger companies such as listed on stock exchanges, will also supply Director Reports on the company activities and future plans and prospects as well as an auditor report.

Financial reports or statements are crucial for tracking the financial health of a business. They are also important in setting goals, making sound business decisions and obtaining finance.

Financial Statements

The Financial Statements represent a formal record of the financial activities of an entity. These reports  quantify the financial strength, performance and liquidity of a company. Financial Statements reflect the financial effects of business transactions and events on the entity.

There are 3 key main financial reports that are supplied – Profit and Loss, Balance Sheet, Cash Flow Statement. For small business, often just the first 2 are generated.

Profit and Loss or Income Statement – reports the Income (revenue) for the period, the Cost of Sales (stock at cost before sold), where the net of these two is the Gross Profit. Then the Expenses or overheads such as rent, wages, advertising etc, and deducted from the Gross Profit, gives the Net Profit or Earnings (often also called EBIT – Earnings Before Income Tax). Read More.

Balance Sheet or Financial Position reports the Assets and Liabilities and Equity of the company. The Assets are what is owned, such as cash, plant and equipment, debtors (clients who owe the company. The Liabilities are what the company owes to others, such as suppliers on account (creditors), loans, tax and super for employees. Assets less Liabilities gives Equity or what the business is worth. Read More.

Cash Flow Statement the Cash Flow Statement, presents the movement in cash and bank balances over a period. The movement in cash flows is split into the following segments:

  • Operating Activities: Represents the cash flow from primary/main activities of a business.
  • Investing Activities: Represents cash flow from the purchase and sale of assets other than inventories (e.g. purchase of a factory plant)
  • Financing Activities: Represents cash flow generated or spent on raising and repaying share capital and debt together with the payments of interest and dividends.

Other statement reports may also be supplied with bigger companies, such as Statement of change in Equity. Read More.

Understanding financial reports

The financial reports, including the audit report, are a source of information about the company. Financial reports are used by a wide variety of people to evaluate an company’s financial position, performance and changes during the financial year. Financial Reports help to make better informed decisions in their investment with the company.

You don’t have to be an accountant to understand financial data. Take some time to look at your company’s financial statements. Start with simple questions:

1 Is the company consistently profitable or does it swing between profits and losses over years?
To find out, we look at the income statements.
2 Do the company’s operations generate surplus cash each year? Does the surplus cash cover the cost of renewing plant and equipment and making new investments?
We check the statement of cash flows.
3 How much does the company borrow to support its operations? What percentage of the total assets of the company is made up of borrowed money?
We find answers from the balance sheet.

In the next posts we look into the detail of what each statement says and how they are constructed.

Want to learn the core issues of share investing?

See our slides SMSF & Shares Overview to get a quick session where you can learn to easily understand Company Financial Statements, how to find healthy companies, what Tools and Ratios to use, work on examples, and also includes how to get better investment outcomes.

If you have questions, call 0407 361 596

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Pensions Centrelink – New year – 5 Easy Steps to Plan Retirement

Pensions Centrelink – New year – 5 Easy Steps to Plan Retirement

Centrelink – New year – 5 Easy Steps to Plan Retirement

You may have heardStudies show that most people spend more time planning the next holiday than ever spent on preparing for retirement – but it is not hard at all!

Consider if you are a –

  • Woman and want to retire at the age of 65, then you need to plan to be living the life of a retired lady for, on average, nearly 22 years – possibly as long as your time in the workforce, or time spent rearing children
  • Man, life expectancy is closer to 20 years at age 65. (Sourced from AIHW)

5 Steps to Plan for Retirement

  1. Where you are – What you own, what debts to repay – home loan credit cards, car loans, what you can save (and put extra into super instead of all savings taxed at top marginal rate).
  2. Want to have – The vision – What type of lifestyle do you want in retirement? An overseas holiday every 5 years, regular local holidays, to dine out, to run mobile phone and internet.
  3. What it will cost –  Rule of thumb is that you are likely to require between 60 and 80 per cent of your pre-retirement income to lead the active life that you’re probably expecting in retirement. But you can also calculate your cost of living – simply record and categorise all your spending for 2 months – total food, fuel, dinners out, movies, presents/gifts, insurances (monthly or use the annual amount divide by 12) etc.
  4. What you need – Using the ASFA examples of cost of living, assuming you own your own home, cost could be over $44,000 a year (or just over $60,000 per couple) for a comfortable lifestyle
  5. What to do NOW – Calculate where/how that money will be derived – (Centrelink will assess your assets and income). Or plan to have enough invested and saved. – For $45,000 at a conservative 5% return you require $900,000, in assets that return $45,000 eg rental with 5% NET return after expenses.

My 5 Actions to take in the next 5 weeks

    ________________________________________________________________________

     ________________________________________________________________________

Get your FREE 5 Easy Steps to Plan Retirement One-Page planner from the Resources

What are your thoughts? Start or continue the conversation here!

Got questions? If you want experts who have years of helping others, without the hype –  then call for a FREE strategy session today

No obligation call 0407 361 596, Paul

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Basics about Super

  1. Basics about Super

    Basics about Super

    Superannuation Guarantee (SG) – All Employers must pay at least the value of 9.5% (currently, see ATO for changes in future) of your wages/salary (not FROM your pay, but another expense of the employer) to your member account in a super fund (including a self-managed super fund). This is a compulsory legal requirement under superannuation guarantee (SG) laws, usually for any employee earning over $450 per month and over 18 years old. These are known as Concessional Contributions (the employer gets a tax concession/deduction as a business expense). (Formerly Deductible Contributions)

  2. Choice of fund –except for employment agreements and some industrial awards, you can choose the super fund you want your employer to pay super into. Even a Self-Managed Super Fund (SMSF) if you have one. If you don’t choose your super fund, your employer chooses for you.
  3. Salary Sacrifice – This is when you tell your employer to deduct some money BEFORE TAX from your pay and send that to your super fund along with the SG they need to pay for you. This is also called a Concessional Contribution.
  4. Save Tax on Concessional Contributions – Your employer’s compulsory SG contributions and any before-tax contributions (Salary Sacrifice) that you choose to make are both taxed at a maximum rate of 15 per cent on entry to the super fund. Compare a person earning $37 000 a year – any $ earnt over this will pay over at least 32.5% on income above the $45,000 (at 2020-21 rates). Put some wage direct into super, instead of taking it home, she/he will only pay 15% tax.
  5. Tax rate on investment earnings. Earnings on your super fund’s investment income is also taxed at no more than 15 per cent.

Interested to know what self-managed super (SMSF) is all about, and if it is for you?

See the slides SMSF Roadmap Overview.

If you want experts who have years of helping others, without the hype – then call for a FREE strategy session today and see how our Super-Connector Service assists you to find the right expert to answer your question – it’s FREE also! No obligation.

0407 361 596, Paul.

Also get your FREE Expert Guide – Self-Managed Super and Youtop right hand side above.

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Masterclass SMSF – Use super to buy a house or other property in super

Masterclass SMSF – Use super to buy a house or other property in super

Use super to buy a house or other property in super

The legislation for Self-Managed Super Fund (SMSF) allows for borrowing to acquire properties when specific criteria are met, but it is stringent and harsh penalties are given if you get it wrong.

There are 2 main ways self managed super funds are buying property.

  1. Outright – If there is enough money to cover the purchase price and legals and costs by the SMSF, there is no special structure and the property can be owed directly.
  2. Borrowing – a special structure (Custodian) is required where the property title must be held in a Custodian or Bare trust whose trustee must be different to the SMSF trustee.

The borrowing must be non-recourse, that is, the lender has no recourse for compensation (should the loan be defaulted or called in) to any other assets or money in the SMSF. The only security is the property asset itself (but the truth is they get the trustees or directors to sign Guarantees! Be aware). A Custodian/Bare trust is a trust where the title holder, holds the property for a specified beneficial owner in this case the SMSF trustee, and has NO other role. Then the SMSF trustee is the operator of the property and receives the rent and meets the expenses as if it was the title holder.

What is involved in setting up the gearing structure that is accepted by both the banks and the regulator (auditor!)?

  1. Step-byStep Property in SMSF

The summary –

  • 1-3 SMSF, Strategy ready –           To complete and sign
  • 4 – Finance Pre-Approval –           Broker to advise
  • 5-7 Custodian Structure –             To complete
  • 8 – Qld SA NT (not apply VIC) –    Sign at correct time
  • 9-15 Purchase Property –              When you find one

A typical borrowing by an SMSF has the following steps and the order of these steps is important to minimise any difficulties in completing the transaction.

The steps are as follows:

  1. Determine (often with the help of the fund’s accountant or financial planner) that borrowing would be an appropriate strategy to leverage investment
  2. Check the SMSF trust deed to ensure trustee has power to borrow, grant security and allow assets to be held by custodians/nominees for the trustee (if not, amend the trust deed)
  3. Check the SMSF investment strategy to ensure it allows for the acquisition of the investment asset and permits borrowing for that purpose (if not, amend the investment strategy)
  4. Investigate borrowing arrangements with the lender including in-principle loan approval
  5. Determine who is to be the custodian – if a new company, purchase the new company
  6. Custodian (Property Company) resolves in writing (Custodian/Bare Trust DEED) to act as custodian for the super fund trustee in the purchase of the asset
  7. SMSF trustee resolves in writing to purchase the asset and to appoint the custodian to act for the super fund trustee as bare trustee of the bare trust
  8. Sign the bare trust deed (Qld, SA, NT need to sign BEFORE the Contract)
  9. Source the asset for purchase, negotiate the price and reach agreement with the vendor
  10. Signing of the purchase contract by the Custodian/Bare Trustee is Purchaser (note: not SMSF trustee) eg Custodian Company required by most lenders
  11. SMSF trustee provides all the deposit money for the purchase (should come directly from the super fund’s account) – if the deposit initially comes from the pocket of the SMSF trustee, then this deposit amount should be paid into the SMSF as a superannuation contribution within several weeks and notation made to that effect in the SMSF’s records
  12. Custodian and SMSF trustee sign the bare trust deed (NSW, ACT, VIC, TAS, WA)
  13. SMSF trustee signs all loan documents with the lender (note: SMSF trustee is the Borrower)
  14. Purchase of the asset is completed using only money coming from the SMSF’s account or from the loan by the lender
  15. The bare trust deed is submitted to the Office of State Revenue for payment of stamp duty (if required by applicable State) – Conveyancer
  16. When the loan is eventually repaid the asset can be transferred from the custodian to the super fund trustee for no stamp duty provided the bare trust deed has been stamped already.

 Want to know the options and how property works in SMSF? See our FREE slides SMSF & Property Overview

 Call for FREE education, or to speak to an advisor about your specific situation. SuperBenefit works with SMSF trustees to CONNECT them with the advisors they need. A call is FREE.

If you have any questions, why not give us a call – it’s FREE!

No obligation. 0407 361 596, Paul

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NEWS – Satisfaction with SMSF increases over commercial funds, with Public Funds highest level

NEWS – Satisfaction with SMSF increases over commercial funds, with Public Funds highest level

NEWS – Satisfaction with SMSF increases over commercial funds, with Public Funds highest level

Consumer satisfaction with superannuation has risen for the first time since the start of the COVID-19 pandemic with SMSF members reporting the highest increase in the levels of satisfaction, according to ongoing Roy Morgan surveys.

The research firm stated as part of its Superannuation Satisfaction Report the overall satisfaction rating for superannuation was 61 per cent in October, increasing marginally by 0.6 per cent since September but down 3.1 per cent from October 2019.

The SMSF sector had the largest increase in satisfaction of 1.5 per cent to 65.3 per cent leading industry funds (62.5 per cent) and retail funds (53.6 per cent), however they still remain well below the levels for October 2019 of 75.7 per cent and have the largest year-on-year decline of any sector.

Public sector funds retained the highest level of customer satisfaction for the fifth month in a row, at 71.5 per cent following an increase of 1.3 per cent

Roy Morgan chief executive Michele Levine said the monthly uptick was the first month-on-month increase since the COVID-19 pandemic and may represent a change in attitude after the worst months of pandemic.

Satisfaction with the financial performance of superannuation funds increased across all four sectors in October – the first time this has happened since COVID-19 hit Australia earlier this year. Overall satisfaction with superannuation funds was at 61 per cent in October 20, an increase of 0.6 percentage points from September 20, although still down a significant 3.1 percentage points on a year ago,” Levine said.

“In further positive news the latest APRA figures on superannuation withdrawal requests show fewer than half of the initial 3.4 million applications for a withdrawal in the period to 30 June 2020 have followed up with a second application for a withdrawal since then. A total of $35.3 billion has now been disbursed under the scheme but less than 10 per cent of that money has been paid out since the end of August,” she added.

The report’s findings are from the Roy Morgan Single Source consumer survey which used in-depth interviews with more than 14,000 Australians during the May to October period.

Source – SMSmagazine.com.au

What are your Thoughts? Comment below!

SuperBenefit works with SMSF trustees to CONNECT them with the advisors they need for a better result. A call is FREE.

If you have any questions, why not give us a call – it’s FREE! No obligation.

0407 361 596, Paul

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MASTERCLASS Investment – Christmas Rally on the Stock Market?

MASTERCLASS Investment – Christmas Rally on the Stock Market?

Christmas Rally on the Stock Market?

The Christmas  Santa Claus Rally – what is it?

While the stock market will move and react depending on various factors, there can be trends at certain periods.

In the run-up to Christmas, stock market share prices have a tendency to rise in Australia and USA. You may have heard this referred to as the Santa Claus or Christmas rally.

Santa Claus Christmas rally is a calendar effect that involves a rise in stock prices during the last 5 trading days in December and the first 2 trading days in the following January. According to the 2019 Stock Trader’s Almanac, the stock market has risen 1.3% on average during the 7 trading days in question since both 1950 and 1969. Over the 7 trading days in question, stock prices have historically risen 76% of the time, which is far more than the average performance over a 7-day period.

However, in the weeks prior to Christmas, stock prices have not gone up more than at other times of the year.

The Santa Claus rally was first recorded by Yale Hirsch in his Stock Trader’s Almanac in 1972.

The Dow Jones Industrial Average has performed better in years following holiday seasons in which the Santa Claus rally does not materialize. (Wikipedia)

What possible reasons mean share prices often rise in the weeks before Christmas?

We’re told the phenomenon is driven by positive sentiment as people embrace the Christmas spirit. Or that our consumer-focused economies and share markets get a welcome boost from all the holiday shopping. Or that institutional investors move to settle their books before tuning out for a few weeks.

It is possibly all three of these factors work together to have a positive impact on ASX share prices.

Australia – ASX

Not that there’s any guarantee share prices will go up in December. But taking a look back at the past five years, the Santa Claus rally occurred on the All Ordinaries Index (ASX: XAO) 80% of the time.

Here are the rounded gains and losses for the All Ords in the three (or so) weeks before Christmas since 2015:

  • 2015 gained 1%
  • 2016 gained 3%
  • 2017 gained 2%
  • 2018 lost 1%
  • 2019 gained 2%

(Fool.com.au)

USA – S&P 500

And since the USA market has an influence on other world markets, it’s good to learn what trends happen there, especially at the Christmas period.

December historically is one of the strongest months for the stock market, with the S&P 500 posting average gains of 1.3% since 1928, according to Yardeni Research. There’s often a late-year boost around the Christmas holiday that’s been dubbed the Santa Claus rally.

SP 500 Index

Want to learn the core issues of share investing?

See our slides SMSF & Shares Overview to get a quick session where you can learn to easily understand Company Financial Statements, how to find healthy companies, what Tools and Ratios to use, work on examples, and also includes how to get better investment outcomes.

Posted in Investing - Stock Fundamentals, Masterclass Investment, SMSF Investing | Tagged , , , , , , , | Leave a comment

Pensions Centrelink – Planning to get Age Pension Australia – What to consider

Pensions Centrelink – Planning to get Age Pension Australia – What to consider

Pensions Centrelink – Planning to get Age Pension Australia – What to consider

Here is a quick overview planning to get Age Pension in Australia, and how to determine if you are eligible.

What your Age Pension Age is

You need to be the qualifying age or older to get Age Pension. We call this your Age Pension age. We use your birthdate to determine your Age Pension age.

How Age Pension age increases

Age Pension age has been slowly increasing from 65 to 67 years. It’ll increase by 6 months every 2 years until Age Pension age is 67 on 1 July 2023.

Read more about Age Pension age requirements on the Department of Social Services website.

Age for Pension rising 2019-2023On the day you claim Age Pension generally you must be an Australian resident and in Australia.

See more –

Eligible Tests –

Services Australia use both income and assets tests to work out how much Age Pension you get. There are different rates of Age Pension payments for single people and couples. The Department of Social Services regularly review and adjust these rates to reflect changes in the Consumer Price Index

Residency, or What if I’ve lived outside Australia?

You usually need to be an Australian resident for 10 years to claim Age Pension. But international social security agreementscan help you meet the minimum period you need to be eligible. They may also let you claim Age Pension when you’re living in another country.

What supporting documents do I need to give?

We need supporting documents to confirm information you give us in your claim. Getting your documents ready will make it easier for you to claim and will help us assess your claim faster.

Before or when you submit your claim, you must give us documents that show your:

  • Age and identity;
  • Bank account details;
  • Tax file number;
  • Australian residence, if you’ve lived outside Australia;
  • Relationship status;
  • Income and assets.

Someone to help you apply – Nominee

If you have a correspondence nominee, they can do the following for you:

  • Complete and sign forms;
  • Complete all or part of the online claim;
  • Come to appointments;
  • Upload documents online.

Find out how to make a nominee arrangement.

What are the next steps?

You should:

A full list of all Age Pension info is here.

Get our FREE Expert Guide – Self-Managed Super and You – it has all the info you need to know, with bonus TIPS and CHECKLISTS  to determine if SMSF is for you and what steps are needed to set up. It also gives you ALL the Aust Tax Office publications about SMSF. Get your copy now – click “FREE Download” top right hand side above.

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Basics about Super – Super and Tax Australia

Basics about Super – Super and Tax Australia

Super and Tax Australia

Super and tax in Australia has some benefits such as reduced tax or no tax.

There are 2 main stages with super –

  1. Contribution / accumulation
  2. Withdrawal at pension age or death

How much tax you pay on your super contributions and withdrawals depends on:

  • Your total super amount
  • Your age
  • The type of contribution or withdrawal you make
  • If you inherit someone’s super after they die, the person’s super fund pays you a super death benefit. You may have to pay tax on some of this benefit.

Because everyone’s situation is different, it’s always best to get advice about tax matters.

Contributions and Tax

Contributing to super can happen in several ways

  1. Employer – Money paid into your super account by your employer, known as concessional is taxed at 15%
  2. Salary-sacrificed – also known as concessional contributions, taxed at 15%
  3. LISTO – If you earn $37,000 or less, the tax is paid back into your super account through the low-income super tax offset (LISTO), tax FREE
  4. Division 293 Tax – If your income and super contributions combined are more than $250,000, you pay Division 293 tax, an extra 15% on top of the 15% already paid
  5. After-tax income contributions — known as non-concessional contributions, tax FREE.

See tax on contributions on the ATO website for more information about how much tax you’ll pay on super contributions.

Also note – To avoid paying extra tax on your super, make sure you give your super fund your Tax File Number.

Withdrawals and Tax

The amount of tax you pay depends on whether you withdraw your super as:

  • A super income stream, or
  • A lump sum withdrawal
  • Inherited super from someone who died (super death benefit).

Each financial situation is unique, especially when it comes to tax. Make an informed decision, and we recommend you get financial advice before you decide to withdraw your super.

Super income stream

A super income stream is when you withdraw your money as small regular payments over a long period of time.

If you’re aged 60 or over, this income is usually tax-free.

If you’re under 60, you may pay tax on your super income stream.

Lump sum withdrawals

If you’re aged 60 or over and withdraw a lump sum:

  • You don’t pay any tax when you withdraw from a taxed super fund;
  • You may pay tax if you withdraw from an untaxed super fund, such as a public sector fund.

If you’re under age 60 and withdraw a lump sum:

  • You don’t pay tax if you withdraw up to the ‘low rate threshold’, currently $205,000;
  • If you withdraw an amount above the low rate threshold, you pay 17% tax (including the Medicare levy) or your marginal tax rate, whichever is lower.

If you have not yet reached your preservation age:

  • You pay 22% (including the Medicare levy) or your marginal tax rate, whichever is lower.

See the super lump sum tax table on the ATO website for more detailed information.

Inherited – When someone dies

When someone dies, their super is usually paid to their beneficiary. This is called a super death benefit.

If you’re a beneficiary, the amount of tax you pay on a death benefit depends on:

  • The tax-free and taxable components of the super;
  • Whether you’re a dependent for tax purposes;
  • Whether you take the benefit as an income stream or a lump sum.

See super death benefits on the ATO website for detailed information.

If you want experts who have years of helping others, without the hype – then call for a FREE strategy session today

and see how our Super-Connector Service assists you to  find the right expert to answer your question – it’s FREE also!

No obligation. 0407 361 596, Paul

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Masterclass SMSF – Downsizer Contribution ATO Rules to top up Super

Masterclass SMSF – Downsizer Contribution ATO Rules to top up Super

Downsizer Contribution ATO Rules to top up Super

In the 2017 federal budget a new allowance for a new type of superannuation downsizer contribution for individuals looking to downsize their principal residence. Michael Hallinan at smsmagazine.com.au explains some of the rules around these new contributions as a means to top up your super for the tax-reduced benefits.

The downsizer contributions proposal was announced in the May 2017 budget to address the housing affordability crisis. The policy justification for downsizer contributions is to remove a hurdle for older taxpayers from selling their current homes for smaller homes, thereby freeing up the housing market by increasing supply.

The legislation to implement downsizer contributions has now been introduced in bill form: namely Schedule 2 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No 1) Bill 2017. This bill was introduced into Parliament on 7 September 2017.

In broad terms, the proposal is that from 1 July 2018 a taxpayer can apply up to $300,000 of the capital proceeds from the disposal of their principal residence as a superannuation contribution for themselves or for their spouse. The contribution will only qualify as a downsizer contribution if the beneficiary of the contribution is aged 65 or over at the time the contribution is made. This contribution will be considered as a non-concessional contribution (NCC).

The contribution can be made despite the beneficiary of the contribution not satisfying the age work test and despite having no or insufficient NCC cap space.

However, downsizer contributions will form part of the total superannuation balance of the beneficiary and will also be counted for the purposes of the transfer balance cap of the beneficiary if and when the downsizer contribution is used to commence an income stream. Consequently, downsizer contributions will have a similar treatment to capital gains tax (CGT) NCCs.

In order to make a downsizer contribution, the taxpayer must dispose of a property that satisfies two requirements.

The first is that there must be a disposal of an ownership interest in relation to the property, which must have been continuously held for 10 years or more prior to its disposal.

The other requirement is that the interest relates to property that must have had the benefit of Division 118 treatment (in whole or in part) or would have been entitled to Division 118 treatment but for the fact the property is a pre-CGT asset. In order to satisfy the second requirement, the property must have a dwelling that was used as the principal place of residence (PPR) of the taxpayer.

Read some great detailed examples such as selling an investment property that was a former PPR.

Also see our slides SMSF Roadmap Overview.

If you want experts who have years of helping others, without the hype – then call for a FREE strategy session today and see how our Super-Connector Service assists you to find the right expert to answer your question – it’s FREE also!

No obligation. 0407 361 596, Paul.

Also get your FREE Expert Guide – Self-Managed Super and YouTop right hand side above. 

SuperBenefit works with SMSF trustees to CONNECT them with the advisors they need. A call is FREE

If you have any questions, why not give us a call – it’s FREE!

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