THE EXCEPTIONAL TOPDOCS SMSF DEED SMSF CHANGES OVER TIME

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1 Superannuation in Australia has been undergoing a constantly evolving process. Some industry participants suggest that change needs to cease, as it tends to undermine confidence in Australia s Retirement Income System. Others contend that the evolution must continue, because of a range of reasons such as the changing nature of the Australian population, world investment trends and the introduction of new strategies. At Topdocs, our SMSF Trust Deed continues to evolve for the same reasons - we regularly explore ways to improve the document, ensuring that it remains one of the most popular and effective SMSF Trust Deeds available. The table below, detailing segments of the history of change of Superannuation in Australia, indicates why the Exceptional Topdocs SMSF Trust Deed has continually evolved - sometimes to lead change, and sometimes to reflect changes made by Government. Whilst records indicate the establishment of the first superannuation fund in Australia was in 1842, we will not go back that far. The last 50 years, from the 1960s to date, cover most change in Australia s Retirement Income System. YEARS 2013 Pension and tax following death of a member CHANGE Proposed legislation deeming an income stream as continuing for a period of time after the death of the recipient. Superannuation Guarantee contributions Maximum age of 70 for SG contributions removed from 1 July Dealing with related parties 2012 SMSF investment Strategy Insurance in SMSFs 2011 Deductibility of TPD Premiums Collectables and Personal Use Assets Contribution rates increase from 1 July Proposed changes to rules regarding acquisition of assets from, and disposal of assets to, related parties. Change to SIS Regulations to require Investment Strategy to be reviewed regularly and for trustees to consider insurance for members. Proposed limit to types of insurance able to be held on behalf of members Full deduction for any occupation, partial for own occupation - does Trust Deed relate only to own occupation? Changes to rules for ownership of Collectables and Personal Use Assets by SMSFs.

2 2010 Stronger Super SMSF Borrowing 2009 Cooper Review Limit on Concessional Contributions Announced following completion of Cooper Review. Changes to legislation. Now referred to as Limited Recourse Borrowing Arrangement. A review into the governance, efficiency, structure and operation of Australia s superannuation system announced. Reduced from $50,000 to $25,000 if under 50 years of age for 2009/10 and later years. Limit on Non-Concessional Contributions Changed to 6 times the limit for under 50 years of age Concessional Contributions (e.g. 6 x $25,000 = $150,000). Ordinary Time Earnings Pre 1999 Unit Trusts 2008 Henry Review Removal of Same-Sex Discrimination Expanded definition for Superannuation Guarantee purposes. Ability to acquire units through re-investment of distributions or otherwise, without becoming in-house assets, ceased. Review into Australia s Future Tax System announced. Includes Superannuation Acts & Regulations. Further Relief for Late Payment of SG Contributions. Temporary Residents Benefits If permanently departed Australia for 6 months, unclaimed benefits to be paid to ATO Simpler Super/Better Super Commenced 1 July Contributions Splitting Limited to Concessional Contributions. Non-Concessional Contributions no longer able to be split between Spouses. Tax on Benefits No tax on benefits paid to individuals over age 60 - part of Simpler Super. Transferring Super Transferring between Funds made easier. Pensions and Annuities New Minimum Standards as part of Simpler Super.

3 Account Based Pensions Transition to Retirement Income Streams Market Linked Pensions Introduced - Deeds must be updated to permit payment. Changed from Transition to Retirement Pensions - Deeds must be updated to permit payment. Only able to commence in SMSFs from 20 September 2007 if rolled over from another Complying Pension. Allocated Pensions Unable to commence from 20 September Pension Reversionary Beneficiaries Compulsory Cashing of Benefits Contributions Caps Excess Contributions Tax Employer Contribution Limits Employer Termination Payments Superannuation Balance Components Proportioning of Benefits Government Co-Contribution Terminal Illness Changes to eligibility to receive a Reversionary Pension. Removed as part of Simpler Super. Trust Deeds need to reflect ability to retain benefits within the Fund. Introduced as part of Simpler Super. Penalty for exceeding Contributions Caps. Removed as part of Simpler Super. Changes to Taxation treatment. Streamlined as part of Simpler Super. Calculation of Tax Free Component comprising pre 1983 amount and other redundant Components. Extended to Self-Employed. Tax Free Benefits able to be paid to those with a Terminal Illness. Income Tax Assessment Acts Most operating Superannuation Tax Law changed from ITAA 1936 to ITAA Superannuation Death Benefits Transfers from Overseas Superannuation Funds SMSF Borrowing 2006 Contributions Splitting Changes to tax treatment if paid to Non-Dependants. Changes to treatment. Generally included under Non-Concessional Contributions Cap. SMSFs able to borrow under Instalment Warrant Arrangement. SG and other Contributions able to be split between Spouses - Trust Deed must permit.

4 Simpler Super announced Most changes to be effective from 1 July Limit on Undeducted Contributions $1m limit introduced for Undeducted Contributions made between 9 May 2006 and 1 July Introduction of Late Payment offset. Reasonable Benefits Limits RBLs abolished as part of Simpler Super. Contribution Terminology Taxable and Undeducted replaced by Concessional and Non-Concessional Contributions Superannuation Surcharge Abolished from 1 July Choice of Super Ability for employees to elect Superannuation Fund to receive SG contributions. Transition to Retirement Commencement of Transition to Retirement Pensions for Members who have reached Preservation Age. Defined Benefit Pensions Restrictions on payment by SMSFs Superannuation Surcharge Maximum rate reduced from 12.5% to 10%. Superannuation Portability Regulations changed to allow greater portability of balances between Funds. Interdependency Introduced as a category of Dependant. Work Test Ceased for Members under age 65. Market Linked Pensions Minimum Member Benefits Compulsory Cashing of Benefits Introduced as a Complying Pension. Minimum Member Benefit rules strengthened. Compulsory Cashing rules relaxed. Contribution and Acceptance Rules Changes to Contribution and Benefit Payment Rules for Members over age 65. Binding Death Benefit Nominations Non-Lapsing BDBNs permitted.

5 Estate Planning More people able to retain wealth in Superannuation until death Superannuation Surcharge Maximum rate reduced from 15% to 12.5%. Government Co-Contribution Introduced to benefit low to middle income earners, who make Personal (Undeducted) Contributions to Super Financial Services Reform Act introduced Superannuation Contributions Child Contributions Family Law Superannuation Splitting Temporary Residents Departing Australia Product Disclosure Statements 2001 Internal Rollovers of Superannuation Pensions 1999 Self Managed Superannuation Funds SMSF Regulator Lost Members Register Preservation of Benefits Moved to quarterly payment of SG contributions. FSR Act, designed to be a single licensing and disclosure approach for all financial services, including Superannuation. Maximum age for Superannuation contributions increased from 70 to 75, provided working at least 10 hours per week. Parents, grandparents and friends able to contribute to Superannuation on behalf of children. Superannuation balances able to be split between spouses in the event of marriage breakdown. Rate reaches 9% at completion of phase-in. If permanently departing Australia, able to withdraw benefits before reaching Preservation Age. PDSs introduced in regards to Superannuation. Treated as ETPs and taken into account for RBL purposes. SIS Act amended to introduce SMSFs - previously Excluded Funds. Moved from APRA to ATO. Established by ATO. All Contributions and Earnings after 1 July 1999 are Preserved until a Condition of Release is met.

6 In-House Asset Rules Acquisition of Asset Rules Binding Death Benefit Nominations SMSF Trustee Rules Expanded to include related party transactions, grandfathered some investments. Expanded to prohibit acquisition from related parties, unless exempted. BDBNs introduced. Other than for Single Member Funds, all Members must be Trustees and all Trustees must be Members. SMSF Trust Deeds Needed to be updated to reflect change of Regulator and Trustee structure, to ensure concessional tax treatment Australian Prudential Regulation Authority APRA - Established as lead Superannuation Regulator. Australian Securities and Investments Commission ASIC - Significant role in Regulation of Superannuation. Insurance and Superannuation Commission Ceased to exist. Age Pension Means Test Means Test for Retirement Income Streams revised. Lifetime Expectancy Complying Pensions Introduced as a Benefit Payment option Maximum age for SG contributions increased from 65 to 70. Access on Compassionate Grounds Added as a Condition of Release to allow payment of Benefits to a Member on Compassionate Grounds. Severe Financial Hardship Added as a Condition of Release to allow payment of Benefits to a Member in Severe Financial Hardship. Retirement Savings Accounts RSAs introduced. Spouses as Members Accepting spouse as Member and for Contributions. Capital Gains Tax CGT Retirement Exemption introduced, allowing up to $500,000 as a Contribution CGT free from sale of Active Assets Superannuation Surcharge Penalty tax of up to an additional rate of 15% introduced (from 1 July 1997). Lifetime Complying Pensions Introduced as a Benefit Payment option.

7 1994 Superannuation Industry (Supervision) Regulations Superannuation Industry (Supervision) Act 1993 Super Fund Trust Deeds 1992 Allocated Pensions 1988 Reasonable Benefits Limits Taxation of Superannuation Pension Rebate Anti-Detriment Provisions 1987 Insurance and Superannuation Commission Occupational Superannuation Standards Act /20 Investment Rule Abolished SIS Regs introduced in support of the SIS Act. SIS Act introduced. Many of the OSSA provisions transferred to SIS Act. Needed to be updated to reflect the change of Governing Act. SG contributions introduced from 1 July 1992, commencing at the rate of 3% of salary. Introduced as an alternative to Defined Benefit Pensions. RBLs introduced with tax impacts for benefits accessed in excess of set levels. Government introduces tax on contributions and earnings. Reduces tax on benefits withdrawn to zero on amounts up to a threshold and 15% up to RBL. Introduced 15% tax rebate on pension payments to compensate for tax on contributions and earnings. Introduced to ensure that the after-tax amounts of Superannuation Benefits will not be diminished as a result of the taxation of contributions to complying superannuation funds. ISC established as Industry Regulator. OSSA prescribed Operating Standards for Superannuation Benefits.

8 Taxation of Benefits 1960s 30/20 Investment Rule Tax on Lump Sum Benefits increased to encourage taking Retirement Benefits as Income Streams. Pre 1983 balances grandfathered. Super Funds exempt from tax so long as 30% of investments are held in Government Bonds, with 20% of the 30% being in Commonwealth Government Bonds. More information Should you have any queries or require more information, please contact the team at Topdocs on