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Understanding the Super Guarantee Surcharge.

Introduction

Welcome to our comprehensive guide on the Super Guarantee Surcharge. In this blog post, we will delve into the intricacies of this mandatory contribution scheme in Australia. We will explore what the Super Guarantee Surcharge is, how it works, who is affected by it, and the key considerations for both employers and employees. So, let's get started!

Section 1: What is the Super Guarantee Surcharge?

The Super Guarantee Surcharge is a compulsory contribution that employers in Australia are required to make on behalf of their eligible employees. It is designed to boost retirement savings by ensuring that a percentage of an employee's earnings is directed toward their superannuation fund.

Section 2: How does the Super Guarantee Surcharge work?

The Super Guarantee Surcharge operates by mandating that employers contribute a specific percentage of their employees' ordinary time earnings to their superannuation fund. The current minimum contribution rate is 9.5% of an employee's earnings.

These contributions are made in addition to an employee's salary or wages and are separate from any voluntary contributions they may choose to make. The purpose of the Super Guarantee Surcharge is to ensure that employees receive adequate retirement savings throughout their working lives.

Section 3: Who is affected by the Super Guarantee Surcharge?

Both employers and employees are impacted by the Super Guarantee Surcharge, albeit in different ways.

3.1 Employers:

3.2 Employees:

Section 4: Key considerations for employers

Employers need to be aware of several important factors when it comes to fulfilling their obligations under the Super Guarantee Surcharge scheme.

4.1 Eligible employees:

4.2 Contribution calculation:

4.3 Deadlines and payment methods:

4.4 Record-keeping:

4.5 Penalties for non-compliance:

Section 5: Key considerations for employees

Employees should also be aware of certain aspects related to the Super Guarantee Surcharge scheme to ensure they receive their entitlements and maximize their retirement savings.

5.1 Checking contributions:

5.2 Choosing a superannuation fund:

5.3 Voluntary contributions:

Conclusion

The Super Guarantee Surcharge plays a vital role in ensuring that Australians have sufficient retirement savings. Employers must comply with their contribution obligations, while employees should monitor their entitlements and make informed decisions about their superannuation fund. By understanding how the scheme works and its implications, both employers and employees can navigate the complexities of the Super Guarantee Surcharge effectively and secure a brighter future in retirement.

Superannuation withdrawal rules

Navigating the world of Self-Managed Superannuation Funds (SMSFs) and retail super funds can be a rewarding but intricate journey for many Australians. While SMSFs offer individuals greater control over their retirement savings, there are crucial rules and regulations in place to maintain the integrity of the superannuation system. In this article, we delve into the potential pitfalls associated with the illegal early release of super funds from SMSFs, shedding light on the consequences and how to avoid them. Loopholes to access superannuation and early access can mean you will and may access money however can have repercussions in the long run.

Understanding SMSFs

1.1 What is an SMSF?
Self-Managed Superannuation Funds (SMSFs) are private super funds that give individuals more control over their retirement savings. Managed by a trustee, usually the fund member, SMSFs allow for greater flexibility in investment choices compared to traditional superannuation funds.

1.2 Benefits of SMSFs
Explore the advantages of SMSFs, such as investment control, tax benefits, and the ability to tailor retirement strategies according to individual needs and goals.

2.1 Rules and Regulations
Dive into the legislative framework that governs SMSFs, emphasizing the importance of compliance to ensure the fund's legitimacy and eligibility for tax concessions.

2.2 Conditions for Early Release
Examine the specific circumstances under which early release of superannuation is legally permitted, such as severe financial hardship, compassionate grounds, or temporary incapacity.

Section 3: The Dangers of Illegal Early Release

3.1 Consequences for SMSF Trustees
Explore the legal ramifications faced by SMSF trustees if they engage in illegal early release, including penalties, fines, and potential imprisonment.

3.2 Impact on Retirement Savings
Discuss the detrimental effects of premature superannuation withdrawals on long-term retirement savings, emphasizing the importance of preserving funds for financial security in later years.

Recognizing Warning Signs

4.1 Identifying Scams
Educate readers on common tactics used by scammers to entice SMSF members into illegal early-release schemes, emphasizing the importance of due diligence and skepticism.

4.2 Reporting Suspected Fraud
Highlight the steps individuals can take to report suspected instances of illegal early release, fostering a sense of responsibility within the SMSF community to protect the integrity of the superannuation system.

Staying Compliant and Informed

5.1 Regular Audits and Reviews
Encourage SMSF trustees to conduct regular audits and reviews to ensure compliance with regulations, safeguarding against unintentional breaches.

5.2 Professional Advice
Stress the significance of seeking professional advice from qualified financial advisors and tax experts to navigate the complexities of SMSFs and make informed decisions.

Conclusion:

In the intricate landscape of SMSFs, understanding the legalities and risks associated with the early release of superannuation is paramount. By staying informed, compliant, and vigilant against potential scams, individuals can safeguard their retirement savings and contribute to the overall integrity of the Australian superannuation system. For more in-depth insights and expert guidance on SMSFs, explore our tax website's resources and connect with our team of specialists to navigate your superannuation journey with confidence.

Bridging the Superannuation Gender Gap: Empowering Women's Financial Future

Introduction

The Gender Pay Gap in Australia has become a pressing issue affecting millions of women in Australia. Despite progress in gender equality, women continue to face significant financial challenges, with lower savings and superannuation balances compared to their male counterparts. This blog post delves into the factors contributing to the superannuation gender gap and proposes measures to address this disparity. Additionally, we provide practical strategies for women to increase their super balances and secure their financial future.

Section 1: Understanding the Superannuation Gender Gap

The superannuation gender gap refers to the disparity in retirement savings between men and women. Statistics reveal that women consistently have lower super balances, fewer assets, and face greater financial stress in retirement. To illustrate this discrepancy, let's consider some data:

These figures highlight the significant gap in retirement savings that women experience. Several factors contribute to this disparity, predominantly affecting women more than men.

Section 2: Pay Disparity (The Wage Gap)

One of the primary contributors to the Gender Pay Gap in Australia is that women earn approximately 22.8% less than men. For every $10 earned by a man, a woman earns only $7.72 on average. This wage gap directly impacts women's ability to save and accumulate wealth for retirement.

Addressing pay disparity is crucial in closing the superannuation gender gap. Advocacy for equal pay and implementing policies that promote pay equity can significantly improve women's financial prospects in retirement.

Section 3: Caregiving Responsibilities

Another significant factor contributing to the superannuation gender gap is the disproportionate burden of caregiving responsibilities borne by women. More than 70% of primary caregiving duties are performed by females, often resulting in extended periods out of the workforce. These caregiving responsibilities encompass childcare, looking after ill or Senior family members, and other family-related obligations.

Taking time off work for caregiving purposes directly impacts women's earning potential and career progression. The years spent out of the workforce translate into reduced superannuation contributions and compound interest over time. Addressing this issue requires implementing policies that support work-life balance, flexible working arrangements, and affordable childcare options.

Section 4: Part-time Work and Career Progression

Women are more likely to work part-time or in casual positions, largely due to the lack of workplace flexibility to accommodate caregiving responsibilities. Part-time employment not only affects income levels but also hinders career progression opportunities. As a result, women earn less, contribute less to their superannuation accounts, and miss out on potential employer contributions.

Promoting workplace flexibility and implementing policies that encourage career advancement for women is crucial in reducing the superannuation gender gap. Providing equal opportunities for women to access full-time employment and supporting their career development will contribute to more significant superannuation savings.

Section 5: Compound Interest Effects

Compound interest plays a pivotal role in wealth accumulation and retirement savings. It refers to the interest earned on both the principal amount and the accumulated interest from previous years. As such, compound interest has a snowball effect over time, leading to exponential growth in savings.

The superannuation gender gap is further perpetuated by compound interest effects. Men tend to have larger savings and accumulate more interest over their lifetime due to higher earnings and longer periods of uninterrupted employment. This disparity widens over time and significantly impacts women's retirement savings.

Section 6: Proposed Measures to Address the Superannuation Gender Gap

Addressing the superannuation gender gap requires comprehensive measures at a macro level. Here are three proposed strategies that could help bridge this gap:

  1. Including Superannuation Guarantee Contributions in the Paid Parental Leave Scheme: As a majority of paid parental leave recipients are women, incorporating superannuation guarantee contributions into this scheme would mitigate the exacerbation of the gender gap during periods of maternity leave.
  2. Allowing Unused Concessional Contributions for Commonwealth Paid Parental Leave Recipients: Currently, recipients of Commonwealth Paid Parental Leave face time limits on making concessional contributions to their superannuation accounts. Removing these limits would prevent further harm to women's retirement outcomes and enable them to catch up on contributions once they return to work.
  3. Amending the Sex Discrimination Act: Modifying existing legislation to ensure employers can make higher superannuation payments for female employees without contravening anti-discrimination laws would encourage companies to take proactive steps toward closing the gender gap.

Section 7: Strategies for Women to Increase Super Balances

While systemic changes are necessary to address the superannuation gender gap, there are practical steps women can take individually to increase their super balances. Consider implementing the following strategies:

  1. Contribution Splitting: Spouses can transfer some of their superannuation contributions to their partner's account, thereby boosting their overall balance.
  2. Salary Sacrifice: Women who have taken time off work or worked part-time can make up for any shortfall by salary-sacrificing additional contributions into their super accounts.
  3. Take Advantage of Government Initiatives: Stay informed about government initiatives such as co-contributions or low-income super tax offsets that can help boost your super balance.
  4. Seek Professional Advice: Consult with financial advisors or specialists who can provide personalized guidance on maximizing your superannuation savings and investment strategies.

Conclusion

Bridging the superannuation gender gap is crucial for empowering women's financial futures and ensuring equitable retirement outcomes. By addressing pay disparities, supporting work-life balance, promoting career progression opportunities, and implementing legislative changes, we can take significant steps toward closing this gap. Additionally, individual strategies such as contribution splitting and salary sacrifice can help women increase their super balances until systemic changes take effect. By taking proactive measures at both individual and systemic levels, we can create a future where women have equal financial security in retirement.

Declaring Superannuation Contributions on Your Tax Return

Introduction

Superannuation contributions are an essential part of planning for retirement in Australia. In certain circumstances, these contributions can be claimed on your tax return, providing you with potential tax benefits. However, navigating the rules and regulations surrounding superannuation contributions can be complex. It is important to understand which contributions are eligible for claiming and seek professional advice to maximize the benefits. In this blog post, we will explore the various aspects of declaring superannuation contributions on your tax return, including eligible contributions, deductions, limitations, and tax on super contributions.

Section 1: Eligible Superannuation Contributions

Superannuation contributions that can be claimed on your tax return fall into two categories: employer contributions and personal contributions.

Employer Contributions

Contributions made by your employer directly to your super fund from your before-tax income cannot be claimed on your tax return. These contributions include:

Personal Contributions

On the other hand, superannuation contributions that you make to your super fund from your after-tax income are eligible to be claimed on your tax return. These personal super contributions can be claimed as a deduction and will count towards your concessional contributions cap.

Section 2: Deductible Super Contributions

To claim personal super contributions as deductions on your tax return, certain criteria must be met. These criteria include:

  1. Contributions Made Prior to 1 July 2017
    • The contributions must have been made to a complying super fund or a retirement savings account.
    • Your earnings as an employee should have been less than the maximum allowed.
  2. Contributions Made On or After 1 July 2017
    • The contributions must have been made to a fund that is not a Commonwealth public sector super scheme with a defined benefit interest.
    • The contributions must not have been made to a Constitutionally Protected Fund (CPF) or another untaxed fund that does not include your contribution in its assessable income.
    • The super fund must have notified the Australian Taxation Office (ATO) before the start of the income year that they treat all member contributions or defined benefit interests as non-deductible.
    • You must meet the age restrictions.
    • You must have given your fund a Notice of Intent to claim or vary a deduction for personal contributions (NAT 71121).
    • Your fund must have validated your Notice of Intent form and sent you an acknowledgment.

It is important to note that certain contributions cannot be claimed as tax deductions. These include rolled-over super benefits, benefits transferred from a foreign super fund, directed termination payments under transitional arrangements, employer contributions from before-tax income, First Home Super Saver (FHSS) recontributions, contributions to Commonwealth public sector super schemes with defined benefit interests, untaxed funds or CPFs, contributions specified in the regulations, downsizer contributions made from July 2018, and recontribution of COVID-19 early release superannuation amounts.

Section 3: Considerations Before Claiming a Deduction

Before deciding to claim a deduction for your super contributions on your tax return, it is important to consider various factors that may impact your superannuation:

Contribution Caps

Exceeding your contribution caps can have financial implications. If you exceed your cap, you will be required to pay extra tax. Additionally, any excess concessional contributions will count towards your non-concessional contributions cap.

Division 293 Tax

Division 293 tax may apply if you have a high income and your concessional contributions exceed a certain threshold. It is essential to understand how this tax can affect your overall financial situation.

Spouse Contribution Splitting

If you wish to split your contributions with your spouse, it is important to consider the impact on both of your superannuation accounts and future retirement plans.

Super Co-contribution Eligibility

Claiming a deduction for your super contributions may affect your eligibility for the government's co-contribution scheme. It is important to assess whether claiming a deduction outweighs the potential co-contribution benefits.

Section 4: Notifying Your Super Fund

Before claiming a tax deduction for personal super contributions, it is crucial to notify your super fund. You need to provide a Notice of Intent to claim or vary a deduction to your fund by either the day you lodge your tax return for the year in which you made the contributions or the end of the income year following the one in which you made the contributions.

Your fund must acknowledge the receipt of a valid notice from you in writing. It is important to receive this acknowledgment before claiming the deduction on your tax return.

Section 5: Seeking Professional Advice

Navigating the complexities of superannuation and taxation can be challenging. To ensure you maximize the benefits and comply with all legal requirements, it is advisable to seek professional advice or guidance before making any decisions regarding superannuation contributions and tax deductions. Consulting with a qualified financial advisor or tax specialist can provide valuable insights tailored to your specific circumstances.

Conclusion

Maximizing the benefits of superannuation contributions involves understanding the rules and regulations surrounding claiming deductions on your tax return. By identifying eligible contributions, considering limitations and implications, and seeking professional advice, you can make informed decisions that align with your retirement goals. Remember, it is crucial to notify your super fund and comply with all requirements outlined by the ATO. Start a conversation with us today to explore how we can assist you in optimizing your superannuation's potential and securing a prosperous retirement.

Understanding Your Superannuation Responsibilities as an Employer

Running a business involves juggling multiple tasks, but amidst the chaos, it's crucial not to overlook your superannuation guarantee to your employees. Neglecting these responsibilities can lead to serious consequences, including penalties and legal troubles. Let's dive into what you need to know about your superannuation guarantees.

Stapled Super Funds and Employee Choices

When employees join the workforce, they should have a designated 'stapled' super fund where they are required to contribute their superannuation. Alternatively, they have the right to select their super fund. However, in cases where an employee is unable to choose a fund, lacks a fund, or fails to inform the employer, you must direct their contributions to an employer-nominated or default fund.

The chosen fund must be compliant with specific regulations and obligations under superannuation laws, and it should be registered by the Australian Prudential Regulation Authority (APRA) to offer a MySuper product.

Who are Participating Employers and what Payment Frequencies for super guarantee?

Certain super funds might necessitate that you become a 'participating employer' before making contributions to them. As a participating employer, you might need to make more frequent super payments, such as on a monthly basis instead of quarterly.

What are Expanded Super Guarantee Contributions?

It's important to keep up with the evolving superannuation landscape. As of 1 July 2022, a significant change occurred regarding super guarantee contributions. Employers were previously required to pay superannuation for employees who earned $450 or more before taxes in a calendar month. Now, super must be contributed for domestic or private workers who put in more than 30 hours of work per week, regardless of their earnings.

What are the Superannuation Guarantee (SG) Essentials?

The superannuation guarantee (SG) sets the minimum amount of superannuation an employer must pay to their employees in Australia. As of 1 July 2023, the SG mandates that employers contribute 11% of an employee's ordinary time earnings. This applies to employees who are either over 18 years old or under 18 years old but work more than 30 hours per week.

Currently, these contributions are required at least four times a year. However, starting from 1 July 2026, employers will need to pay their employees super concurrently with their salary and wages. This is termed 'payday super,' a change that aims to enhance compounding potential within superannuation funds due to more consistent contributions.

What are Tax Deductions and Missed Payments for Super guarantee?

Employers can claim a tax deduction for the super payments they make for employees within the same financial year. The timing of the deduction aligns with when the employee's super fund receives the contributions.

In cases where payments are missed, the superannuation guarantee charge (SGC) might apply. Although the SGC is not eligible for the tax deduction, employers can utilize a late payment to offset the charge or consider it as a pre-payment for a future super contribution for the same employee, which can be tax-deductible.

Seeking Assistance

If you're uncertain about your superannuation obligations as an employer, consider reaching out to our team members for guidance. They are well-equipped to help you navigate through these matters and ensure you fulfill your responsibilities effectively.

Understanding Departing Australia Superannuation Payment (DASP):

A Guide for International Workers

If you are an international worker in Australia on a temporary visa, it is essential to familiarize yourself with the Departing Australia Superannuation Payment (DASP).

Claiming superannuation when leaving Australia allows eligible individuals to claim superannuation contributions when they leave Australia permanently.

In this article, we will explore the key aspects of DASP, including eligibility criteria, the application process, and important considerations.

Understanding DASP will help you make informed decisions regarding your superannuation funds when departing Australia.

The Departing Australia Superannuation Payment (DASP) is a lump sum payment made to eligible individuals who hold a temporary visa in Australia and are leaving the country permanently. It allows them to claim the super contributions made by their employers during their stay.

  1. Eligibility Criteria for DASP:

To be eligible for DASP, you must meet the following criteria:

a) You must hold a temporary visa in Australia.

b) You are leaving Australia permanently.

c) You are not an Australian or New Zealand citizen or a permanent resident of Australia.

d) Your visa has ceased or will cease to be in effect within six months of the DASP application.

  1. How to Apply for DASP:

To apply for DASP, follow these steps:

a) Gather required documents:

Prepare a copy of your passport, visa details, and your Australian Tax File Number (TFN) or a certified copy of your TFN exemption certificate.

b) Create an online account: Visit the Australian Taxation Office (ATO) website and create an online account.

c) Lodge your application:

Complete the DASP online application form, providing accurate details about your superannuation fund(s) and employment history. Attach the required documents and submit the application.

d) Track the progress:

You can track the progress of your application through your online account or contact the ATO for assistance.

  1. Important Considerations:

a) Taxation: DASP is subject to taxation.

The tax rates vary based on various factors, such as your country of residence, the length of your stay in Australia, and the Double Tax Agreement between Australia and your home country.

Please seek professional tax advice to understand your tax obligations.

b) Consolidating super funds:

Before departing Australia, consider consolidating your super. This will assist consolidation simplify future transactions and save you from paying unnecessary fees.

c) Claiming superannuation held by the ATO:

If you have lost track of your superfunds or your employer failed to make contributions on your behalf, the ATO may hold your super.

You can check if you have any unclaimed super using the ATO's online services.

As an international worker in Australia, understanding the Departing Australia Superannuation Payment (DASP) is crucial when you decide to leave the country permanently.

Understanding eligibility criteria, the application process, and important considerations such as taxation and consolidation, you will navigate the DASP process smoothly and ensure you will receive the super contributions you are entitled to.

Be sure to consult relevant authorities or seek professional advice to make informed decisions about your superannuation funds when departing Australia.

Retirement planning is a crucial aspect of financial management, and there are several strategies to ensure a comfortable retirement. In this article, we will explore the benefits and advantages of two powerful tools for retirement savings: Downsizer Contributions and Super. By understanding how these options work, and how they can complement each other, you can make informed decisions to maximize your retirement savings.

Understanding Downsizer Contributions

Downsizer Contributions are a government initiative designed to help older Australians boost their superannuation savings. Traditionally, downsizing has been associated with selling a larger home and moving into a smaller, more manageable property. However, with Downsizer Contributions, individuals aged 65 or older can now contribute up to $300,000 from the proceeds of selling their primary residence into their super fund.

The Benefits of Downsizer Contributions

  1. Tax Advantages: Downsizer Contributions are considered non-concessional contributions, meaning they are made with after-tax dollars. As a result, they are not subject to the usual contribution caps and may offer potential tax benefits.
  2. Increased Superannuation Balance: By injecting a substantial amount of money into your super fund, Downsizer Contributions can significantly increase your retirement savings, ensuring a more comfortable lifestyle in your golden years.
  3. Flexibility and Freedom: Downsizer Contributions provide flexibility as they do not require you to satisfy the work test or have a total super balance below a certain threshold, making them accessible to a broader range of individuals.

Harnessing the Power of Super short for Superannuation, is a long-term investment vehicle specifically designed to help individuals save for retirement. It offers several benefits that make it a valuable tool for wealth accumulation.

  1. Tax Benefits: Super contributions are generally taxed at a concessional rate, meaning you can enjoy potential tax savings and benefit from compounding returns over time.
  2. Investment Options: Super funds provide a wide range of investment options, allowing you to choose investments that align with your risk tolerance and long-term goals.
  3. Employer Contributions: Many employers are required to contribute a percentage of your salary into your super fund, boosting your savings without any additional effort on your part.
  4. Government Co-contributions: Eligible individuals who make personal contributions to their super fund may receive additional contributions from the government, helping to further boost retirement savings.
Maximizing Your Retirement Savings To maximize your retirement savings, consider integrating Downsizer Contributions and Super into your financial plan:
  1. Evaluate Your Downsizing Options: If you are nearing retirement age and considering downsizing, explore the potential benefits of Downsizer Contributions and how they can supplement your superannuation savings.
  2. Seek Professional Advice: Consulting with a financial advisor or retirement specialist can provide personalized guidance tailored to your specific circumstances and goals.
  3. Take Advantage of Super Contribution Strategies: Regularly review your superannuation contributions, consider salary sacrificing, and explore other strategies to optimize your super balance.
  4. Plan for the Long Term: Keep your retirement goals in mind and make consistent contributions to your super fund over time to take full advantage of compounding returns.

By combining the power of Downsizer Contributions and Super, you can proactively enhance your retirement savings. Downsizer Contributions offer tax advantages and increased flexibility, while Super provides long-term investment opportunities and potential employer and government contributions. Take control of your financial future today by exploring these options and creating a solid retirement plan. Remember, it's never too early or too late to start building a nest egg that will support you throughout your retirement years

Superannuation for Contractors who run their own business and sell their services to others have different obligations to their super than what employees in a business may usually have.

A contractor (also known as an independent contractor, a subcontractor, or a subbie) who is paid wholly or principally for their labour is considered to be an employee for super purposes, and may be entitled to super guarantee contributions under the same rules as other employees.

A contract may be considered ‘wholly or principally for labour’ if: You’re paid wholly or principally for your personal labour and skills you perform the contract work personally you’re paid for hours worked, rather than to achieve a result

What is a Contractor?

If hiring a contractor to perform solely their labour for a fee, the employer may also have to pay super contributions on their behalf.

In this sense, if you are a contractor who is being contracted to an outside business than your own to perform your usual work or labour, your employer must contribute to your super the same way they would any other employee.

This could be seen in an example of an electrician who runs their own small business, or is employed by a small business who has been hired by another business to supplement their workforce and perform a specific role that they can fit to.
Take, for example, an electrician who runs their own business and has been subcontracted by a larger business.

They are performing labour but also providing materials (i.e., themselves plus a toolbox plus a van full of PowerPoints and wiring etc.), they would be seen as a contractor and not an employee for super purposes. They must pay themselves super, in this case.
However if they are sub-contracted to perform labour only then the company that has sub contracted them may be liable to pay super on the amount that they pay to their contractor.  This would be the case where the electrician just turns up with their tool box and everything else is provided by the "employer".

If they are in an employment-like relationship with the person that they entered their contract into, they may need to have their super paid to them by their contract employer. In order for super to be applied from what you earn, the contract must be directly between you and your employer. It cannot be through another person or through a company, trust or partnership.

How Does Superannuation & Contracting Work?

It is important that both parties in the process are aware of their super obligations during the contracted period. There can be significant penalties for employers who use contractors if they fail to correctly pay super. Each case regarding contractors and super needs to be assessed independently to ensure that you are doing the right thing. There is no definitive black and white line between a contractor and a contractor in an employment-like relationship that can be obviously seen after all.

If you’re unsure about whether Superannuation for Contractors applies to your business as an employer, or are a contractor looking to make sure their super is being correctly paid into, speak with Australia wide tax solutions (AWTS) on 0488854200 or book here

Participants involved with the NDIS are assisted to live independently and plan out their ongoing future, including their home and living goals. The NDIS Housing in Superannuation can provide support to accessing housing for these individuals, but availability is often limited due to high demand.

NDIS Housing in Superannuation

Using your Self Managed Super Fund to invest in an NDIS property is a mid-to-long-term investment that could supplement your super to fund the retirement you want and deserve.

Having a self-managed superannuation fund gives you the ability to leverage your super by borrowing money from a lender to be able to make more sizable investment purchases, such as NDIS Property.

The rules and regulations around using your SMSF to purchase NDIS property can be quite complicated.

An SMSF can borrow money to purchase a house and land package as long as it is purchased together in one transaction (a one-part contract) as a single acquirable asset where the asset is identified up front as vacant land with a completed house on it.

There are specific considerations to consider to determine whether or not the investment property can be purchased through your SMSF.

Location & Demand

The property must be in an area with high rental demand (typically considered as anywhere within a 50-kilometre radius of an Australian capital city or a 35-kilometre radius of a major city).The areas generally fall into these areas and have a vacancy rate of 1% or below (meaning that the rental demand for investors is there).

Bank Approval

The property purchased through your SMSF must be ideally as new as possible as it needs to be approved by the bank. This is because the property must be positively geared (income from the rent should be higher than the outgoings on the property). At the very least it should have a neutral cash flow (meaning the incomings and outgoings are relatively even).

No Personal Gain From The Property

The last criterion is that you can’t see any personal gain from your investment property. This includes:

Some risks can accompany using your SMSF (Self-Managed Super Fund) to invest in NDIS property – the number one is cash flow. Your loan repayments will come from your SMSF. Sufficient income into your SMSF (including NDIS Rent from the tenant/s) needs to be ensured to make the repayments.

Some ongoing costs can come with using your SMSF to purchase a property. These may include:

When you retire, there will be two options available to you with the property.

  1. Continue to receive rent on your investment property as your pension-based income, or

In short, using funds from your SMSF to purchase an NDIS investment property is not the same as a regular SMSF property investment loan. Doing so should consider guidance from professional advisers and careful planning.

Superannuation remains a very tax effective investment vehicle, with a maximum tax rate within the fund of 15% when the relevant rules are complied with.

It may be hard to believe, particularly with all the discussions since the 2016 Budget announcements regarding changes to the system, however we know that in Australia it’s the most simplistic system anyone has in the world when it comes to retirement.

Is it a Scam?

Can invest in my own Superannuation fund?

Why Is Superannuation compliance so expensive?

Are Retails Funds better than Self Managed Superannuation Funds?

How much tax is paid by my Superannuation Fund?

So what’s all the noise about the changes then? There are some changes and it is important to be across them, but the above fundamentals still remain. The changes themselves can largely be categorised into two main themes – changes around contributions, and changes in retirement.

Contribution changes

The changes to contributions don’t take effect until 1 July 2017. From that time, there will be a reduction in the amount that can be contributed annually, and if you have (or are approaching) a total super balance of $1.6 million, an additional restriction on your non-concessional (or after tax) contributions apply. I’m finding it hard to believe that the government thinks that you can actually live off $150,000 for the next 20 years, because most tax payers will not retire on more than this, now they have caps for higher income earners and balances.

Changes from July 1, 2017.

From 1 July 2017, the annual limit for concessional contributions falls to $25,000. This limit applies for everyone eligible to make or receive these pre-tax contributions, which generally comprise Super Guarantee (SG) amounts from employers, amounts salary sacrificed to super and, if you are eligible, personal deductible contributions. If all you receive is the minimum SG required from your employer, then the reduction in annual limits (from $30,000 or $35,000 this year depending on your age) won’t have an impact on you. But if you also salary sacrifice, you may need to review your arrangements by 1 July 2017 to ensure you don’t inadvertently exceed the cap. Of course, the flip side is that if you aren’t maximising these contributions this year whilst the cap is higher, is there more you can do?

Non Concessional Contributions.

For non-concessional, or after tax contributions, from 1 July 2017 the annual cap will be reduced from its current $180,000 to a lower limit of $100,000. The three-year bring forward provision still applies, meaning you can do up to three years’ worth of contributions in one year (provided you were under 65 at the start of the year).

Limits that are reducing.

With that limit reducing from 1 July 2017, the question again arises as to what you can do this year? If you were under 65 on 1 July 2016, and you haven’t used the bring forward provision in the last 2 years, you actually have the ability to contribute up to $540,000 of after tax contributions this financial year and give your super a great kick before the limits reduce. Of course we know not everyone has the ability to contribute this much, but again it’s worth thinking about how much you can actually afford to do.

Changes in retirement.

Despite all the talk of the changes to super in retirement, there have been no changes to the rules around when you can actually access your super or, if it comes from an accumulation style fund, the way the payments are taxed to you. The existing rules continue to apply.

In essence, only two things have changed. First, if you have commenced drawing on your super through a ‘transition to retirement” (TTR) income stream, or look to commence one from 1 July 2017, from that date, earnings on the assets in your super fund that support that ‘transition to retirement”  will no longer be tax free. Rather, those earnings in the fund will be taxed at the standard 15% tax rate in super, rather than being tax free in the fund. Remember, there is no change to your personal tax on the amounts you receive from a ‘transition to retirement”.

Second, for pension paid in the “retirement phase”, which essentially refers to pensions payable to you after retirement or age 65 may increase to 67, there is a limit on how much you can actually start these pensions with. From 1 July 2017, that limit will be $1.6 million. Amounts above that need to stay in accumulation phase, with the earnings on those accumulation amounts continuing to be taxed within the fund at the rate of 15%.

If you don’t have, and don’t expect to ever be in receipt of superannuation accounts in excess of $1.6 million, these changes won’t impact you, other than if you run a ‘transition to retirement”.

Super is still a great option as tax deductible expense.

One of the major things that these recent super changes have shown is that it’s really important to understand what the changes mean for you. Superannuation, as a concept, remains unchanged. The Government estimates that no more than 4% of the population will be impacted by these changes.

Whether you are in that 4% or not, it’s always worth contacting AWTS just to see how you are placed in terms of your current plans, or if they should change.

Let our Superannuation Specialist help you retire on a healthy super balance later on life, avoid risking being a tax payer that retires on less than $150,000 for life, and speak to us today.

Please note that deductible contributions as an employee can only be classed as Salary sacrifice so you can deduct superannuation after tax superannuation contributions goes to a different pool of funds within your superannuation, which may not be taxed when you retire, all other contributions will be taxed unless you reach preservation age.

There is never a better time to plan your tax affairs than right now.