1. Presented by Mark Ellem Policy Director - Supercorp

2. This presentation is for general information only. Every effort has been made to ensure that it is accurate, however it is not intended to be a complete description of the matters described. The presentation has been prepared without taking into account any personal objectives, financial situation or needs. It does not contain and is not to be taken as containing any securities advice or securities recommendation. Furthermore, it is not intended that it be relied on by recipients for the purpose of making investment decisions and is not a replacement of the requirement for individual research or professional tax advice. This presentation was accompanied by an oral presentation, and is not a complete record of the discussion held. No part of this presentation should be used elsewhere without prior consent from the author.

4.  2014/15 Concessional Cap ◦ Std = $30,000 (up from $25k) ◦ Aged at least 49 @ 30.06.14 = $35,000  Not end of current income year  2014/15 Non Concessional Cap ◦ Std = $180,000 (6 x std concessional) ◦ 3 yr b/fwd rule = $540,000 ◦ Triggered in 2014/15 ◦ Triggered pre 1/7/2014 = $450,000

5. 1/7/2014 1/7/2013 1/7/2012 NCC$ ?? $150,000 $200,000 $450,000 $540,000  $100,000 $190,000  No B/fwd trigger 30/6/201330/6/2014 30/6/2015

6.  TR 2010/1  Cash ◦ Rec’d by fund  EFT ◦ Credited to fund’s bank account  Cheque ◦ Rec’d by fund  Promptly banked  Not post dated

7.  TR 2010/1  Anything of value  Increases capital of fund  Purpose was to benefit member(s) ◦ Member pays fund expense ◦ Member provides free service ◦ Employer pays fund expense ◦ Employer pays expense billed to employer ◦ Forgiveness of fund liability ◦ Transfer from reserve to member account   

8. Pre 1/7/111/7/11 to 30/6/13From 1/7/13 Excess CCsSubject to tax at 31.5% 31.5% tax, unless refunded, then MTR Included in personal ITR & taxed at MTR Count towards NCCYesYes, unless refunded Excess CC chargeNo charge Applied to additional tax Ability to refund Excess CC NoYes, but limited: 85% of excess Only where excess CC $10,000 or less No previous excess CC since 1/7/11 Yes, elect up to 85% of excess CC

9.  No solution pre 1 July 2013  Taxed @ 47%  Apply for re-allocation of contribution to other year ◦ “special circumstances”  Di Minimis rule  Reg 7.04(3) ◦ Refund excess over relevant cap  Only applies to single contribution  Beware ATO ID 2012/79

10. ShareNumberMarket PriceTotal Transfer Value Listed Coy A60,000$4.53$271,800 Listed Coy B140,000$1.25$175,000 Listed Coy C65,000$1.62$105,300 $552,100  ATO ID 2012/79  Sue, aged 46, makes in-specie NCC to SMSF ◦ Same day transfer of all share parcels

11.  Applies from 1 July 2012  Tax concession reduced from 30% to 15% if “income” exceeds $300k  “Income” = determine liability for Medicare levy surcharge  2012/13 assessments issued Feb 2014  Fund can pay where release authority received ◦ Due 21 days after notice issued

13.  SMSF in full pension mode ◦ Not tax benefit of expenses ◦ Member’s drawing minimum pensions ◦ Minimum pension > required  Members personally pay for SMSF running costs ◦ Accounting, audit  No reimbursement by fund ◦ Contribution (for tax)  Breach of acceptance rules (??) ◦ SMSF required to return contribution = reimbursement

14.  S.34(1) – comply with operating standards ◦ Breach = 20 penalty points = $3,400 (per trustee)  Operating standard relevant to contributions ◦ Person who may contribute to funds  S.31(2)(a) ◦ Amount of contribution that can be accepted  S.31(2)(c) ◦ Circumstances in which fund can accept conts  S.31(2)(d)

15.  Maximum 85% ◦ Net of o/s personal tax liabilities paid to ATO ◦ Can release < maximum  No release = count towards NCC ◦ Release amount ÷ 0.85  Funds not obliged to release ◦ DB interest ◦ Non complying fund interest ◦ Pension interest  Better to release and re-contribute

16.  Know the time constraints ◦ 21 days to elect to have an amount refund  From receiving excess CC notice  On approved form to ATO  Specify the amount to be released  Superannuation interest  Irrevocable election ◦ ATO provides Release Authority to Super Fund ◦ Super Fund must pay within 7 days  Amount specified in release authority; or  “Maximum available release amount”

18. Not a contribution Counts toward concessional cap Exceptions →Allocate to: {≥ 65, <75} & not working ≥ 75 →Use higher concessional cap + personal tax = $NIL →Allocate to: {≥ 65, <75} & not working ≥ 75 →Use higher concessional cap + personal tax = $NIL

19.  Joan is member of SMSF ◦ 77 yo ◦ Only income is super pension ◦ Member balance $680,000 ◦ Reserve $100,000  Joan’s concessional cap ◦ $35,000  How much can we allocate to Joan with no tax?

20. Allocate from reserve$85,000 Less: contribution cap$35,000 Excess concessional$50,000 Joan’s income Excess CC$50,000 Prime tax$ 7,797 Fund tax offset (15%)$ 7,500 Net tax$ 297 5% rule$34,000 Count toward NCC as not refunded Not paid by fund. Personal tax offset (s.291.15 ITAA 97)

21.  Clara is member of SMSF ◦ 63 yo ◦ Still working ◦ Member balance $570,000 ◦ Reserve $100,000  Clara’s 25 yo grand daughter, Sophie, joins SMSF ◦ Student, no income  How much can we allocate to Sophie with no tax?  Can we get preserved super out to Sophie?

22. Allocate from reserve$80,000 Less: contribution cap$30,000 Excess concessional$50,000 Sophie’s income Excess CC$50,000 Prime tax$ 7,797 Fund tax offset (15%)$ 7,500 Net tax$ 297 5% rule$34,000 Not paid by fund. Personal tax offset Refund up to 85% to Sophie (no NCC) Rules do not allow refund Cash to Sophie$42,500 Gift to Grandma?

23.  Excess CC Strategy ◦ Invest in tax favoured investments  Losses from leverage investments  Imputation credits from Aus equities  Taxable components on benefit payment??? ◦ Excess CC = NCC = tax free on payout????? ◦ Tax free = contributions + crystalised segments ◦ Cont seg = conts not included as assessable ◦ Excess CC are included as assessable income  Included in taxable component

24.  Allocated contributions within 28 days after end of month received (reg 7.08) ◦ SuperStream requires allocation within 3 business days of employer contributions  except SMSFs (reg 7.07H)  Contributions rec’d in June, allocated in July.  ATO ID 2012/16  TD 2013/22 ◦ Confirms strategy of unallocated contribution ◦ Greater protection as TD (public ruling)  Only from 1 July 2013

25.  ATO SMSF Newsletter 28 Feb 2014 ◦ Report contributions in section F (Member Section) of SMSF Annual Return when received not when allocated.  Every contribution reserving strategy will now result in excess contributions tax assessment ◦ Need to object  Costs  Closer scrutiny by ATO  Still worthwhile?

26.  When to satisfy contribution acceptance rule? Year contribution made Year of reserve allocation  ATO SMSF News Bulletin 29, issued Feb 2014

27.  2014 Federal Budget proposal to refund ECC ◦ From 1 July 2013  Draft law released 10 October 2014 ◦ Submissions due 24 October 2014  Refund of Excess NCC + “associated earnings” ◦ Total amount  Lesser amount if interest holds less  Does not apply to “Nil” value interests  Pension & DB interest not considered “nil” interest  Refund can come from any super interest  Prescribed time periods

28.  Must be deducted from tax free component ◦ Re-calculation of pension tax split %’s ??  Associated earnings ◦ Average of GIC for income year ◦ Calculated from 1 July  Associated earnings taxed at MTR ◦ No tax offset for tax paid by fund  If no release/refund then excess tax applies ◦ Unless “nil interest”  Still no solution to inadvertent trigger of B/fwd rule ◦ Rely on Di minimis rule

29.  Deduct release amount from tax free ◦ Associated earnings  Belinda $100,000 excess NCC 2013/14 ◦ Associated earnings $13,814 (9.66% 1/7/14 to 1/11/14)  $763,814 @ time of release ◦ $550,000 tax free ◦ $213,814 taxable  $650,000 after release ◦ $436,186 ◦ $213,814 Taxed in the fund @ 15% + Taxed @ Belinda’s MTR

30. 1/7/2016 1/7/2015 1/7/2014 $540,000 NCC $180,000 NCC No B/fwd trigger Fred Age 57 30/6/201530/6/2016 $35,000 (personal) CC Can only claim $34,900

31. 1/7/2016 1/7/2015 1/7/2014 $540,000 NCC $180,100 NCC  No B/fwd trigger Fred Age 57 30/6/201530/6/2016 $34,900 (personal) CC Trigger bring forward rule in 2014/15 $180,100 Excess NCC Amount to refund/release: $180,100 + associated earnings $100 in 2014/15

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