Week 8 Flashcards

Question

SPOUSE CONTRIBUTIONS TAX OFFSET FOR

Answer 1

Contributions may be made for contributor’s spouse until spouse reaches 65 years. ``` Low-income spouse: assessable income < $37 000; Australian residents; complying superannuation fund; and reduction where income > $37 000 up to $40 000. ``` Maximum rebate/offset $540 based on the lesser of: 18 per cent of contributions up to $3000; or $3000 – (AI – $37 000) x 18 per cent.

Answer 2

Contribution Tax - 15% on entry to fund applies to contributions for which a tax deduction has been claimed ( Concessional Contributions) i.e. employer contributions (including SG), salary sacrifice and self-employed contributions. does not apply to Non Concessional Contributions

Answer 3

Taxable income (Investment earnings etc.) of a super fund is taxed at a maximum of 15% Capital gains are taxed at 10% if the asset is held for at least 12 months ie. 2/3 of the capital gains are included within income of superannuation fund and taxed at 15% (2/3 x 15% = 10%)

Answer 4

From 1 July 1999 ALL contributions made by or on behalf of members and ALL earnings of the fund or RSA must be preserved within super. By 2025, the preservation age will have increased from 55 to 60 (those born after 30 June 1964 – benefits fully preserved until age 60)

Answer 5

reaching age 65 Preservation Age with no intention to work again TTR - Age 57, access to super in the form of a Account Based Pension, no access to lump sum, continue to work reaching age 60 and terminating employment death permanent incapacity severe financial hardship (limited access) Terminal Illness

Answer 6

Restricted Non preserved can access under previous release conditions eg. terminating current employer Unrestricted non-preserved benefits able to be cashed in at any time Preserved benefits need to satisfy a current condition of release The rules will substantially remain the same for those under age 60, BUT After age 60 – from 1 July 2007, benefits taken as a lump sum or as a pension will be exempt from income tax.

Answer 7

Effective 1st July 2017, there are now caps on how much money can be transferred from Superannuation into a Pension/Annuity. The cap is $1.6 Million for 2018/2019 tax year. This cap will be indexed in $100,000 increments over the following tax years Many people had to adjust amount in Super over the 2016/17 to 2017/18 tax year.

Answer 8

Members are to be given choice to decide the fund they want the employers contribution to go to Employers can refuse if the employees do not provide details as the name of the fund and evidence that the fund will accept the contributions If no choice made, then the employer can continue to make contributions to any complying fund. Employees can change their choice, by requesting and lodging another form. ( However the employer does not have to provide one, if an employee has received one within the previous 12 months) employer must provide employee with standard choice form.

Answer 9

Employers will not be required to provide choice where their employees are covered by : An Australian Workplace Agreement or a Certified Agreement A State Industrial Award Certain Victorian Workplace Agreements An Unfunded public sector scheme Approximately 50% of employees are likely to have the choice

Answer 10

(From April, 2005) This policy introduced changes to the access to benefits Rules. People could access benefits: If reached preservation age Purchased with superannuation money No work test – part-time or full time Access superannuation benefits while continue to work Access via a non-commutable Account Based Pension (NCAP) while working Minimum and maximum payment limits At age 65 – option to commute Once a Transition to Retirement policy is started, any earnings on funds invested in superannuation, there will be a tax (15%)

Answer 11

Once very popular as the income stream from superannuation was tax free for 60+. However, rules removed this tax loop hole from 2017 Best to conceive of Transition to retirement as a method of reducing work and making up the difference in income from super

Answer 12

Use money in your super towards buying your first home Make voluntary superannuation contributions of up to $15,000 a year, (maximum of $30,000 over several years) for the purposes of purchasing a first home. Withdrawals available from 1st July 2018. You will be taxed on withdrawals at your marginal tax rate less a 30% tax offset. E.g. if your marginal tax rate is 34.5%, with the 30% tax offset you will pay a tax rate of 4.5% on withdrawal Under the scheme rules, the ATO will consider (or deem) that your contributions have earned a return based on the rate earned by 90-day bank bills plus 3%.

Answer 13

Small funds are either: Types are: a self managed superannuation fund (SMSF) a small APRA fund (SAF) Why establish a small fund? Advantages greater control and flexibility over investment choice less onerous checks and balances cost control/reduction ``` Why not?- Disadvantages risk of non-compliance cost reductions may not be available increased administrative burden trustees personally liable ```

Answer 14

``` trustees are members of fund regulated by A.T.O less than 5 members all members must be trustees no member allowed to be an employee of another member, unless relative no remuneration for trustee duties ```

Answer 15

less than 5 members subject to prudential requirements of APRA appoints an approved external trustee

Answer 16

Available from 24 September 2007 Requirements Borrowing used to acquire an asset held on trust so that trustee has beneficial interest in the asset and a right to acquire legal ownership (or replacement) through payment of installments Lender’s recourse is limited to rights relating to the asset in the event of default or exercise of rights by the trustee The asset (or its replacement) is one which the fund would be permitted to acquire and hold directly.

Answer 17

Property or asset is identified for purchase by the SMSF The SMSF pays the deposit on the asset The Lender provides remainder of capital (non-recourse loan) Trustee of the Instalment Trust purchases the asset (holds the legal title) for the beneficial ownership of the SMSF SMSF as beneficial owner has right to receive ALL Rent, pay expenses and loan repayments (from the SMSF) Legal title of asset passes to SMSF when loan FULLY repaid Related party issues still apply LVR issues – lenders may offer max 70% LVR and limit areas of investment