Super News

Fighting for SMSF Lending

The MFAA convened a group of influential stakeholders to represent the financial services industry as Treasury takes a look at the key aspects of the SMSF sector.

The MFAA sought for support from the Financial Planning Association of Australia or FPA, the Association of Financial Advisers or AFA, and the Commercial Asset Finance Broker Association or CAFBA for its submission to the Financial System Inquiry.

A joint response that engages with these industry bodies should boost the impact of the submission significantly, the MFAA said.

Providing the government with a comprehensive submission from the broader industry is more important than small multiple submissions that the government needs to decipher, according to MFAA chief executive Siobhan Hayden.

In demonstrating an industry unity and support for initiatives currently under review, there’s no better idea than to have a shared voice.

The initiative of the MFAA to unite the other industry bodies comes after former MFAA president and Bernie Lewis executive chairman Mark Lewis told The Adviser last year that industry groups representing financial planning, mortgage broking and accounting must form deeper and stronger relationships to help with the convergence of the professions. In his statement, a deeper relationship needs to be built with the accounting associations. A mutual respect that needs to be found between associations and some communication from each of them to their membership that convergence is happening and that associations are working together to help facilitate the convergence.

He also adds that mortgage broking faced the biggest challenge, as compared with planning and accounting, when it comes to being viewed as a professional industry.

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What You Need to Know about SuperStream

What is SuperStream?

SuperStream is a new standard that requires all super contributions to be made electronically with linked data and payments. The changes will allow contributions to be treated in the same way – regardless if an employer sends them to a default or choice fund, including an SMSF.

SuperStream started to gain momentum by focusing on medium to large employers, or those with 20 or more employees, in the late 2014. These employers were required to have an implementation plan in palce and to ensure that they are SuperStream compliant by no later than 30 June 2015.

Smaller employers are also being encouraged to begin preparation for the SuperStream, which starts for them on 1 July 2015. Those that began earlier can already enjoy the benefits sooner.

Reducing costs and complexity

SuperStream’s benefit is that it reduces the cost and complexity that many employers face when they make super contributions. This means that they can use their payroll system to generate contributions as single event and send them through a single electronic channel.

The early signs of success from employers who already used SuperStream are visible and a few of them even noted how making a super contribution through SuperStream would now take them no longer than 10 minutes as opposed to the traditional method that usually takes about half a day. Other employers spoke about how using multiple formats was an inconvenience for their office because some were made through paper and some through electronic. But after they used the ATO’s Small Business Super Clearing House – a free service for employers with 19 or fewer employees, they were able to make contributions at once and at the same time, thereby meeting SuperStream requirements.

How to prepare

For SMSFs:

Contributions sent to an SMSF from a related-party employer are exempt from SuperStream and can be made using existing processes. For all the other SMSFs, you can get an electronic service address and provide this along with your SMSF’s ABN and back account details to your employer.

SMSF trustees need an electronic service address in order to receive contribution remittance information. You can get this from an SMSF messaging provider. The ATO has a register of service providers on their website. This is very easy to set-up and takes less than 5 minute to complete. Trustees can also find low-cost or free options available in the market. Don’t forget or don’t delay in providing your fund details so your employers can make changes in their payroll system. You need to wait for at least 60 days before your employer plans to start making SuperStream contributions.

On a broader note, businesses with 20 or more employees should have progress on their implementation plan. For those with 19 or less, they should try to talk to their bookkeeper, accountant payroll provider or major super fund and check what solutions they need to avail of so they can be SuperStream ready.

Employers should note employees who’re already members of an SMSF and they should be reminded to provide them with SuperStream information for their payroll records, including the SMSF’s electronic service address, ABN and bank account details.

SMSF Trustees May Live Longer than Average Aussies

An interesting research says that the SMSF trustees are likely to outlive an average Australian by 2.5 years (female) and 3.2 (male) years. While higher life expectancy may be a cause to cheer, it is also important to live out one’s age in fine fashion. This, however, is not possible unless the SMSF trustees have enough money in their kitty to tackle the post-retirement years.

Are You Losing Retirement Funds from Super Fees?

losing retirement funds According to a research from ING Direct, retiring Australians could lose as much as $190,000 from their superannuation savings due to the fees that have been imposed over the course of their working lives.

Retirement is a wonderful thing

Retirement should be a wonderful milestone in your life because it gives you the well-deserved from almost X number of years working without having to worry about your financial security anymore. These are the days that will be spent in the house, the beach, the cruises, or even in the mountains without worrying about deadlines, reports, and other pertinent matters related to work.

But retirement is more than just leaving your job after X number of years to call it quits. For the elderly, it’s important that they get to manage their superannuation correctly if they want to live a worry-free life. There are more than 600 super funds in Australia, and with the variations, super fees and performance can differ from one fund to another. Rate City representative Jeremy Willer says that there are 5 or 6 different types of fees, so it’s difficult for the average Australian to determine what they’re being charged.

What super ranks as the best and the worst?

Analysts from super experts Rate City found that the lowest charging fund was ANZ Smart Choice Super. They gave you a 12.83 per cent return with $300 in annual fees. Talk about a bargain.

But it’s also important to choose supers based on performance as well as fees. In terms of best performance, Rate City chose The Portfolio Service due to its 15.84 per cent return despite having a thousand-dollar annual fee. For worst performer, Optimum Professional bagged the title because of its outrageous $1300 annual fee with a low return rate of 7.4 per cent.

Taking control

Retirement is something that needs to be taken care of even before you reach that point. People need to be aware of the super funds that they invested in and pay attention to how much they’re gaining in exchange for how much they’re paying.

Australians pay as much as $20 billion in fees every year, or roughly an average of $1300 each. This is three times the average of what you would usually pay in other countries.

What You Need to Know about Your SMSF at Age 65

Can I make contributions to my SMSF as if I am 65 during the financial year 2014-15?

You can start contributing to your super after you turn 65 as long as you worked 40 hours within a 30-day period during the financial year wherein you want to make a contribution. Assuming that you did not retire in December 2014, it’s safe to assume that you met the above work test within the first half of the financial year and you are entitled to contribute to your super fund until June 30 within the same year. But in the financial year 2015-16, you will need to meet the work test before you make any contributions.

But note that if you’re retired, you can make a personal/deductible contribution or in SMSF jargon a concessional contribution before June 30. This is useful if, by the time you retire, you have a number of accrued leave that could boost your annual taxable income. Take note that you can only make a total of $35,000 in concessional distribution for the financial year of 2014-15. This total includes all employer contributions and any salary-sacrificed contribution made earlier during the year.

Because you just turned 65, you are limited to the standard $180,000 cap for non-concessional contributions and you cannot use the three year roll-up.

Has the tax offset of $500 for a mature age worker (someone over the age of 50) has been abolished or amended in the last budget?

The bill that abolished the mature age worker tax offset for the financial year 2014-15 and in the later financial years, dubbed as the Tax and Superannuation Laws Amendment (2014 Measures No.5) Bill 2014, passed the Parliament and both houses on March 3, and as of March 2015, the bill is awaiting Royal assent.

Can I withdraw the money in my retirement accounts 401(k) and 403(b) and transfer it to my UniSuper accumulation superannuation account without worrying about tax implications and the 10 per cent penalty? Are there tax implications for the transfer and does the USA and Australia have tax treaties that can make this possible?

A 401(k) account is an SMSF where an employer can make pre-tax contributions and a 403(b) plan is another form of SMSF that’s available for certain public-school employees or employees of tax-exempt organizations. The latter can be in the form of tax-deferred annuity and can be held by a retirement account custodian and invested in mutual funds. The latter can also be a retirement income account that’s invested in annuities or mutual funds.

For both, there are rules about when money can be withdrawn and penalties when you withdraw prior to retirement age. A US resident pays standard income tax on withdrawal after the age of 59.5 (59 years and 6 months).

Assuming that you gave up US residency, you will be subject to a withholding tax on withdrawal as a lump sum, which is around 15 per cent under the US-Australia tax treaty but you may want to get in touch with the Internal Revenue Service and complete form W-8BEN.

You can get an exemption from this tax under the dual tax treaty if you withdraw a pension from your funds, but I suggest you get a ruling from the IRS first before making any decisions as to whether you withdraw it as a lump-sum or have it paid as pension. You will also find state charges because a pension is likely to be taxed in Australia. But you can apply the $18,200 tax-free general concession, assuming that your other income comes from untaxed super benefits.