Day 1 Superannuation Schools WHAT S NEW FOR SMSFs Key warning areas in the ATO s regulation of SMSFs...2

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1 Contents Topic Page No. WHAT S NEW FOR SMSFs Key warning areas in the ATO s regulation of SMSFs Legal ownership of SMSF assets Illegal access to preserved benefits SMSF status and trustee registration checks Deductions for superannuation contributions new ATO guidelines When a deduction can be claimed broad conditions and other restrictions The eligible person test Overriding exception the 10% rule Complying with the notice requirements in S.82AAT The superannuation co-contribution burning issues and the latest developments New co-contribution amounts from the 2005 income year Co-contribution extended to those individuals without employer superannuation support Self-employed or substantially self-employed taxpayers who make personal superannuation contributions Interest on late payments of co-contributions Maximising the co-contribution for individuals Claiming superannuation contributions for an associate new ATO guidelines What was the ATO s traditional view? Ryan s case challenging the ATO s traditional view ATO s new position on superannuation contributions for associates TD 2004/D Accessing superannuation benefits without retiring new condition of release What is the new condition of release? What are the income streams that can be accessed? What are the implications for SMSF deeds? Changes to superannuation guarantee Relief from double payment of SG contributions Salary paid after termination of employment New rules for taxing lump sum payments from overseas super funds How lump sum payments from overseas super funds are taxed in Australia S.27CAA New labels for recording lump sum payments from overseas super funds 2005 Fund Return...28 National Tax & Accountants Association Ltd: September October 2005 i

2 8. Paying SMSF expenses which are treated as superannuation contributions MT 2005/ ATO ruling restores deduction for employers and self- employed persons who pay SMSF expenses Additional tax consequences of the ATO s approach New life expectancy tables 1 January What are the new life expectancy tables? Superannuation thresholds/limits for SETTING UP AN SMSF Basic steps in establishing an SMSF Clauses in the trust deed of an SMSF Becoming a complying SMSFs Regulated superannuation funds Complying with the regulatory provisions Trustee issues for SMSFs...43 Common questions associated with trustees and SMSFs How will recent changes impact on an SMSF s deed? Government co-contributions Contribution rules Accessing benefits from an SMSF Family Law and divorce Spouse splitting of superannuation Estate planning flexibility (binding death benefit nominations) Market linked and growth pensions Defined benefit pensions...49 A GUIDE TO RUNNING AN SMSF Introduction Accepting contributions paid into an SMSF What is a contribution for Part 7 purposes? The concept of mandated/non-mandated contributions and a member s age Members who are under 65 years of age Members aged 65 years or more but under Members aged 70 years or more but under Members aged 75 years or more The concept of gainfully employed What is the tax treatment of contributions to an SMSF?...60 ii National Tax & Accountants Association Ltd: September October 2005

3 2. Classifying benefits into different categories the preservation rules Classifying a member s benefits before 1 July Classifying a member s benefits from 1 July Preservation worksheets for recording benefits Applying the cashing rules for paying out a member s benefits Compulsory cashing of a member s benefits Voluntary cashing of a member s benefits Paying lump sum ETPs from an SMSF ETPs paid during a member s lifetime ETPs paid on a member s death Other obligations for SMSF trustees...81 ATO ATTACKS SMSF INVESTMENTS...85 Introduction Which investments will the ATO target? Investing in accordance with the sole purpose test Core purposes Ancillary purposes How is the sole purpose test applied in practice? Common questions associated with the sole purpose test and SMSF investments Pitfalls with undertaking related party investments What assets can SMSFs acquire from a related party? Dangers with SMSFs acquiring assets as tenants-in-common with a related party Problems with SMSFs owning primary production land CGT trap for SMSFs attempting to claim the active asset concessions Introduction ATO issued ATO ID 2004/ What does all this mean? New market valuation rules for valuing SMSF assets Introduction How is market value determined? What documentation is required to verify a valuation? National Tax & Accountants Association Ltd: September October 2005 iii

4 A GUIDE TO ALLOCATED PENSIONS AND MARKET LINKED PENSIONS What is an Allocated Pension? Definition of an Allocated Pension Reg 1.06(4) Advantages of an Allocated Pension Disadvantages of an Allocated Pension What is a Market Linked Pension? Definition of a Market Linked Pension Reg 1.06(8) Advantages of a Market Linked Pension Disadvantages of a Market Linked Pension Choosing between an Allocated Pension and a Market Linked Pension Comparing the key features of an AP and an MLP Factors to consider in making the right choice Establishing an Allocated Pension Procedures to set-up an Allocated Pension Post establishment issues making AP payments and dealing with commutations of an AP Establishing a Market Linked pension What happens on the death of the member? Paying a reversionary pension on death Paying a new pension on death Paying a death benefit ETP Disposing of SMSF assets to pay a death benefit ETP the CGT trap! HOW TO AUDIT AN SMSF AND GET IT RIGHT Introduction Who can perform an audit of an SMSF? Latest developments on auditor independence How will the ATO enforce auditor independence? Common questions with auditor independence Planning for an SMSF audit What is the scope of the audit? What should be in the engagement letter? Planning memorandum Issues associated with the planning memorandum Maintenance of a permanent file iv National Tax & Accountants Association Ltd: September October 2005

5 4. How to perform financial audits on SMSFs Contributions received by the fund Investments/assets of the fund Benefits paid by the fund General expenses of an SMSF Other considerations Performing compliance audits on an SMSF Does the fund satisfy the definition of an SMSF? Has the fund been operated pursuant to the sole purpose test? Has an investment strategy been prepared & implemented? Have the investment restrictions been adhered to? Have the contribution and benefit payment standards been satisfied? Have the administrative and documentation requirements been satisfied? The whistle blower provisions Introduction When is an auditor meant to prepare an Auditor/Actuary Contravention report? What are the tax return disclosure requirements? What happens once a material breach is identified? What happens with immaterial breaches? Can approved auditors be penalised for failing to discharge their responsibilities? Finalising an SMSF audit The representation letter Independent audit report General reporting requirements Management letter Notes National Tax & Accountants Association Ltd: September October 2005 v