Rolling over death benefit income streams

Transcription

1 IOOF TechConnect Technical bulletin: Winter 2015 Rolling over death benefit income streams 1 Refund of excess non-concessional contributions 3 In-house assets versus related party investments 7 Need to know: the latest changes that may affect your clients 8 Rolling over death benefit income streams By Julie Steed, Senior Technical Services Manager A dependant cannot receive a lump sum death benefit and elect to roll it into their super account. Only superannuation member benefits may be rolled over. However, it is a common misconception that a client can instantly roll over their deceased spouse s super or income stream to another fund or back to the accumulation phase of the same fund. Prescribed period When the spouse receives a death benefit pension, they can only elect to rollover the income stream outside the prescribed period. Generally, the prescribed period is the latter of: six months after date of death, or three months after grant of probate or letters of administration. The prescribed period may be extended if there have been delays in making the benefit payment due to legal action, identifying dependants or if the tax commissioner determines that a longer time period may apply. If a death benefit is rolled over outside of the prescribed period, it will no longer be treated as a super death benefit. It will be a life benefit and tax concessions may be lost. Why is the prescribed period important? Super death planning can be limited by the contribution rules and caps. In most instances, the deceased client s account balance will be retained within super and a death benefit income stream will be created by: using an existing super account balance continuing an existing pension as a reversionary beneficiary, or commencing a new pension from an existing pension. Regardless of the initial barriers to rollover a death benefit income stream, the prescribed period continues to remain relevant to a spouse who is under age 60 who has elected to have a death benefit income stream. If the spouse decides to receive a lump sum commutation outside the prescribed period, the payment will be treated as a super member benefit and will be taxed at standard tax rates (ie up to 20 per cent (plus Medicare levy) on the taxable component if under age 55). This is regardless of the age of the deceased spouse at the time of death as explained on the next page. 1

2 Tax consequences It is common for the surviving spouse to change product providers following the death of their spouse. However, this action can only take place outside of the prescribed period and this delay needs to be anticipated. It is important to consider the taxation impacts of rolling over a death benefit income stream for the surviving spouse who is under age 60. The pension payments paid to the surviving spouse from the death benefit income stream will be tax-free if the deceased was over age 60 at the date of death. The simple action of rolling over to another fund could result in a tax-free income stream being re-classified: as taxable pension payments less the 15 per cent tax offset for a surviving spouse aged 55 to 59, or as taxable pension payments with no 15 per cent tax offset for a surviving spouse under age 55. This is because the surviving spouse is commencing an income with unrestricted non preserved money. Case study 1 Arthur has a 70 per cent tax-free and 30 per cent taxable pension in his SMSF but unfortunately dies on 1 August. The pension reverts to his widow Martha. Martha is considering winding up the SMSF by rolling over the death benefit pension to Pursuit within the prescribed period. However, a death benefit pension cannot be rolled over within the prescribed period. Martha can take a tax free lump sum commutation within the prescribed period and then wind up the SMSF. But, to get into the superannuation system an eligible contribution has to be made subject to contribution caps and preservation rules. Martha can decide to wind up the SMSF by rolling over the death benefit pension to Pursuit outside the prescribed period because she is a spouse a child cannot rollover a death benefit pension. The benefit will be a life benefit with 70 per cent tax-free component and 30 per cent taxable component. Depending on Martha s age the following tax applies: If Martha is over age 60, the new pension will be tax free. If Martha is aged 55 to 59 the taxable component of the pension will be taxed at Martha s marginal tax rate and she will receive a tax offset of 15 per cent of the taxable component. If Martha is under age 55 the taxable component of the pension will be taxed at Martha s marginal tax rate there is no tax offset. Case study 2 Arthur has a 100 per cent taxable component accumulation account in his SMSF but unfortunately Arthur dies on 1 August. His widow Martha seeks financial advice and elects to take a tax free lump sum and the balance of the benefit as an income stream. Martha is considering winding up the SMSF by rolling over the death benefit pension to Pursuit within the prescribed period. However, a death benefit pension cannot be rolled over within the prescribed period. Martha can take a tax free lump sum commutation within the prescribed period and then wind up the SMSF. But, to get into the superannuation system an eligible contribution has to be made subject to contribution caps and preservation rules. Martha can decide to wind up the SMSF by rolling over the death benefit pension to Pursuit outside the prescribed period because she is a spouse a child cannot rollover a death benefit pension. The benefit will be a life benefit with 100 per cent taxable component. Depending on her age, the following tax applies: If Martha is over age 60, the new pension will be tax free. If Martha is aged 55 to 59 the taxable component of the pension will be taxed at Martha s marginal tax rate and she will receive a tax offset of 15 per cent of the taxable component. If Martha is under age 55 the taxable component of the pension will be taxed at Martha s marginal tax rate there is no tax offset. 2

3 Refund of excess non-concessional contributions rule legislated By William Truong, Technical Services Manager Legislation was been passed to amend the treatment of excess non-concessional contributions (NCC) to make it fairer and more aligned to the treatment of excess concessional contributions. In doing so, the Government has acknowledged that the previous treatment of excess NCCs was too punitive with no recognition of inadvertent breaches. Previously, excess non-concessional contributions were subject to the top marginal tax rate, even if the excessive contributions were made inadvertently. The new rules provide clients, who breach the non-concessional cap, with the option to withdraw the excess NCC plus 85 per cent of the associated earnings amount. This treatment recognises that earnings within superannuation may already be taxed at a rate of up to 15 per cent. By making the election, the client can avoid paying excess non-concessional contributions tax. In effect, the full associated earnings amount (as calculated by the ATO), will be included in assessable income and taxed at the client s marginal tax rate. A non-refundable tax offset is available, equal to 15 per cent of the associated earnings amount. The refunded excess NCC amount is non-assessable, non-exempt income. The rule applies to non-concessional contributions made during the 2013/14 tax year and beyond. Excess contributions made in prior years are assessed under the rules applicable at that time. Note: there is no change in the calculation of excess NCC, including the bring forward rule and the ATO s discretion to disregard or reallocate NCC. Associated earnings and offset An associated earnings amount, as calculated by the Commissioner, on the excess contributions is fully included in the individual s assessable income (where the refund election is made) and is specified in the ATO determination. The associated earnings amount is calculated: starting from 1 July of the financial year the contribution is made, and ending on the day the ATO makes the first excess non-concessional determination relating to the financial year. Example 1: calculating the associated earnings amount Rob s non-concessional contributions for the 2014/15 financial year exceeded his non-concessional contributions cap by $100,000. The Commissioner issues Rob an excess non-concessional contributions determination on 1 November 2015 stating the following: 1. The amount of associated earnings stated on the determination is calculated as follows: Associated earning amount = [Excess amount x (1 + proxy rate*) ^compounding days ] excess amount = [$100,000 x ( )^489 days = $113,814] $100,000 (for the period from 1 July 2014 to 1 November 2015 = $13,814 * The proxy rate uses the average of the general interest charge (GIC) for each of the quarters of the financial year in which the excess contributions were made. This is compounded on a daily basis. For the purposes of this example, the proxy rate for the 2013/14 financial year of 9.66 per cent (or daily equivalent of per cent) has been used as the rate for the 2014/15 financial year is not yet available. The Treasurer will be able to specify an alternative proxy rate that is lower than the default rate (or indeed a zero rate) for any specified contributions year. For example, this would allow the Treasurer the option of setting a lower rate, possibly zero, where superannuation funds on average have made significant losses, such as occurred during the global financial crisis. 2. An election to have the contribution refunded is based on the total released amount, calculated as follows: Total release amount = [Excess amount + (85% x associated earnings amount)] = [$100,000 + (85% x $13,814)] = $111,741 The purpose of calculating the associated earnings amount and taxing it at the marginal tax rate is to remove any arbitrage of investing funds in super until the determination is made. Calculating associated earnings at the GIC rate (which is expected to be greater than fund earnings), is a disincentive for breaching the non-concessional contributions cap. 3

4 How will the refund mechanism work? The client will receive a determination from the Commissioner notifying them of eligibility for a refund or have their excess contribution taxed at penalty rates. The determination will include the: excess NCC amount associated earnings amount, and release amount (which comprise the excess NCC plus 85 per cent of the associated earnings amount). The client will have 60 days from the date of issue of the determination (or a further period as the Commissioner allows) to formally accept the offer by completing the approved form and returning it to the ATO. The client will still have an opportunity to advise the Commissioner that the contribution amount is incorrect and seek to have their fund re-report the contributions or to apply for discretion to disregard or reallocate excess contributions. Where the client does not accept the offer, the excess NCC penalty of 49 per cent (inclusive of Medicare and temporary deficit levy) will be levied on the excess amount. Where the client intends to accept the offer to have the non-concessional contributions refunded: The client must make an irrevocable election to have all the excess amount refunded. There is no scope for refunding part of the excess amount (as is allowable with excess concessional contributions). The ATO will issue a release authority to the superannuation fund(s) that holds an interest for the client to release the excess NCC and 85 per cent of the associated earnings amount. Clients may choose which super fund(s) to refund from. The appropriate amount must be paid by the super fund to the client within 21 days of receiving the release authority (note that refunds of excess concessional contributions must first be paid to the ATO). There is no option for the client to first pay the tax themselves and use the release authority to ask their super fund to release the money to them. Defined benefit funds do not have to release these amounts in accordance with release authorities. The Commissioner will need to adjust the client s tax return by including 100 per cent of the associated earnings amount in assessable income for the client in the year the excess contribution was made. The client will receive an amended notice of assessment. The income tax arising from that amendment will be reduced by a non-refundable tax offset equal to 15 per cent of the associated earnings amount. The tax offset recognises the tax on earnings effectively being paid by the fund on the excess NCC and ensures that double taxation does not occur. This tax offset cannot reduce Medicare levy or the temporary deficit levy. Example 2: full release During 2014/15 Roger receives a determination from the ATO that he has breached his NCC cap by $100,000 with associated earnings of $13,814. The determination states a total of $111,741 (representing $100,000 excess NCC plus 85 per cent of associated earnings of $13,814). Roger makes a valid election in an approved form to release the total release amount of $111,741 by notifying the Commissioner and specifying a superannuation fund that holds an interest for him. The Commissioner issues Roger s superannuation fund with a release authority requiring the fund to make a payment to Roger of $111,741 from his superannuation interest. That amount is paid to Roger by his superannuation provider in compliance with the release authority. The superannuation fund notifies the Commissioner and Roger of the payment of $111,741 made in accordance with the release authority. The Commissioner reassesses Roger s tax return by including the full associated earnings amount of $13,814 towards his assessable income for the 2014/15 year. The refunded excess non-concessional contribution amount is non-assessable, non-exempt income in his hands. Assuming Roger is on the top marginal tax bracket, his tax payable is summarised as: Tax on marginal rate Tax on top marginal rate Tax offset (non-refundable) Refund of excess NCC $6,769 (49%* x $13,814) No election is made n/a n/a $49,000 (49%* x $100,000) $2,072 (15% x $13,814) n/a Net tax $4,697 $49,000 * Inclusive of Medicare and temporary budget deficit levy. Nil interest determinations: in situations where the full amount cannot be released from any of the client s super funds (eg the full account balance has been withdrawn), the client could make a valid election to not release any amounts from super as the value of their super interests is nil. In that case, the ATO may then make a determination of nil interest. A nil interest determination will ensure that the full amount of associated earnings will be included in assessable income and taxed at the client s marginal tax rate (rather than top MTR) with a 15 per cent tax offset available equal to the associated earnings amount. 4

5 There may be circumstances where an individual elects to release the total release amount from superannuation but only part of the total release amount can be released if the value of the individual s superannuation interests is not nil as in the following situations: An individual who has commenced a superannuation pension or income stream, and continues to have an interest in such a pension or income stream, is not taken to have superannuation interests with a value of nil. This is regardless of whether the pension or income stream can be commuted in order to pay a lump sum. An individual who has only a defined benefit interest is also taken to have a superannuation interest with a value greater than nil, regardless of whether or not the superannuation provider can release an amount from the interest in accordance with a release authority. In these cases, the amount of associated earnings included in the client s assessable income will be calculated based on the amount of the excess contributions that are released. The client will be entitled to a tax-offset equal to 15 per cent of the amount of associated earnings included in their assessable income. Excess non-concessional contributions tax (49 per cent) will apply to the amount of the excess that cannot be released. Example 3: partial release Sam s non-concessional contributions for the 2014/15 year exceed his non-concessional cap by $100,000. On 1 November 2015, the Commissioner provides him a notice of excess non-concessional contributions determination stating his excess contributions amount of $100,000 plus associated earnings amount of $13,814 and a total release amount of $111,741 [$100,000 + (85 per cent x $13,814)]. Sam makes a valid election to release the total release amount of $111,741 by notifying the Commissioner and specifying a superannuation fund that holds interests for him. The Commissioner issues a release authority to the specified superannuation fund which holds a defined benefit interest for Sam as well as an accumulation interest. The maximum amount that can be released from the accumulation interest is $60,000. Sam has no other superannuation interest with this or any other superannuation fund. In compliance with the release authority, the superannuation fund pays the $60,000 to Sam. The fund does not have to release any amount from Sam s defined benefit interest and does not do so. The fund notifies the Commissioner and Sam of the amount released. The fund also notifies the Commissioner of the amount unable to be released and the reason the amount was unable to be released. The Commissioner notifies Sam that the full amount of the release authority issued has not been successfully released and asks Sam to either: nominate another superannuation fund for release of the unpaid amount of $51,741 ($111,741 - $60,000), being the amount of the release authority issued less the amount that was released, or elect not to release the unpaid amount because the value of his superannuation interests is now nil. As Sam has no other superannuation interests, he cannot nominate another superannuation fund and, as the value of his superannuation interests is not nil, Sam cannot make that election and notifies the Commissioner of his situation. Sam s amount of excess non-concessional contributions for the financial year is $40,000, being the excess contributions amount stated in the determination ($100,000) less the released amount ($60,000). The Commissioner issues Sam an assessment for excess non concessional contribution tax on $40,000. This amount will be taxed at the top marginal tax rate. An associated earnings amount of $8,289 1 (ie the associated earnings amount for the $60,000 of excess contributions released), is included in Sam s assessable income for the 2014/15 year. He receives a non-refundable tax-offset of $1,243 (15 per cent x associated earnings of $8,289) included in his assessable income. Note: the $8,289 of associated earnings of included in Sam s assessable income is calculated in the same way as the associated earnings amount stated in the determination, but uses the released amount instead of the amount of his excess contributions for the financial year. As a result, this amount is less than the $13,814 associated earnings originally calculated by the Commissioner. Some important points for clarification: The legislation that passed parliament has dropped the earlier draft provisions that would have required an amount withdrawn from a super fund to first be paid from the client s tax-free component. Instead, the regime in the legislation provides that the proportional rule will not apply to the amount withdrawn under a release authority in an accumulation interest. As a result, a refund under a release authority will first reduce the taxable component in an accumulation interest. Note that for release authorities from pension phase, the proportioning will still apply. So an account-based pension with 50/50 per cent tax-free and taxable components will have refunded amounts coming out from the same tax proportion as at commencement. Therefore, a client with multiple superannuation funds should consider any tax planning benefit from nominating for release the interest with the largest taxable component (subject to their other individual circumstances). 1 Associated earnings = [refunded amount of $60,000 x ( )^489 days] $60,000 5

6 Timing the client may not receive a refund of the amount until more than 12 months after the end of the financial year of the contribution. Impact: the timing may be detrimental in terms of the investment of the amount and the fund being required to release the amount if the excess was fully invested, it could have gone down in value and the fund is forced to sell assets at a low price to pay the release authority. Are there any income test impacts? The refund causes an increase in assessable income (flowing on to taxable income), which will have an impact on entitlements to a range of benefits and concessions, including: personal tax offsets family tax benefits child care benefits Centrelink and other child support agency requirements eligibility to claim personal super contributions as a tax deduction under the 10 per cent maximum earnings test, and the super co-contribution benefit. There is no self-assessment process clients who are aware that they have breached the NCC cap do not have the opportunity to make an early assessment of their breach and avoid having to pay extra associated earnings amount. To avoid incurring unnecessary earnings penalties, clients should be reminded not to delay completing their tax return, as the ATO relies on information contained in completed returns to make the excess determination. This may be more applicable to clients who rely on a tax agent or accountant to complete their tax return. Summary Changes to the rules for excess non-concessional contributions offer flexibility for clients to have their excess non-concessional contributions refunded, thereby avoiding top marginal tax rates on their excess contributions. Often the contributions which cause the breach of the cap(s) arise later in the financial year (rather than early in the year). Accordingly, the late timing of these excess contributions are unlikely to generate returns in the superannuation environment which are going to exceed the GIC rate of penalty. Whilst these rules allow refunding of excess contributions, clients are best advised to avoid breaching the cap in the first instance so they don t have to go through this process and avoid the associated earnings amount. 6

7 In-house assets versus related party investments By Kate Anderson, National Technical Services Manager Several issues need to be considered when devising an investment strategy for a self-managed super fund (SMSF). One of these issues includes the substantial distinction that can be drawn between an in-house asset and a related party investment. An in-house asset is an asset of the fund that is a loan to, and investment in or lease with, a related party of the fund. A related party investment is also an asset of the fund that is a loan to, an investment in or lease with, a related party of the fund but meets one of the exceptions of the in-house asset rules. While they seem similar, and one is in fact a subset of the other, the distinction is relevant because a fund is not permitted to invest more than 5 per cent of its capital in an in-house asset whereas no such cap applies to a related party investment. So, when is a related party investment not an in-house asset? (ie what are the exceptions to the in-house asset rules?) Some of the most commonly utilised exceptions to the in-house asset rules include: a life policy issued by a life insurance company, but not a life policy acquired from a member of the fund or a relative of a member. an investment in a pooled superannuation trust made on an arm s length basis. real property subject to a lease, or to a lease arrangement enforceable by legal proceedings, between the trustee of the fund and a related party of the fund, if throughout the term of the lease or lease arrangement, the property is business real property of the fund. an investment in a widely held unit trust. A unit trust in which the unit holders have fixed entitlements to all of the income and capital of the trust, and fewer than 20 entities between them do not have fixed entitlements to 75 per cent or more of the income or capital of the trust. property owned by the fund and a related party as tenants in-common, other than property subject to a lease or lease arrangement between the trustee of the fund and a related party. In addition, an SMSF is able to invest in a unit trust or a company without that investment being considered an in-house asset if certain conditions are met. The main conditions include, but are not limited to the unit trust or company not acquiring an asset from a related party of the fund other than business real property, do not directly or indirectly lease assets to related parties other than business real property and do not conduct a business. Case study: investment strategies and in-house asset restrictions Mr and Mrs Brown have established an SMSF in which they are the members and trustees. The fund has $70,000 in cash which, as trustees, they would like to use to purchase a one third interest in a residential property in Byron Bay used for holiday letting. As individuals, Mr and Mrs Brown will own the other two thirds interest. They will borrow money to fund their purchase but their private residence will be used as security. Mr and Mrs Brown intend to use the holiday property when it is not being rented. It will, however, be available to rent for the whole year. For the purposes of this example, what are the areas of concern you would have to consider in relation to the in-house asset restrictions? The SMSF, and Mr and Mrs Brown as trustees of the SMSF, can invest as tenants-in-common in a residential property as it falls within one of the exceptions of an in-house asset. The property would need to be bought from an unrelated party. A member, or any related party, would not be permitted to rent or reside in the property otherwise it would constitute an in-house asset. The in-house asset rule is a day-by-day test and any stay by Mr and Mrs Brown or a related party would require the trustee to include the full market value of the property as an in-house asset of the fund. If the market value exceeds the 5 per cent rule, then the trustee is in breach of the in-house asset rules. 7

8 Need to know Winter 2015 Outlined below is all the latest news you need to know. Issue What it means What do you need to be thinking about Self-managed super funds (SMSF) pension tax exemption being targeted by the ATO 56 is the new 55 Preservation ages are changing ASIC launches financial advisers register Direct shares in industry super funds NAB pulls out of SMSF LRBA Market In order for super funds to qualify for a tax exemption on earnings derived from pension assets, certain conditions must be satisfied. For example, the minimum pension payment must be paid, and the 10 per cent restrictions for transition to retirement pensions, if applicable, must not be exceeded. Other rules such as correctly valuing fund assets that underpin these pensions must also apply. If your client is not already 55, and not due to turn 55 before 1 July 2015, then their preservation age will actually commence from their 56th birthday. For example, if your client turns 55 in August 2015, their preservation age will in fact be 56. Remember though that the preservation age gradually increases in one year increments before finally reaching 60 for clients born after 30 June The new financial advisers register can be found on ASIC s Money Smart website www. moneysmart.gov.au. The register currently gives details of persons employed or authorised directly or indirectly. ASIC s next focus will be to update the register with advisers qualifications, training and professional memberships. This is intended to be on the register by May Care Super and Media Super now offer direct shares in pension phase as well as accumulation phase. This brings the number of super funds offering direct shares in both accumulation phase and pension phase to four including the QSuper and LG Super. It is rumoured that Australian Super will shortly do the same too. It is still only QSuper that allows the direct shares to be in-specied directly into pension phase. All the other funds still require the shares to be sold down before being re-purchased in pension phase. The Australian newspaper has reported that NAB has pulled out of the SMSF limited recourse borrowing market. The newspaper reported on 6 May 2015 that NAB is a relatively small player in this market. However, it will affect their broker and the bank based planners who operate in this space. Make sure your SMSF clients and their accountant understand the importance of proper administration of SMSFs particularly when it comes to paying a super pension. Many trustees fail to pay the minimum pension for the year so ensure that clients are on track otherwise the SMSF risks forgoing the tax exemption status for pension assets. When a client reaches preservation age they can access their super upon permanent retirement from the workforce or on a limited basis while still employed via a transition to retirement (TTR) income stream. So it is vital that clients expectations are set in light of what may be a later preservation age and this should be incorporated into a client s retirement planning/ttr strategy. Remember that access to the $185,000 (2014/15) low rate cap on the taxable component of super lump sum withdrawals only becomes available when a client reaches their preservation age and has unrestricted non-preserved super benefits. Increased preservation also impacts the tax rate of employment termination payments (this is generally measured by the age of the client as at 30 June of that year). You should check that your details are on the register. If you are not on the register speak with your dealer group. Those who have their own dealer group should check with ASIC directly as late fees apply from September Advisers need to be increasingly conscious of the alternatives to owning direct shares inside an SMSF. If a client is only going to hold direct shares and cash inside an SMSF and you have made that recommendation you need to be conscious that the recommendation has to be in the best interests of the client particularly given the increasing availability of other low cost options for direct share investing within super. Perhaps this is an indication of the concern that NAB has about ASIC s continued scrutiny of SMSF advice and LRBA advice. This continued scrutiny means that all advisers who provide advice in this area remain fully conscious of the compliance and technical issues that it raises. 8

9 IOOF TechConnect: Technical Winter Autumn 2015 Issue What it means What do you need to be thinking about Standard choice form changes The Public Sector Superannuation Accumulation Plan (PSSap) to charge administration fees to members Private companies owned within SMSFs implications of Taxpayer Alert 2015/1 Updated rates for 2015/16 The Government has introduced draft legislation that relieves employers from having to provide the standard choice of super fund form to temporary residents. If legislated, the law takes effect from 1 July Superannuation Guarantee contributions will however still be required but can be made direct to the employer s default fund. Note: New Zealander s are temporary residents unless they hold a permanent resident visa. Currently, the Government covers the cost of administering the PSSap scheme. In imposing these charges on members the Government hopes to save $26.8 million over four years. The new charges will take effect from 1 July This Taxpayer Alert describes arrangements where a private company with accumulated profits channels franked dividends to a SMSF instead of to the company's original shareholders. As a result, the original shareholders escape tax on the dividends while simultaneously benefiting in their capacity as members of the SMSF from the consequential franking credit refunds issued to the SMSF. New rates published for the 2015/16 year: Lifetime CGT super cap $1,395,000 Low rate cap will be $195,000 ETP cap $195,000 SGC base $50,810 Tax free redundancy amount: $9,780 + $4,891 for every completed year of service Super co-contribution limits: Full co-contribution if income is below $35,454 No contribution if income is above $50,454 Concessional and non-concessional contribution caps will be the same as for the 2014/15 year. Temporary residents could include young backpackers employed on farms. At the other end of the spectrum it could include professionals who arrive on 457 visas such as doctors, nurses and other health care professionals who are attracted here by the better pay and conditions. It is the latter whom you may come in contact with and, while they may not be given a choice form, there is nothing to prevent them getting their own standard choice form and giving it to the employer. Whilst we don t yet know what the charges will be exactly, it s important to remember that every 1 per cent pa increase in fees means 20 per cent less in actual outcome over thirty years. From time to time an SMSF client and/or an accountant may seek your opinion on whether company profits can somehow be diverted to an SMSF. While this would fundamentally constitute tax advice, you could point the client/accountant in the direction of TA 2015/1 as evidence that the ATO will scrutinise the transaction. This, in turn, may lead to the application of the anti-avoidance provisions and the cancellation of any tax benefit for the transferring shareholder and/or denying the SMSF the franking credit tax offset. If your planning involves payments or implementation of strategies in the new financial year, you will need to incorporate these new rates into your planning process. For example, even for those clients under 60 that have completely utilised their low rate cap (via previous super lump sum payments of unpreserved component since reaching preservation age), it is worth remembering that the $10,000 uplift to the low rate cap (from $185,000 in 2014/15) avails those clients of a further $10,000 in tax-free super lump sum withdrawals. An increase to the SGC base may necessitate a review of a high income earning clients SG arrangement with their employer. An increase to the ETP and redundancy thresholds may make it more appealing to defer resignation/ retirement to the following financial year. Find out more For more information on the IOOF TechConnect team or any of the IOOF AdviserConnect services, please speak to your business development or relationship manager, go to or call adviser services: For IOOF Pursuit please call For IOOF Alliances please call For IOOF Employer Super please call This document is for financial adviser use only it is not to be distributed to clients. Issued by IOOF Investment Management Limited (IIML) ABN AFSL IIML is a company within the IOOF group of companies consisting of IOOF Holdings Limited ABN and its related bodies corporate, and is not a registered Tax Agent. Examples contained in this communication are for illustrative purposes only and are based on the assumptions disclosed and the continuance of present laws and our interpretation of them. Whilst every effort has been made to ensure that this information is accurate, current and complete, neither IIML nor its related bodies corporate within the IOOF Group give any warranty of accuracy, reliability or completeness, nor accept any responsibility for any errors or omissions and shall not be liable for any loss or damage in connection with, any use of or reliance on, the information provided. INV-668