Superannuation the current state of play

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1 Superannuation the current state of play Matthew Bartemucci Ernst & Young Matthew Bartemucci 2009 Disclaimer: The material and opinions in this paper are those of the author and not those of the Taxation Institute of Australia. The Taxation Institute of Australia did not review the contents of this presentation and does not have any view as to its accuracy. The material and opinions in the paper should not be used or treated as professional advice and readers should rely on their own enquiries in making any decisions concerning their own interests. 1

2 Session Outline In recent years we have seen a significant amount of change in the area of superannuation which has provided both opportunities and pitfalls for everyone. This session will cover important ATO guidance provided in respect to superannuation and in particular Self Managed Superannuation Funds. SMSFR 2009/D1 - Scope & Operation of 17A(3)(b)(ii) of SIS Enduring Power of Attorney qualifies as a legal personal representative Appropriate steps need to occur: The legal personal representative must be appointed as a trustee or director The member must also resign as a trustee or director 2

3 The ruling also states the following: The legal personal representative performs duties pursuant to their appointment and not as attorney for the member As a trustee of a SMSF or director the legal personal representative is subjected to Civil and criminal penalties for any breaches of their duties. SMSFR 2009/1 Business Real Property Business Real Property means: Any freehold or leasehold interests Where used wholly or exclusively in one or more businesses 3

4 Ruling provides 2 basic conditions that are required to be satisfied: SMSF holds an eligible interest in real property; and The underlying land must satisfy the business use test (wholly & exclusively in one or more businesses) Both must be met. SMSFR 2009/2 Meaning of Borrow Money and Maintain an Existing Borrowing of Money Provides that a Borrowing should exhibit the following characteristics Temporary transfer of money Obligation or intention to repay 4

5 SMSFR 2009/3 Application of SIS to Unpaid Present Entitlements (UPE) Considers the following in respect to UPE s: The in-house asset rules The arms length rules The sole purpose test In-house asset rules: A loan to a related party? An investment in a related party? Arms length rule: Dealings to be at arms length Sole purpose test Is the SMSF carried on for the required purpose? 5

6 SMSFR 2009/4 Definitions for In-house assets Explains the core concepts in the definition of in-house asset of a SMSF under SIS rules. Terms covered are: Asset Loan Investment in Lease or lease arrangement TR 2009/D3 Superannuation Contributions and Timing of Contributions Provides guidance on the following: How a contribution can be made When a contribution is made 6

7 How a superannuation contribution can be made: Money & money equivalent Transfer of assets Settlement of a liability on behalf of the SMSF Loan forgiven by the SMSF Distribution from trustee of a discretionary trust A rolled-over superannuation benefit When a superannuation contribution can be made: Money & money equivalent When received by the fund Transfer of assets Legal or beneficial ownership passes Settlement of a liability on SMSF s behalf On payment Loan forgiven by the SMSF On deed of release Distribution from discretionary trust On distribution A rolled-over superannuation benefit On rollover 7

8 ATO Interpretative Decisions ATOID 2009/29 Return of Contribution after 30 Days Requirement for a Trustee of a SMSF to return a contribution when not a valid contribution In this case the contribution was found to not be a valid contribution after 30 days Trustee is still required to return this contribution ATO Interpretative Decisions ATOID 2009/92 Losses Realised by Complying SMSF on disposal of Shares Trustee claiming a deduction under s8-1 for a capital loss made on revenue account s states that the s8-1 provisions do not apply to a CGT event in a Superannuation Fund Shares do not fall within any of the exemptions in s (3) (b). 8

9 Practice Statement PSLA 2009/5 What SMSF Advice and Guidance will the ATO Provide The practice statement outlines: The forms of SMSF advice and guidance the ATO provides The weight that will be given to any advice or guidance provided Further information about procedures for developing and issuing advice and guidance to SMSF s Wrap-Up Superannuation and in particular SMSF are growing at a fast pace therefore the ATO and Government for are increasing their presence in this area via guidance statements, ATO reviews, ATO audits and changes to the rules governing superannuation. Therefore it is imperative that we are continuing to monitor guidance and changes in superannuation. 9