SUPERCentral News
The “MySuper” changes are the first tranche of the Stronger Super changes. The first tranche (as set out in the Exposure Draft of the proposed legislation) deals with the details of the authorisation to issue a “MySuper” product and the product features applying to “MySuper” products.
The Draft Ruling however maintains that the development of a vacant block of land will not constitute a single asset. The development will cause the nature of the property to be fundamentally changed thereby transforming the asset.
The Draft Ruling clearly states that a sub-division of land from one legal title to two or more titles will not be permissible while the land is subject to a limited recourse borrowing.
In many cases an apartment and its car space are on separate titles. Consequently in buying the apartment two assets will be acquired. However these assets will be linked if they cannot be separately sold and will also be linked in a practical sense in that they form one dwelling. The Draft Ruling confirms that if the two titles cannot by law be separately sold, then for the purposes of limited recourse borrowing they are treated as a single asset.
The Draft Ruling takes the position that the meaning of “asset” should be given, in certain situations, a practicable meaning rather than a purely legal meaning. Normally, “asset” will be taken as having the sense of “legal title”. However, “asset” will be taken as consisting of 2 or more legal titles where these titles are linked: either legally or physically.
The Draft Ruling provides that a SMSF Trustee can enter into an off the plan purchase and use borrowed monies to complete the purchase.
This Draft Ruling, SMSF 2011/D1, released by the ATO on 14 September 2011 deals with a number of controversial issues relating to limited recourse borrowing.
The ATO statistics show that the SMSF sector has continued to grow with 33,106 new funds being established during financial year 2010/11 while less than 500 were wound up during that year.
The AAT has recently heard a case where a taxpayer was issued with a substantial excess contributions tax assessment. During the May 2006 to 30 June 2007 transitional period leading into the current super regime, the taxpayer contributed about $1.5m as non-concessional contributions. The taxpayer’s intention was that this contribution would be shared between himself and another person.
Where a benefit is paid to a super fund member who has not satisfied a relevant release condition what happens?
The SIS Regulations have recently been amended to ensure that the minimum benefit and payment standards do not frustrate the enforcement of forfeiture orders made under various Commonwealth and State acts.
The ATO has recently published data on excess superannuation contributions tax.
In a recent AAT case, the taxpayer was successful in reducing the penalty imposed by the ATO for understating taxable income.
The Assistant Treasurer, Bill Shorten, has confirmed that the Government no longer intends to amend superannuation legislation to incorporate deeming clauses in SMSFs.
On the basis of the Draft Ruling, a commutation is the conversion of future pension payments to a currently payable lump sum. This requires the pension documents to specify with some detail those future pension payments. If the pension payments are not specified, then it is not possible to commute them, so the argument would run.
A lump sum paid from a pension interest will be counted in determining whether the pension interest has satisfied the pro-rata minimum payment requirement before a commutation payment can be made.
Another interesting observation is that the ATO takes the view that a super interest in pension phase will immediately revert to taxable phase once the pensioner has requested the full commutation of the pension.
The ATO has taken the view that the super interest supporting the pension will cease to be in exempt phase when the member who is receiving the pension dies. The super interest will then revert to taxable phase. This is not a new or novel position. The ATO has previously indicated this view. This is one reason why pensions are often established as reversionary pensions (sometimes called auto reversionary pensions).
The Draft Ruling has highlighted a tax management issue which is vital in pension phase. While a super interest is supporting a pension, capital gains and income arising from assets allocated to that interest will be tax exempt.
This Draft Ruling has had a long gestation. Its release has been delayed a number of times.