WA SMSF Symposium

1. WA SMSF Symposium

2. AGENDA Day 1 Agenda • Establishing & Winding up a SMSF • Contribution Strategies • Accessing SMSF Benefits • SMSF Estate Planning Day 2 Agenda • xxx

3. Establishing & Winding up a SMSF Shirley SchaeferDirector BDO Advisory (SA) Pty Ltd

4. SETTING UP A SMSF Definition of SMSF

5. SETTING UP A SMSF Definition of SMSF • Less than 5 members • Sole purpose – the provision of retirement benefits • All trustees must be members (all members must be trustees) • No remuneration for trustee services

6. SETTING UP A SMSF • SMSF Trust Deed • On line providers vs solicitors • Trustee • Corporate vs Individuals • Resident Regulated Fund • Central management & control in Australia • Non residents are not active

7. SETTING UP A SMSF Why SMSFs are set up • Control • Business structures • Cost? ADVICE?

8. SETTING UP A SMSF 6 member funds • Legislation drafted • Not supported by the Labor Government

9. SETTING UP A SMSF 6 member funds - administration

10. SETTING UP A SMSF 6 member funds - investment

11. SETTING UP A SMSF 6 member funds – benefit payments

12. Current ato activity

13. COMPLIANCE PROGRAM ATO current compliance risk focus areas: • Illegal early release (IER) and promoters • Non-lodgement • Regulatory contraventions • Top 100 SMSFs and tax planning • Top 100 auditors • High risk auditors Our aim is to promote trust and confidence and encourage willing participation

14. SMSF ILLEGAL EARLY RELEASE AND PROMOTERS In FY2018 the ATO disqualified 257 trustees who were trustees of 169 funds • 70% of these cases were for IER of funds and loans to members This financial year of 12,211 new SMSFs: • 10% of new registrants were reviewed – IER focus • 123 Funds had their registration withheld from Super Fund Look Up • 329 Newly registered SMSFs had their registration cancelled 1/3 of reviews resulted in action $45m in super was protected

15. SMSF ILLEGAL EARLY RELEASE AND PROMOTERS Common drivers for illegal early release: • Individuals have a desire to access money due to: • Financial stress, or • A desire to spend on a present day benefit • Individuals know little or nothing about setting up or running a SMSF are targeted by unscrupulous promoters The ATO work jointly with ASIC and share of information in relation to mattes that come to their attention, such as organisations or persons who encourage the establishment of an SMSF as the vehicle to invest in their products inappropriately.

16. SMSF NON-LODGEMENT STRATEGY Non lodgement is a risk flag • Early difficulties are symptomatic of ongoing difficulties • Lapsed lodgement occurs when administrative or regulatory issues arise • First time never lodgers high risk of IER A trustee’s most fundamental obligation is to lodge their SMSF’s annual return after their records have been independently audited.

17. SMSF NON-LODGEMENT STRATEGY In 2017 the ATO commenced their non-lodgement program which focuses on: • Lapsed lodgers (includes first year non-lodgers) • Never lodgers (includes new SMSFs)

18. SMSF NON-LODGEMENT STRATEGY – NON-LODGERS New SMSFs – First-year never-lodgers So far this year the ATO have: • Identified over 6,500 SMSFs • There SMSFs registered in 2017 and their first return was due 28 Feb 2018 • If they have had a rollover asking them to lodge • If no rollover asking them to cancel their registration as the fund is not operating

19. SMSF NON-LODGEMENT STRATEGY – NON-LODGERS First-year non-lodgers So far this year the ATO have: • Identified 26,000 SMSFs who have not lodged their 2017 SAR • This population had previous good lodgement history • Contracting all non-lodgers for FY17 • Advising them that if they don’t meet their regulatory obligation to lodge: • Compliance status at risk • SMSF will be removed from SFLU, and • If they are not able to lodge due to a problem, encouraged to use our SMSF early lodgement and voluntary disclosure service

20. SMSF NON-LODGEMENT STRATEGY – NON-LODGERS Approximately 30,000 SMSFs who have NEVER lodged: • Over 50% appear to have a rollover from an APRA fund • Remainder have not had a rollover • There is an increasing trend over the past 5 years • Average rollover increased over the past 5 years from $78k to $140k in FY17 • Average age of members is 36 • Currently reviewing SMSFs where we know there has been a rollover to determine if the fund is operating or if IER • For those who have not rolled over, asking them to cancel their registration as the fund is not operating

21. SMSF TOP 100 & TAX PLANNING ARRANGEMENTS The ATO risk profiled all the top 100 SMSFs representing $7.9b of assets • 35% warrant a closer look into: • Use of LRBAs • Reported contraventions • Rapid and excessive asset growth rates • Non arm’s length arrangements • Previously identified risks The ATO will escalate an SMSF for review where there are transactions requiring formal investigation

22. WINDING UP A SMSF When to Exit? • No balance/members left • SMSF size • No longer suits • Relationship breakdown • Age/capacity • Surviving spouse When to Exit? • Time • SIS – disqualified trustees • ATO enforceable undertaking • DBPS solvency issue • Residency • “Skeletons in the closet”

23. WINDING UP A SMSF How to exit? • Pay benefits - need to meet a condition of release • Rollover to an APRA regulated fund • Retail, Industry, Government or Corporate fund • Small APRA Fund (SAF) Implications • Sale of Assets (liquidity) vs transfer of assets • Fund tax payable • Capital gains tax (if assets sold & fund not in pension phase) • Stamp duty

24. WINDING UP A SMSF Small APRA Fund (SAF) • Approved/Regulated trustee appointed • Generally still member directed • Will accept most assets (if complying)

25. WINDING UP A SMSF Small APRA Fund (SAF)

26. WINDING UP A SMSF Small APRA Fund (SAF)

27. WINDING UP A SMSF Death • Check trust deed for specific instructions • Who becomes trustee/s? • Who are benefits paid to? • Dependants? • How are benefits to be paid? • BDBNs?

28. WINDING UP A SMSF Divorce • How does the fund operate – decision making? • Super is a family law property asset • Family court orders/agreements • Multiple members

29. Winding up a SMSF Divorce – What can go wrong • Members try to DIY • No court approved financial agreement • Members cannot agree, not talking to each other • Wont sign off on financial statements • One member accesses super • A ‘grab’ for assets

30. WINDING UP A SMSF Dementia (incapacity) • How is loss of capacity determined? • Is there an Enduring Power of Attorney (EPOA)? • EPOA must • consent to act • be appointed • complete all forms

31. WINDING UP A SMSF Disqualification • A Trustee is disqualified: • Bankrupt • Civil penalty order under SIS • Convicted of an offence involving dishonesty • ATO determination

32. Winding up a SMSF Disqualification • If you cannot be a trustee – you cannot be a member of a SMSF • Must exit the SMSF system • Cannot appoint LPR or EPOA to act • Cannot act as a trustee (but can undertake administrative functions) • Have 6 months to remove benefits from the SMSF

33. WINDING UP A SMSF Disqualified Trustees - checklist

34. WINDING UP A SMSF Departure • For tax concessions must be a resident regulated fund • Be established in Aust or have an asset in Aust • Active member test • Central management & control

35. WINDING UP A SMSF Residency • Active member test • 50% of active members balances must be held Aust resident • Active members = contributions or rollover; or • No Active Members • Central Management & Control must be in Aust • Formulating investment strategy • Reviewing performance • Determining how assets used

36. WINDING UP A SMSF

37. WINDING UP A SMSF

38. WINDING UP A SMSF

39. Contributions Strategies Shirley SchaeferDirector BDO Advisory (SA) Pty Ltd

40. CONTRIBUTIONS TO SUPER Total Super Balance (TSB) • All accumulation balances • All retirement phase balances • Rollovers in transit • Measured as the amount on voluntary exit from super • Net market value of assets • After costs to sell & taxes

41. CONTRIBUTIONS TO SUPER This is the balance per the financial statements – total member balances At Market Value Total Super Balance (TSB)

42. CONTRIBUTIONS TO SUPER For TSB reporting purposes At Net Market Value (less costs & taxes) Total can be different to total at “S” Total Super Balance (TSB)

43. CONTRIBUTIONS TO SUPER Total Super Balance (TSB)

44. CONTRIBUTIONS TO SUPER Concessional Contributions • Contributions that are included in the taxable income of the superannuation fund • Generally, the payer has received a tax deduction for making the contribution • Employer contributions • Superannuation guarantee contributions (SG) • Salary sacrifice contributions

45. CONTRIBUTIONS TO SUPER SG - maximum superannuation contributions • Employers are only required to provide SG support to a maximum amount per employee

46. CONTRIBUTIONS TO SUPER Concessional Contributions - personal • Personal concessional contributions • NAT 71121 • Notice of intent to claim tax deduction • Confirmation by super fund that notice has been received • NOI must be received/dated prior to commencement of pension or a rollover with the relevant contributions

47. Personal Concessional Contributions CONTRIBUTIONS TO SUPER NAT 71121 received 30/9 Pension commenced 1 July

48. Concessional Contribution Limits CONTRIBUTIONS TO SUPER • *Indexed in accordance with AWOTE, in $2,500 increments

49. From 1 July 2017 - The cap of $25,000 includes: Super Guarantee (9.5%) & salary sacrifice amounts Personal concessional contributions Defined benefit fund contributions (notional) Contributions to constitutionally protected funds This is a significant change – previously did not count towards the caps CONTRIBUTIONS TO SUPER

50. CONTRIBUTIONS TO SUPER Constitutionally Protected Funds • Will now count towards CC cap • Will not result in an excess concessional contribution in that fund • But may result in cause excess contribution if there are contributions to other funds • Note: full amount of contribution counts for Div 293 purposes