moving your kiwisaver funds to an Australian Super Fund

If you are an expat new Zealander and you call Australia your home, you might be one of thousands who has Kiwisaver retirement savings. Now, like most, you would think that moving them to an Australian Super Fund would be an easy thing?

Well, its not that simple and its not that easy. It turns out that there are only three funds that allow transfers of kiwisaver retirement savings and then there are the New Zealand retirement and tax rules ,and Australian super and tax rules, to be mindful of, which can make the transfer more complicated.

Here are some steps to consider:

  • Identify a suitable fund. SMSF’s and most Australian super funds do not accept Kiwisaver transfers
  • Provide the fund your Australian tax file number and your NZ IRD number and Kiwisaver rollover form
  • Only the whole balance can be transferred which needs to be below your non concessional contribution limit
  • The amount cannot exceed your Australian non concessional contribution limit per person
  • You may be able to transfer the original kiwisaver funds back to New Zealand should you return to New Zealand
  • Kiwisaver sourced funds,cannot be transferred to a SMSF or to another country and all income or earnings are taxable and form part of the taxable component in your super fund

The non concessional contribution cap limit per person is $100,000 per financial year.Further, your Kiwisaver funds are preserved till age 65 which is when you can access them as a pension payment. Most Australians can access their super via a pension from age 55 – 60 and just like with the contribution of taxed monies into Australian super accounts, all kiwisaver monies are non taxable on withdrawal by dependents and non dependents and form part of the tax free proportion within your super fund.

Its important to consider the benefits gained and lost when transferring retirement savings and importantly the tax consequences to all beneficiaries and the available options to access to these funds. Seeking advice is the best way to manage your Kiwisaver transfers.

Want to find out which funds accept Kiwisaver transfers ??

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W: SMSF administration for crypto, property, gold and diamonds

 

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Budget 2018

BUDGET 2018

A very benign May budget was handed down by the government, compared to last years, with very few changes to super. We have highlighted the significant changes that will impact SMSF trustees and members in this article.

Lost Super

The government has proposed that from 1 July 2019 the ATO will assist with identifying lost super accounts with less than $6,000 in value which will be forwarded to the ATO by retail and industry funds. The ATO is further proposing to consolidate lost super funds to this value with the already active funds in the market using data matching for active member accounts. This will result in an increase of around $6 billion in super being matched with 3 million active super accounts.

First Super Saver Scheme(FHSSS)

Members who make voluntary super contributions( salary sacrifice) up to $15,000 per member per financial year into their super fund, will be able to withdraw a maximum amount of $30,000 per member or $60,000 per couple to help fund the purchase of a first home. The concessional tax treatment of super (15% rate) makes this initiative very attractive for first home savers and this become available from 1 July 2018.

SMSF Loans

From 1 July 2018, the use of Limited Recourse Borrowing Arrangements (LBRA’s) will be included in a member’s total super balance and transfer balance cap. The outstanding loan will now be included in a member’s total super balance, which will be reported to the ATO. This is not a significant deterrent or disadvantage for SMSF property buyers, but it will limit higher income individuals who are close to retirement from buying a property with a loan and commencing a pension where a loan will count towards the $1.6 million transfer balance cap per member.

The repayments of the principle and interest of a LRBA or SMSF Loan from a member’s accumulation account will be credited and debited from the member’s transfer balance account.

Work Test

Members with low super balances below the value of $300,000

Will be given a one-year exemption from the work test for voluntary contributions to super for people aged 65-74. This will enable many older Australians the opportunity of contributing more funds to super to maximise their retirement. This measure commences from 1 July 2019

Example:

John retires on the 1st of June 2020 with only $150,000 in super. He does not meet the work test. Under the new rules, he could put $45,000 at concessional rates (using the carry forward arrangements) and $100,000 in non-concessional contributions.

Examples provided in the budget work papers

Number of SMSF Members

SMSF’s will be allowed 6 members in a fund from 1 July 2019 which represents an increase of  two (2) people from the current maximum of  four (4) persons allowed in an SMSF to cater for larger families

Division 293 – High income earners

Those of you that earn over $263,157 with multiple employers will be able to nominate which contractors or employers are exempt from Superannuation Guarantee payments from 1 July 2018. This measure is intended to reduce the number of people who breach the $25,000 cap on concessional contributions and it further, allows these high-income earners the ability to negotiate a higher income without impacting their super contribution levels.

SMSF Audits

SMSF’s with a clean up to date tax history extending to

  • Individual tax returns
  • Company’s; Trusts,

Will be allowed to be audited every (3) three years instead of annually where the fund has a clean audit history. This will not result in a reduction in audit costs as auditors will need to review activities in the fund over three years.

Claiming Concessional Contributions:

members who are PAYG , who wish to claim a tax deduction for salary sacrifice contributions

must notify your SMSF administrator or accountant and lodge a NAT71121 form with the provider or accountant

The administrator or accountant must confirm that they have received this notice in writing.

You can give a valid notice to your fund if all of the following apply:

  • you are still a member of that fund
  • the fund still holds the contribution. Note that special rules apply for full or partial voluntary rollovers, and situations where there has been a successor fund transfer or a MySuper transfer
  • the notice does not include all or part of an amount covered by a previous notice.
  • the fund has not begun to pay you a super income stream based in whole or in part on the contribution.
  • you have not lodged an application (which hasn’t yet been dealt with by the fund) to split the contribution for which you intend to claim a deduction.
  • you have not yet requested a release of FHSS amounts
  • the notice does not include all or part of an FHSS amount that you have recontributed to your super fund(s).

This deduction can only be claimed via a individual tax return lodgement (ITR)

More Details:  https://www.ato.gov.au/Individuals/Super/In-detail/Growing/Claiming-deductions-for-personal-super-contributions/?anchor=Howtomakeaclaim#Howtomakeaclaim

 

New Tax Rates and thresholds:

 Taxable income V super tax and savings
2018-19
Taxable IncomeTax Rate*Tax in superTax benefit
$0 to $20,542*0%0%**NIL
$20,543 to $37,00021%0%**21%
$37,001 to $87,00034.50%15%19.50%
$87,001 to $180,00039%15%24%
$180,001 to $250,00047%15%32%
$250,000 +47%30%17%
*include low income offset
** low income super offset

NOTE: From I July 2024 the 39% tax bracket will be removed

Pension Loan Scheme

From 1 July 2019 You may qualify if:

  1. You are of age pension age 60 -65 and are a qualified resident
  2. You own a home with a mortgage and you have available equity
  3. You receive less from the age pension due to failing the income or assets test, but not both.

You receive one of the following types of pensions

  • Age Pension /Bereavement Allowance/Carer Payment / Disability Support Pension/ Widow B Pension / Wife Pension

Loan Interest rates are 5.25% and the payments are not taxable, and the amount of the loan will be determined based on what is required, equity in your property and a few other variables.

So,overall a very easy budget to digest and its certainly enhanced the attractiveness of SMSF’s.

Warning: This is general information only. Seek tax, legal and financial advice before implementing any of these measures

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SMSF Crypto Currency investing

Bitcoin, Ethereum and Ripple along with the over 1500 Altcoin investments are proving very popular investments for smsf investors.

There are a lot of things people need to be aware of before embarking on bitcoin or crypto investing, in an SMSF.

3 Things to check, to remain compliant

  1. Who owns the asset ?  – make sure you open a trading account in the SMSF’s name
  2. How are the holdings stored – you cannot store bitcoin or other coins in a software, paper or hardware wallet and keep the wallet at your home or office. It must be independently stored, just like all collectables
  3. Does your trust deed allow for derivatives and collectable investments? and is your investment strategy up to date to reflect the crypto assets?

The Super Laws – SIS Act 1993

Of particular importance to SMSF investors are the super laws and what they say about whether you can or cannot buy bitcoins or altcoins. The good news here is that the super laws ( SIS Act 1994) does not dictate what is allowed and what is not allowed to be invested in super. It does provide guidance on the responsibilities of trustee/members in selecting appropriate investments which are suitable for investing for the fund members retirement. Here are some of the key sections of the super laws that highlight the importance of managing bitcoin and other such assets.

Sis Act Section 62– sole purpose test, requires that investments are suitable for retirement and the provision of death benefits ; the core purpose.

Sis Act Section 4.09–  Requires SMSF members to regularly review and update their investment strategy considering, risk, age and suitable asset allocations within the fund relative to a members circumstances. Crypto assets should be classed as a separate asset class, as they don not conform with existing asset classes.

Sis Act Section 4.09a –  Requires members to identify investments held by an SMSF as owned by the SMSF and clearly separate assets held by members of the fund personally

Sis Act Section 13.18aa highlights the treatment of collectables. What is acceptable and how these assets are maintained.  In particular storage so no personal benefit or present day benefit is gained

http://www7.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_reg/sir1994582/s13.18aa.html

Sis Act Sections 66  – A trustee or a member of an SMSF  must not intentionally acquire an asset from a related party of the fund. The only exception is in the acquisitions of business real property and listed securities

Sis Act section 71   – In -house assets are a investment made by an SMSF with a member/ trustee of the fund, such as a loan, any direct type of investment or via a trust and a lease to a member of the fund. A fund may invest in no more than 5% of the funds value in in-house assets, calculated each financial year. Note:Exemptions exist for business real property.

Sis Act section 109– All transactions must be at arms length, so at commercial rates neither below or above market value

The super laws show that, just as with owning jewellery; which may be used by a member for personal benefit; or a race horse;which could be considered a hobby interest with a present day benefit; or a car collection which is not housed independent of the member;  that, bitcoins held by a member personally via a paper wallet, software wallet or hardware wallet, in the members home or office or within their control, will breach these provisions and thereby render a fund non compliant and  subject to penalties from the ATO.

It is important to check your SMSF trust deed to make sure there are no restrictions on investing in collectables or bitcoin and it is very important that the funds investment strategy shows the level of investment and considerations of risks, asset allocations into such an asset, having regard for members age and time frame to retirement. Research reports on the investment, can further provide evidence of due diligence undertaken, relating to bitcoin investing by the fund.

An SMSF Bitcoin auditor will check the following

a) Where the bitcoins or altcoins are stored and a wallet address will not suffice !

b) The value of the holdings from a reputable exchange  and transaction receipts for buy/sell trades during the year

c) A receipt of proof for the purchase of a hardware wallet in the SMSF’s name and proof of storage services engaged to maintain the assets at arms length in compliance with the SIS regulations

In order to invest in bitcoins and altcoins and remain compliant with super laws, there needs to be measures put in place to ensure that these investment are maintained at arms length, that the fund and its members are not party to early access of super monies or providing financial assistance to ( via a loan ) a member of the fund and that the assets are purchased and stored properly, just as with collectable investments. Some crypto investments involve leverage and others provide distribution payments, which might be deemed as a contribution to the fund. It is therefore important to understand the risks entailed with purchasing some crypto assets, as not all will comply with super laws.

Warning: Always seek legal and financial advice when investing in crypto currency due to the high volatility and uncertainty around this sector

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Contribution Splitting in a SMSF

Splitting concessional contributions amongst members or spouses can be an effective strategy provided that you benefit in the following ways.

1) It creates a Tax-free portion for the receiving spouse – like a re-contribution strategy

2) It’s tax deductible for the contributing spouse ( subject to PSI or the 10% income test) if they are self-employed

3) It can provide early access to pension payments and TTR pensions, for the spouse who is receiving the  payment particularly if they are older than the contributing spouse

So how does it work?

Example:

Tony is 51 years old his wife Amanda is 55 and works part time. Tony wants to split his super ( concessional contributions) with his wife so she can start a tax-free pension as she has met preservation age.

Tony contributes $35,000 in 2014-15 Financial year and claims the split in the 2015-16 financial year

  • Tony (self employed) $35,000 ( 2014-15 FY)
  • Minus tax                $5,250
  • Contribution applied $29,750  to spouse’s account

The super fund or accountant will apply 85% of the contribution ( minus 15% super tax) recorded as a contribution for Tony, who makes the contribution. It is received by Amanda and recorded in her member statement as a tax-free component.

As SMSF’s mainly operate a pooled strategy, there is no money to transfer to another fund in an SMSF. It is simply recorded as received by the spouse on her member balance, as an amount in the tax-free component of her member balance for the financial year where the split was applied.

  • When Amanda is 60, she is able to commence a TRIS or TTR Pension with tax-free money
  • Tony claims a tax deduction for the contribution split
  • Amanda is able to draw an income sooner from a tax-free source, which further creates a succession benefit for their adult children

These are the conditions:

  1. The contribution to be split must be applied to the following year from the year it is received
  2. The receiving member must be under age 65 and not retired
  3. Only 85% of the contribution ( excluding super tax of 15%)  may be applied to the receiving member
  4. You only split concessional contributions, both employer paid and salary sacrificed amounts
  5. A contribution split form must be received by the super fund

 

Warning: Always seek advice on these arrangements as they are complex to administer.

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