The information in this presentation has been prepared by Accurium Pty Ltd ABN 13 009 492 219 (Accurium). It is general information only and is not intended to be financial product advice, tax advice or legal advice and should not be relied upon as such. Whilst all care is taken in the preparation of this presentation, no warranty is given with respect to the information provided and Accurium is not liable for any loss arising from reliance on this information. Scenarios, examples and comparisons are shown for illustrative purposes only and should not be relied on by individuals when they make investment decisions. We recommend that individuals seek professional advice before making any financial decisions. 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.

2020 Federal BudgetSuperannuation related measures

Budget superannuation measures

Update on other matters of interest for SMSFs

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Federal Budget Webinar

Agenda

Superannuation measures from the Budget

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• All (relatively) quiet on the superannuation fund front

• Measures to re-start the economy

• Personal tax cuts brought forward

• Incentives for business to buy new equipment; hire apprentices; hire new employees; cut FBT admin costs and tax, get back tax paid in prior profitable years

• Additional support payments for those on certain Government benefits

• CGT exemption for granny flat arrangements with formal written agreement

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Federal Budget 2020

Tax, jobs and spending

Refer Accurium TechHub for our Federal Budget Report o the above and further measures

• No 3rd tranche of COVID-19 early access to super

• No change to SG implementation timeline in Budget 2020-21:

• Currently 9.5% in 2020-21

• Increasing to 10% on 1 July 2021 → 0.5%↑ each 1 July until 12% from 1 July 2025

• Contribution caps remain the same

• No TBA debit for macroeconomic loss

• No change to taxation of superannuation fund income

• No change to taxation of superannuation benefit payments

• No SIS changes affecting SMSFs!

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Superannuation

What didn’t change

• Super reforms – better outcomes for fund members

• Previously announced COVID-19 response package

• Deferred start date for various super measures

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Superannuation

Budget measures

• Super follows member to new job

• Every year 1.6m people change jobs

• 470,000 people enter the workforce each year for the first time

• From 1 July 2021 - employee’s existing super account will be ‘stapled’

• Avoid automatic creation of a new (default) super account upon new employment

• Employee can still elect to open a new account

• This measure will result in 2.1 million fewer unintended multiple accounts over 10 years, saving workers about $2.8 billion by avoiding duplicate fees, insurance and lost earnings across that time

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Super reforms

Super account to follow an employee

Data from Government information sheet “Your future, your super”

Phase 1 – 1 July 2021

Employers no longer automatically create new default super

Obtain fund information from ATO via online services, if not provided by employee

Phase 2 – 1 July 2022

ATO provide new service to employers from 1 July 2022

Enable employer payroll software to automate communications with ATO

Removes need for manual data entry of fund details

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Super reforms

Super account to follow an employee

Where employee is new to the workforce and does not have a super account and does not

select fund → Employer pays super to

nominated default fund

Display quarterly updated ranking table, highlighting underperforming products

Link to the fund’s website to select a product from the table of MySuper products

Show current super accounts + allow selection of existing super accounts

Provide a prompt to consider consolidation of super accounts, where more than one held

Interactive YourSupercomparison tool (MySuper)

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Super reforms

Comparing MySuper fund performance

• Based on information funds report to APRA & developed in consultation with Treasury

• A typical Australian already in the workforce at age 50 could be around $60,000 better off at retirement

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Super reforms

Holding fund to account for underperformance

From 1 July 2021 – MySuper products subject to annual performance test

1st test requires underperforming funds to inform members by 1 October 2021 + YourSuper comparison tool (+ listed as underperforming)

Members to be made aware when their fund is underperforming

Funds that fail two consecutive annual underperformance tests will not be permitted to accept new members unless their performance improves.

From 1 July 2022 – annual performance test to include ‘trustee-directed products’ outside of MySuper

• Ensure that trustees only use member’s money to maximise retirement savings

• Strengthen obligations on trustees to act in the “best financial interests” of members

• Anti-avoidance measures covering payments to a third party

• No materiality threshold

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Super reforms

Increasing transparency and accountability of superannuation trustees

“…..the onus on demonstrating compliance with the new duty will be reversed so that trustees must establish that there was a reasonable basis to support their actions being

consistent with members’ best financial interests.”

• Temporary access to super – 2 tranches:

1. $10k up to 30 June 2020;

2. $10k - 1 July 2020 to 31 December 2020

• Cut off date for 2nd tranche 31 December 2020 (need ATO determination → super fund)

• ATO ongoing compliance review of eligibility (ATO QC 62932)

• Temporary 50% reduction to minimum pension drawdowns for account-based pensions and market linked pensions for 2019/20 and 2020/21

• Beware of recategorising payments in excess of revised 50% minimums in 2019/20

• Paid prior to 25 March 2020

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Previously announced COVID-19 response package

Drawdown measures

• Purpose: SMSF trustees to formulate a retirement income strategy for their members

• In addition to Investment, risk management and insurance strategies

• Transition from accumulation to the de-cumulation phase

• Operates alongside existing covenants in the SIS Act

• Start date deferred to 1 July 2022

• Allows drafting to take into consideration Retirement Income Review.

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Deferral of timeframes for start dates

Retirement Income Covenant

• Increase maximum number of members for SMSFs and SAFs from four to six

• Date of Royal Assent

• Choosing preferred method for claiming ECPI for SMSF with no 'disregarded small fund assets’

• 1 July 2021

• Remove requirement for SMSF wholly consisting of retirement phase accounts to obtain actuarial certificate when claiming ECPI under proportionate method

• 1 July 2021

• ATO pay lost and unclaimed super directly to KiwiSaver accounts

• Six months after Royal Assent

• Facilitating closure of eligible rollover funds implementation dates deferred to allow further time and flexibility for super funds to transfer amounts to the ATO

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Deferral of timeframes for start dates

Previously announced measures

SMSFs – other updates

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Waiting enaction, finalisation or guidance……

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• LCR 2019/D3: application of the amendments to the NALI rules re general expenses

• Extension of bring forward rule for non-concessional contributions for 65 & 66 yo’s

• Re-reporting requirements of TBA events for pre 1 July 2017 MLPs & Life expectancy pensions

• Application of SMSF administration penalties & remission

• SMSF Auditor independence requirements

• Consideration of application of expenses that are general in nature, e.g. accounting fees, advisor fees

• Question of nexus of general expense with all fund income

• PCG 2020/5 operating until 30 June 2021

• Still need to consider asset specific expenses, e.g. rental property expenses

• Service provided by business or employee of business using business resources

• Less than arm’s length price paid for service

• Applies from 1 July 2018

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LCR 2019/D3

Application of amendments to NALI provisions

TechHub recorded webinar “New rules for

NALI and NALE”

• ‘Work test age’ increased to 67 from 1 July 2020

✓ SIS regulations amendment

• Extension of bring forward rule for non-concessional contributions for 65 & 66 yo’s

• Bill in the Senate – One Nation amendments

1. Re-contribution of COVID-19 early release up to 30 June 2030 (no deduction)

2. Increase concessional cap - $10k for each year older than 66 up to age 71

3. Allows those earning up to $300k to take compulsory super above $25k cap as wages

• Not in Government list of Bills to be debated 6-8 October 2020

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Bring forward rule for non-concessional contributions

Proposed changes waiting enaction or finalisation

Treasury Laws Amendment (More Flexible Superannuation) Bill 2020

• New method to calculated special debit value: Treasury Laws Amendment (2019 Measures No 3) Bill

• Royal Assent 22 June 2020

• Applies from 1 July 2017

• ATO reviewing compliance approach and have said:

• Fund will need to review the information already reported & consider whether needs to be re-reported

• Intend to provide further guidance by end of November 2020 as to when retrospective reporting to be done

• No re-reporting for a deceased member

• Acknowledge where SMSF wound up not possible for reporting to be reviewed.

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TBA event reporting

Pre 1 July 2017 Market linked and life expectancy pensions

TechHub recorded webinar “The latest on

complying pensions in an SMSF”

• ATO to release Administrative Penalty Practice Statement

• Planned release in March 2020 → delayed due to COVID-19

• converting remaining internal practice notes – dealing with directions to educate and rectification directions to Practice Statements

• Add to existing Practice Statements

• PS LA 2006/17 – disqualification of individuals

• PS LA 2006/18 - enforceable undertakings

• PS LA 2006/19 – issuing a notice of non-compliance.

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ATO SMSF enforcement action

SMSF penalty regime

Total admin penalties:

• 2017/18 – 169 SMSFs totalling $1.7m

• 2018/19 – 146 SMSFs totalling $3.1m

SMSF trustee can request remission of Administrative penalty

• 75% of admin penalties fully remitted

Harder approach to request for remission

• Serious offences

• Repeat breaches

• Amount of self rectification done by trustee(s)

Minimum will be an education direction

• Can impose more than 1 type of enforcement action

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SMSF Auditor independence

Review of approach

Partner SMSF Auditor

SMSF compliance team:Admin & annual compliance

Prepare annual financial statementsAttend to periodic compliance

reportingPrepare SMSF annual return

SMSF Audit team:

Attend to annualPart A – financial statements

Part B – super compliance

Independent

Accounting Firm Audit Firm

Rent relief:

• National Cabinet Mandatory Code of Conduct

• Applies to commercial lease: 4 April 2020 for duration of JobKeeper (27 Sept 2020 → 31 March 2021)

• State and territory based rules for residential property

• Proportionate, reasonable and due to financial effect of COVID-19 + documentation

LRBA related party loan relief:

• Phase 1 relief – initial 6 months

• Phase 2 relief – potential additional 4 months

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COVID-19 related issues

Ongoing

• Email service for SMSF trustees and tax agents to deal with commutation authority

• Understand why commutation authority has been issued & what needs to be done

• Identify and rectify any reporting issues

• Duplicate reporting due to:

• Not realising TBA event previously reported

• Change in reporting platforms and change in member identification number

• Not checking which TBA events have been reported by previous accountant for new SMSF client

• Not reporting pension commutations when transferred to another fund

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SMSF dealing with commutation authority

ATO support extended to 30 November 2020

ATO Quick Code: QC 62689SMSFRegulatoryContraventionVoluntaryDisclosure@ato.gov.au

The information in this presentation has been prepared by Accurium Pty Ltd ABN 13 009 492 219 (Accurium). It is general information only and is not intended to be financial product advice, tax advice or legal advice and should not be relied upon as such. Whilst all care is taken in the preparation of this presentation, no warranty is given with respect to the information provided and Accurium is not liable for any loss arising from reliance on this information. Scenarios, examples and comparisons are shown for illustrative purposes only and should not be relied on by individuals when they make investment decisions. We recommend that individuals seek professional advice before making any financial decisions. 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.

Contact us

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Questions?

We are proud to be Accredited Educators of the SMSF

Association. Membership of the Association offers SMSF

specialist qualifications, CPD opportunities, advocacy on

behalf of the sector, part of professional community.

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Visit the SMSF Association for information: https://www.smsfassociation.com/membership