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01 May 2013 - High net worth Trustees set up special Estate Planning deeds to minimise Tax.

A specialist Legal structure has been developed to allow families to better distribute their superannuation to dependent children and minimise Estate taxes. Please call us urgently if you need to review your Estate planning because of changes in your family.

07 Apr 2013 - Superannuation changes hit the market before the budget

The government has announced a range of changes to superannuation before the budget to silence criticism from own party.

The changes are:

1. Taxing earnings in pension phase that exceed $100,000 p.a.

2. Increasing the concessional contributions cap for those over the age of 50.

3. Increase the ability to refund excess contributions contributions to reduce administration.

4. Establishing a council of Superannuations custodians.

Proposed change.From July 1, 2014 future earnings, including interest and dividends on assets supporting an income stream will be tax free up to $100,000 a year for each individual.

Likely response. SMSF members will leave some money in accumulation side to collect dividend imputation credits and transfer enough to the pension side up to the $100,000 threshold. Also, members are likely to recontribute amounts into other members accounts to balance the thresholds.

Propsed change. Change to defined benefit superannuation funds to include notional earnings of pensions.

This will include all public sector funds and give rise to additional tax to be paid by politicians and public servants. This is likely to encourage additional contributions to be paid into a low cost accumulation fund away from the employer fund.

Proposed change. Increase concessional contribution cap without indexation to $35,000 p.a. for those over 60.

The abolition of the earlier proposal to tax members superannuation balances of $500,000 with higher contribution tax. The government will tax excess contributions at the individuals marginal rate of tax plus an interest charge.

07 Nov 2012 - More people satisfied with their self managed super fund than Industry and Retail super

SMSF's boast a 64% satisfaction rate compared to 49% with Industry funds and 43% with Retail super funds.

Roy Morgan research says that the reason most people switch to a self managed super fund is because of poor performance with their current Industry Fund and the fees associated with the Retail super funds.

Self managed is better both on fees and performance.

A self managed super fund invested in the ASX 200 over the last 10 years would have outperformed all Industry funds as well as all Retail super funds according to performance figures provided by Superratings.

19 Aug 2012 - New Rules for SMSF investors borrowing to invest in residential real estate

In May 2012 the Australian Taxation Office (ATO) released SMSF Ruling SMSFR 2012/1 which outlines the key concepts that apply to limited recourse borrowing arrangements (LRBA).The key concepts outlined in the ruling include the meaning of a single acquirable as the difference between maintaining/repairing and improving an acquirable asset when changes made to a single acquirable asset result in it becoming a different (replacement) asset.

Under the LRBA provisions a trustee is permitted to use borrowings to maintain and repair but not to improve an asset. Therefore, the distinction between these activities becomes very important where the trustees will be using borrowings to fund the work.

Maintenance-Making it clearer.

The ruling confirms that the term maintenance takes on its ordinary meaning and includes work done to prevent defects, damage or deterioration of an asset, or in anticipation of future defects, damage or deterioration, provided the work merely ensures the continued functioning of the asset in its present state.

What about Repairs?

A repair ordinarily means work to remedy or make good defects in, damage to, or deterioration of an asset and contemplates the continued existence of the asset. In addition, the ruling also outlines that a repair restores the function of the asset without changing its character and may include restoration to its former appearance, form, state or condition and that it is usually occasional and partial, ie a repair would not usually involve the complete replacement of the asset.

What about drawing down on a Limited Recourse Borrowing Arrangement (LRBA)

Where a trustee draws down on an existing loan to pay for maintenance or repairs the ATO has confirmed that the existing LRBA will continue to satisfy the requirements so long as the draw downs are provided for under the LRBA.

The ruling confirms that an asset is improved if its state or function is significantly altered for the better, through substantial alterations, or the addition of further substantial features or rights.

It is a thin line between an improvement and a renovation.

Therefore, a trustee must not use borrowings to fund any alterations or additions to a property that would add substantial features, such as an additional bedroom, bathroom, pool or garage as these would all constitute an improvement.

What are the key points then?

Well, you can use borrowed money for imorovements, maintenance and repairs but you cannot use o load to renovate to add to the property.

So those budding renovators that have a superannuation balance and think that they can gear it up to renovate and profit should consider their strategy very carefully.