November 2014
Contributions & In-Specie Transfers
Contributions & In-Specie Transfers
Disclaimer
Please note this presentation is to be considered as general advice only. The opinions of the presenter should not be relied upon as providing specific advice for you or your clients.
The information contained within this presentation is based upon our understanding of the relevant legislation, regulations and other materials as at November 2014.
Contributions & In-Specie Transfers
Topics Covered
1. Contributions update
2. ATO requirements relating to contributions
3. Key legislation and regulations relating to SMSF contributions
1. Contributions Update
Contributions & In-Specie Transfers
1. Contributions update
Budget 2014-15 Budget Measures
Concessional contributions
SG rate to increase to 9.5 per cent from 1 July 2014
Will remain at 9.5 percent until 30 June 2018 and increase by 0.5% each year until it reaches 12 percent in 2022/23
Contributions & In-Specie Transfers
1. Contributions update
Budget 2014-15 Budget Measures
Excess non-concessional contributions
Individuals can withdraw non-concessional superannuation contributions in excess of the non-concessional contributions cap made from 1 July 2013 and any associated earnings, with these earnings to be taxed at the individual’s marginal tax rate
Excess non-concessional contributions that are left in the fund to be taxed at top marginal rate*
• * Note: Excess CC left in fund to be added to NCC cap.
Contributions & In-Specie Transfers
1. Contributions update
Increase in excess NCC tax rate
Superannuation (Excess Non concessional Contributions Tax) Act 2007 ‑ – Excess Non-Concessional Contributions to be taxed at 47%
Superannuation (Excess Non-concessional Contributions Tax) Amendment (Temporary Budget Repair Levy) Act 2014 – Increases Excess Non-Concessional Contributions to 49%
However sum of concessional and non-concessional tax capped at 95% tax on excess concessional contributions.
Contributions & In-Specie Transfers
1. Contributions update
Increase in excess NCC tax rate
Superannuation (Excess Non concessional Contributions Tax) Act 2007 ‑ – Excess Non-Concessional Contributions to be taxed at 47%
Superannuation (Excess Non-concessional Contributions Tax) Amendment (Temporary Budget Repair Levy) Act 2014 – Increases Excess Non-Concessional Contributions to 49%
However sum of concessional and non-concessional tax capped at 95% tax on excess concessional contributions.
2. ATO requirements relating to contributions
Contributions & In-Specie Transfers2. ATO requirements regarding contributions
TR 2010/1 Income Tax Superannuation Contributions
Definition of a contribution (Page 9 notes):
“anything of value that increases the capital of a superannuation fund provided by a person whose purpose is to benefit one or more particular members of the fund or all of the members in general.”
Contributions & In-Specie Transfers2. ATO requirements regarding contributions
TR 2010/1 Income Tax Superannuation Contributions
How and when a contribution is made to a superannuation fund?
Transferring funds to the super fund
Rolling over a superannuation benefit from another fund
An in-specie contribution
Increasing the value of an existing asset held by the fund
(Page 9 notes)
Contributions & In-Specie Transfers2. ATO requirements regarding contributions
TR 2010/1 Income Tax Superannuation Contributions
How and when a contribution is made to a superannuation fund (Cont)?
Paying an amount to a third party for the benefit of a member
Forgiving a debt owed by the super fund
Shifting value to an asset owned by the super fund
(Page 9 notes)
Contributions & In-Specie Transfers2. ATO requirements regarding contributions
TR 2010/1 Income Tax Superannuation Contributions
When is a contribution recognised (via transfer of funds)?
Cash payment - When cash received by the fund
EFT - When funds are credited to the fund
Personal cheque - When the cheque is received by the fund
(Page 9 notes)
Contributions & In-Specie Transfers2. ATO requirements regarding contributions
TR 2010/1 Income Tax Superannuation Contributions
When is a contribution recognised (via in-specie transfer)?
When the super fund obtains ownership of the asset from the contributor
Shares - properly executed off market share transfer
Property - legal or beneficial ownership
Others – when fund becomes registered owner or when physical possess occurs in absence of formal registration process
(Page 9 notes)
Contributions & In-Specie Transfers2. ATO requirements regarding contributions
TR 2010/1 Income Tax Superannuation Contributions
When is a contribution recognised (via increasing value of an asset)?
For example, when member makes an improvement to fund’s asset
When ownership of the improvement passes to the fund
When the improvement becomes a fixture of the fund’s asset
A contribution by way of value shifting to an asset owned by a superannuation provider is made when the capital of the fund is increased because of the increase in value of the asset.
(Page 10 notes)
Contributions & In-Specie Transfers2. ATO requirements regarding contributions
TR 2010/1 Income Tax Superannuation Contributions
When is a contribution recognised (via payment of fund liability by member)?
When the fund’s liability is extinguished; or
When the fund’s liability is forgiven; or
If and when a guarantor pays the debt of the super fund
Note: If not treated as a contribution, e.g. member at contributions caps or aged over 65, may be considered borrowing
(Page 11 notes)
Contributions & In-Specie Transfers2. ATO requirements regarding contributions
Case Study 1 (Page 4 notes)
ZZZ Superannuation Fund
[15 Minutes]
3. Legislation and regulatory requirements
Contributions & In-Specie Transfers3. Legislative and regulatory requirements
Case Study 2 (Page 5 notes)
M & M Superannuation Fund
[20 Minutes]
Contributions & In-Specie Transfers3. Legislative and regulatory requirements
Concessional contributions caps
Excess concessional contributions (section 291.20 ITAA 1997):
Year ended 30 June 2014
$25,000 (General Cap); or
$35,000 (Temporary Cap) for those aged 59 or over on 30 June 2013.
Contributions & In-Specie Transfers3. Legislative and regulatory requirements
Concessional contributions caps
Excess concessional contributions (section 291.20 ITAA 1997):
Year ended 30 June 2015
$30,000 (General Cap); or
$35,000 (Temporary Cap) for those aged 49 or over on 30 June 2013.
Contributions & In-Specie Transfers3. Legislative and regulatory requirements
Taxation excess concessional contributions
Section 291.15, excess concessional contributions are included in the member's assessable income for the corresponding year, with the member entitled to a 15% tax offset of the excess contribution. This excess can be released from the superannuation fund if elected.
If not released, excess concessional contributions may be added to the member’s non-concessional contributions.
Contributions & In-Specie Transfers3. Legislative and regulatory requirements
Non-concessional contributions caps
A member's non-concessional contributions cap (NCC) per section 292.85 of the ITAA 1997:
6 times the member's general concessional contributions cap
6 x $25,000 for the 2014 financial year
6 x $30,000 for the 2015 financial year
Not 6 x $35,000 as this is a 'temporary cap' and does not apply
Contributions & In-Specie Transfers3. Legislative and regulatory requirements
Non-concessional contributions caps
Bring forward rule:
Applies to those aged less than 65 at any time during the financial year
In any year (year 1), member able to contribute up to their NCC, and contribute in year 1 also, the non-concessional contributions cap amounts for years 2 and 3
Therefore, NCC using bring forward rule is $450,000 for 2014 financial year and $540,000 for the 2015 financial year
Contributions & In-Specie Transfers3. Legislative and regulatory requirements
Non-concessional contributions caps
Bring forward rule (continued):
Bring forward rule is automatically triggered once the member's NCC has been exceeded
For example, in year 1 member contributes $151,000. Any NCC for years 2 or 3 are then added to this amount
If $150,000 exceeded in ’13, all contributions made in ‘14 & ‘15 are automatically included in ‘13.
← $150,000 in ’15 & ‘16 to ‘14
? ? $150,000 $450,000 $0 $0
30 Jun ‘11 30 Jun ’12 (Yr 1) 30 Jun ’13 (Yr 2) 30 Jun ’14 (Yr 3) 30 Jun ’15 (Yr 4) 30 Jun ’16
Contributions & In-Specie Transfers3. Legislative and regulatory requirements
Member contributions - Other
Section 290.160 maximum earnings as employee condition states that no more than 10% of your income can come from employment services
Section 290.170 notice of intent to claim deduction must be provided to trustee and acknowledged by trustee
Contributions & In-Specie Transfers3. Legislative and regulatory requirements
Member contributions
Regulation 7.04
Refer page 12 notes for acceptance of contributions
Contributions & In-Specie Transfers3. Legislative and regulatory requirements
Timing of contributions
Taxation Ruling TR 2010/1
Refer page 9 of notes for timing of contributions
Contributions & In-Specie Transfers3. Legislative and regulatory requirements
In-specie transfer of assets
Section 66 of SISA – Assets can be transferred from related party
Listed securities
Business real property
Units in related unit trust (conditions apply)
Refer pages 13 to 20 of notes for more information.
Contributions & In-Specie Transfers3. Legislative and regulatory requirements
Case Study 3
A & B Superannuation Fund (Page 7 notes)
[15 Minutes]
Thank you