I am getting divorced - what happens to our SMSF?
1. I have accidentally exceeded my contribution limit. What should I do about this and will I be penalised by the ATO?
By Andrew Zbik, senior financial planner with Omniwealth
Prevention is better than cure. Before June 30, check the value of your concessional contributions and non-concessional contributions to your superannuation fund. A superannuation fund has up to 30 days to refund a contribution if it has been incorrectly received.
So you may be able to get in early and refund any excess contributions prior to June 30.
However, the contribution that is being refunded must have been made in the 30 days before the refund takes place.
If you have a self-managed superannuation fund, and your contribution was received after June 4, your trust deeds may allow for you to keep this contribution in a "reserve account".
A superannuation fund has up to 28 days to allocate a contribution to a member. So any contributions received after June 4 can be held in this reserve account and allocated to the member on July 1 - the next financial year.
But it is important to note that the contribution that was allocated to the member in the next financial year will count towards the contribution caps of the financial year in which it was allocated.
What if you received an excess contributions notice from the ATO? If you exceeded your concessional contribution cap, your excess (the amount over the cap) will be taxed at your marginal tax rate and you will receive a 15% tax offset to recognise the 15% contributions tax already deducted from the excess concessional contributions. You then have two options:
1. Withdraw all or part of the excess amount from your superannuation fund net of the 15% contributions tax and use these funds to pay the additional tax.
2. You can pay the additional tax personally and keep the excess funds in your superannuation fund.
The excess concessional contributions that remain in the fund will count towards your non-concessional contributions cap. If you exceed your non-concessional contribution cap, you have to withdraw this amount from your superannuation fund plus 85% of any associated earnings.
The notional earnings on the excess contribution will then be taxed at your marginal tax rate. If you don't withdraw your excess non-concessional contribution then you have the honour of paying 49% of that contribution in tax to the ATO.
2. Can I sell my business property to my SMSF?
By Nerida Cole, managing director - head of advice with Dixon Advisory
Although transferring residential property into an SMSF is not allowed, the restriction on related party transactions is removed for properties that meet the definition of business real property.
This definition is very technical but, in general, if your business premises are used wholly and exclusively in carrying on a business, and the sale occurs at the current market value, you can sell or contribute your property to your SMSF. This is a strategy unique to SMSFs.
It's one of the reasons small business owners look to SMSFs, as they can help maximise their efforts in running a business by accelerating their retirement planning at the same time. But be aware that it is a change of legal ownership, so CGT, GST and stamp duty may apply.
You may also need to check your contribution limits. As this is a very technical area, so make sure the lawyer and SMSF accountant you engage are experienced in these areas.
3. I am getting divorced - what happens to our joint SMSF?
By Liam Shorte, director of Verante Financial Planning
First thing you do is agree in writing that no party is to buy/sell or move SMSFs without both members agreeing in the short term.
You can do this officially by having your fund "flagged". For an interest that is in a self-managed superannuation fund, a flagging agreement takes effect at the time when a copy of the agreement is served on the trustee(s).
In terms of splitting your superannuation interests, a number of options are available:
1. You can both continue as members of the fund with your individual interest being held in separate accounts within the fund.
This will require a degree of trust and continued cooperation over the long term between the former spouses, which is not always possible to maintain.
2. Enough of the assets may be sold and the funds used to pay out either one or both of the member's interests into a new fund, with the exiting member resigning as a trustee (or trustee director).
This option also has its own problems in that it may not be an appropriate time to sell the asset or there is a deep desire by one of the parties to retain the property within the fund. In some cases, assets may be rolled over in-specie to the departing partner's new fund with a CGT exemption.
3. A third option would be for one of the parties to seek an external investor (sibling, child, parent or business partner) to contribute to the fund so that it could pay out the exiting spouse's interest.
Some rush to include their new "love interest", which often causes more issues than it solves in terms of amicably splitting the fund.
4. The fourth option, which depends on the spouses' individual financial circumstances, may be a tax effective option for one spouse to make a non-concessional contribution into the fund to be used to pay out the other spouse.
4. Can equipment owned by the SMSF be leased to other members of the same SMSF?
By Andrew Yee, director of superannuation for HLB Mann Judd
Yes, but the lease of the equipment by the SMSF would be subject to strict conditions.
First, the market value of the equipment being leased cannot exceed 5% of the market value of the total of the SMSF's assets.
This is because a lease of an SMSF asset to a member or related party of the SMSF (excluding business real property) is deemed under the superannuation investment rules to be an "in-house asset".
Under these rules, an SMSF is not permitted to invest more than 5% of market value of the fund's assets in in-house assets without breaching the superannuation fund investment rules. An in-house asset is generally defined as a loan or investment in a related party of the fund.
Second, the terms of the lease must be made on commercial terms.
That is, the equipment cannot be leased to a related party for free, or for a lower-than-market-value rental. To do so would mean that the SMSF is providing a financial benefit to the SMSF member, which is prohibited by the superannuation fund investment rules.
These same rules also require all transactions and investments of an SMSF to be made on an arm's length basis.