Super guarantee amnesty ends on 7th September

Super guarantee amnesty ends on 7th September

Don’t wait until it is too late. This is the final call for all employers to apply for the super guarantee amnesty before tougher penalties apply. Note there are no extensions available.

As reported in March, the long-awaited superannuation guarantee amnesty bill passed both houses and received royal assent. This super guarantee amnesty provides for a one-off amnesty to encourage employers to self-correct historical super guarantee non-compliance dating from 1 July 1992 to 31 March 2018.

Note payment plans are available if you want to apply but don’t have the funds to pay right now. Additionally, any amnesty payments made before 7th September 2020 are tax-deductible.

If you need assistance, please get in touch with the team at PrimeAccounting on 02 9415 1511 or email reception@primeadvisory.com.au.

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Binding Death Benefit Nominations

Binding Death Benefit Nominations

by Stephen Lynch, Somerville Legal

Just as it is desirable to maximise your wealth during your lifetime, it is important to ensure that in the event of your death your assets pass to the people you wish to benefit. For most people, superannuation is one of the most significant assets they have, and ensuring that it is paid to the appropriate people is a critical element of estate planning.

One of the most common mistakes people make is thinking that their superannuation is automatically an estate asset, and therefore covered by their will. In fact, superannuation is a separate type of asset that is held by the superannuation fund and paid out by the trustee of the fund upon the death of the member of the fund.

In fact, in most cases, it is the trustee, and not the member, which decides who gets the member’s superannuation death benefits, and in what proportions.

For most people, the only way to ensure they, and not the trustee, control whom their superannuation death benefits pass to upon death, is to make a binding death benefit nomination (“BDBN”), which is a specific form which directs the trustee how to pay the member’s superannuation upon death.

The advantages of having a BDBN in place include the following:-

  1. Control
    Just as having a will is important to ensure that your assets are distributed according to your wishes, most people would rather decide who should get their superannuation if they should die. Most super funds’ rules state that unless there is a BDBN in place, the trustee has complete discretion as to whom to pay the person’s superannuation, as long as the recipient is a dependant of the deceased member(such as a spouse, or child including adult child, of the member) or the member’s Legal Personal Representative (ie their estate).If you want to make the decision as to payment of your super, rather than leaving it to the trustee to decide, a BDBN is critical.
  1. Certainty
    For many people, it is not just that they don’t want the trustee of the super fund to decide who gets the person’s superannuation – it is that they have specific intentions about how all of their estate is to be distributed. For example, they may want a spouse to get the super, but the children to get the non-super assets. A BDBN allows the peace of mind that your wishes will be followed in relation to your super. This allows you to make other decisions, such as gifts during your lifetime that will even up the ledger.
  1. Flexibility
    According to the Commonwealth superannuation laws, superannuation death benefits can only be paid to a person’s dependants (such as spouse or children), or estate. If you want your super to pass to someone else, such as your parents, a sibling or a charity, you will need to have a BDBN directing the trustee to pay your super to your estate. Your will can then stipulate that the proceeds are to pass to the intended beneficiary.Or, if you want your superannuation to be held for the benefit of your children, but do not want them to have control until a later age – say, 27 – having a BDBN in favour of your estate and a will that establishes testamentary trusts for your children may be the answer.Without a BDBN, your will may contain very specific provisions as to how your superannuation is to be distributed, only for the trustee to bypass your estate altogether in which case the terms of your will would not apply.
  1. Speed of payment
    When a person dies, the executor of their will would in most cases need to obtain a grant of probate of the estate from the Supreme Court. Although probate is usually a relatively simple process, there can sometimes be delays in obtaining probate, for example due to a dispute over the terms of the will, or delays in obtaining the details about each asset that need to be disclosed to the Court. If there is a BDBN in place that directs the trustee to pay the superannuation to one or more dependants (ie not to the estate), the trustee may be willing to pay out the superannuation before probate is granted.Without a BDBN, even if the trustee was inclined to pay the superannuation to the deceased member’s dependants, the trustee may await probate so as to obtain the executor’s consent to the trustee bypassing the estate.Similarly, if there were no BDBN there may be competing claims from dependants (eg the deceased’s spouse vs his or her children from an earlier marriage). Before making a determination, the trustee would in all likelihood need each claimant to provide a substantial amount of information and would take some time to go over that information before making its decision. Such delays may be avoided if a BDBN is in place.
  1. Self managed super funds and BDBNs
    If a person has a self managed super fund (“SMSF”), there are several factors which will influence who would control that SMSF upon the person’s death. Without a BDBN, whomever controls the SMSF may have the same discretion to decide how the super will be paid. If that person is a dependant, they could exercise that discretion in favour of themselves to the exclusion of their other family members, regardless of the wishes of the deceased. There have been several instances where this has occurred, with devastating results for family relationships.Of course, a BDBN may not be the best way forward in your particular circumstances. There are some circumstances where flexibility is more important than control. In all cases, the decision as to whether or not a BDBN is appropriate for you should be made only after seeking the advice of your financial adviser and estate planning solicitor.

Beware the non-binding death benefit nomination
Many people believe they have a binding death benefit nomination in place, when in fact their nomination is a non-binding nomination. A non-binding nomination indicates your preference to the trustee, but the trustee is not bound to follow it.

If your nomination as to whom is to receive your superannuation death benefits was made by simply ‘ticking a box’ when you fill out your application for membership of the super fund, and was not done by way of a separate form with adult witnesses, then in all likelihood your death benefit nomination is non-binding rather than a BDBN.

There have been many cases where the trustee has acted contrary to the wishes set out in the deceased member’s non-binding nomination. Accordingly, non-binding nominations should be treated with extreme caution, and advice sought from your financial adviser and estate planning solicitor.

Beware the lapsing period of BDBNS
Many BDBNs will lapse after three years, after which they cease to be binding on the trustee. Others are called non-lapsing nominations and will remain in place until revoked. Be careful to ensure you know whether or not your BDBN needs to be renewed every three years.

At the end of the day, superannuation represents a significant part of most people’s wealth, and careful consideration needs to be given as to whom their superannuation may be paid to in the event of their death and whether they have any specific wishes as to how it is to be paid. A BDBN is a critical tool for many people in ensuring their superannuation is properly dealt with upon their death, and should be carefully considered after obtaining specialist advice.

If you need assistance please get in touch with one of our advisors on 02 9415 1511 or email reception@primeadvisory.com.au.

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New financial year = new super rules.

New financial year = new super rules.

This new 2020/21 financial year sees two main changes to superannuation with pending legislation that may include additional changes that will apply this financial year.  This financial year will see the termination of the work test for individuals 66 and 67 who wish to make personal non-concessional contributions and see an extension of spouse contributions to those aged between 70 to 75 years. Note, we are currently awaiting legislation that will allow for access to the ‘bring forward’ rules.

Termination of the work test for individuals 66 and 67 years old
From 1 July 2020, those under the age of 67 years can make personal contributions without needing to satisfy a work test. In the financial year a person reaches the age of 67, personal contributions can be made prior to reaching 67 years old.

Extension of spouse contributions to those 70 to 75 years old
Until 30 June 2020, it was only possible to make spouse contributions up until the age of 70 years. Between the ages of 65 and 70 years, the spouse was required to meet the work test of 40 hours in 30 consecutive days for the year in which the contribution was made. However, from 1 July 2020 this has now been extended to apply to spouse contributions made between the age of 67 years, and 28 days in the month after the spouse reaches 75 years old, which puts it in line with other personal superannuation contributions. The work test must be met prior to the spouse contributions being made to the fund.

If you would like to know how these new changes apply to you, please get in touch with our team by phone 02 9415 1511 or email reception@primeadvisory.com.au.

 

This strategy is not for everyone and has been provided as general information only and prepared without taking into account your financial position, objectives, and needs. You should consider its appropriateness and seek financial advice before making any financial decisions.

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SMSF information regarding tenancies in your property & COVID-19

SMSF information regarding tenancies in your property & COVID-19

The economic impacts of the COVID-19 crisis are causing significant financial distress for many businesses and individuals.

If your SMSF has a property and a tenant in financial distress, you may be able to provide your tenant with rental relief under an agreed commercial arrangement. This may even be the case when the tenant is a related party or yourself.

Ordinarily, charging a tenant a price that is less than market value in an SMSF is usually a breach of superannuation laws. However, the ATO have provided guidance which allows SMSF landlords to provide for a reduction in or waiver of rent because of the financial impacts of the COVID-19.

For the 2019–20 and 2020–21 financial years, the ATO will not take action where an SMSF gives a tenant – who may also be a related party – a temporary rent reduction during this period.

What do you need to do?

There are some important things you should ensure are in place when you are providing a rent reduction to a tenant, especially when this is a related party.

  • Ensure the relief only applies to rent.
    • Any relief offered to a tenant can only relate to the rent component of the lease agreement. The ATO concession does not extend to other lease incentives.
  • Ensure that the reduction in rent is only temporary.
    • This means it should have an agreed period of time or agreed date where the rent is reviewed in light of the economic circumstances.
  • The financial difficulty faced by the tenant is linked to the financial impacts of COVID-19.
    • Any negotiated rent relief will need to be measured against the COVID-19 financial impact suffered by your tenant.
  • Clear arrangements which detail the amount of discount, waiver or deferral of the rent.
    • In evidencing that the rent relief is reasonable, it would be best practice if it is consistent with an approach taken by an arm’s length landlord.
  • Ensure you have proper documentation which allows your independent auditor to be satisfied that the temporary rent relief satisfies all of the above.
    • This may take the form of a signed minute, renewed lease agreement or anything deemed appropriate to amend the terms of the lease temporarily.
    • Even if you are both the tenant and landlord, the above should all be documented.

These are extraordinary times and the ATO is providing this guidance to allow SMSF trustees to be flexible and agile.

If trustees act in good faith in implementing a reasonable and measured reduction in rent because of the impacts of COVID-19 they should not fall foul of the law.

How can we help?

If you need assistance providing rental relief or whether this is the right action for you and your specific circumstances, please feel free to give us a call 02 9415 1511, and we can discuss in further detail.

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The super guarantee charge (SGC).

The super guarantee charge (SGC).

All you need to know about the super guarantee charge and how to ensure compliance and avoid penalties.

What is the SGC? Super Guarantee Charge

To explain this simply the super guarantee is a compulsory amount that an employer must pay into their employee’s chosen super fund as part of their employment conditions. The employer has 28 days after the end of each quarter to make this payment.   If the employer fails to pay the employee’s super by the due date, then this is when the Super Guarantee Charge is applied.

The SGC is a charge incurred if you don’t pay the minimum amount for your employee into the correct fund by the due date. The charge is non tax-deductible and calculated to include the following;

  • Super guarantee (including any choice liability)
  • Interest on the above amounts (currently 10%)
  • An administration fee of $20 per employee, per quarter

You must report and rectify any missed payment and lodge an SGC statement by the due date and pay the SGC to the Australian Tax Office (ATO).

If you pay your super guarantee late, you may be able to use the late payment rules either to offset the SGC or to carry forward the amount as a pre-payment of a future contribution for the same employee. However, you must still lodge an SGC statement and pay the balance of the SGC to the ATO.

Please note the following dates;

Super Guarantee reporting and payment due dates;

Quarter Period SG Reporting & Payment Date to the Employee’s Super Fund
1 1 July – 30 September 28 October
2 1 October – 31 December 28 January
3 1 January – 31 March 28 April
4 1 April – 30 June 28 July

If you don’t pay the minimum amount by the above reporting and payment dates you will need to adhere to the SGC schedule lodgement and payment due dates as below;

Quarter Period SGC Payment & Lodgement with the ATO by the following dates
1 1 July – 30 September 28 November
2 1 October – 31 December 28 February
3 1 January – 31 March 28 May
4 1 April – 30 June 28 August

With the implementation of data matching, single touch payroll and generally the ATO being more active in this area noncompliance will be easier for the ATO to discover.

For more on the above please click here or get in touch with your PrimeAccountant on 02 9415 1511 or email reception@primeadvisory.com.au

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