Welcome to ESUPERFUND’s May Newsletter.
In this issue, we remind you of the minimum pension amount that you are required to withdraw if you have commenced a pension.
We highlight the proposed changes in the 2016/17 Federal Budget that may affect your superannuation planning.
Lastly, we provide you with some knowledge tips about Limited Recourse Borrowing Arrangements.
Client Services Manager
2015/2016 Pension Withdrawals Reminder
If you have commenced a pension (i.e. SABP / TRAP) in your SMSF, you will be required to withdraw at least the minimum pension amount
(and not exceeding the maximum pension amount in the case of a TRAP) from your SMSF prior to 30 June 2016 to comply with the SMSF Pension Rules.
The minimum amount is calculated as a percentage of your super balance based on your age (see the below table) and the maximum amount for TRAP is 10% of your super balance.
If a member does not withdraw the minimum pension payment for a particular financial year,
the tax free status of the SMSF income and realised capital gains may be at risk as the member may not be considered to be in pension phase.
You can learn more about Pensions on our website.
||Minimum Pension Factor
|55 - 64
|65 - 74
|75 - 79
|80 - 84
|85 - 89
|90 - 94
We advise that the 2015/2016 pension notification with the minimum and maximum withdrawal limits will be mailed and emailed to you in the first week of June 2016.
Please contact our office if you do not receive the notification by that time.
2016/17 Federal Budget
The government released the 2016/17 Federal Budget on 03 May 2016.
This Budget includes a number of proposed measures that may affect your superannuation planning.
We have summarized these proposed changes on our website.
We caution that at this time, these measures are proposals only and require the passage of legislation to become effective.
These measures may be subject to change through the implementation process.
Do You Know?
Limited Recourse Borrowing Arrangements
SMSF can use a limited recourse borrowing arrangement (i.e. LRBA) to fund the purchase of a single asset
(or collection of identical assets that have the same market value) to be held in a separate trust. Any investment returns earned from the asset belong to the SMSF.
If the loan defaults, the lender's rights are limited to recovering only that asset held in the separate trust – so the other SMSF assets are still protected.
In April 2016, the ATO released a “Practical Compliance Guideline” for the LRBA financed by a Non-Bank Lender (including related party).
The Guideline set out a number of requirements for the safe harbours of SMSF LRBA, including the RBA Indicator Lending Rates, Loan Term, Loan to Market Value Ratio (LVR) and etc.
The ATO accepts that the LRBA is consistent with an arm’s length dealing if the terms of the LRBA are established and maintained within the requirements set out in the Guideline.
SMSF trustees that have already entered into Non-Bank LRBAs might need to revise the terms of their exiting LRBAs and/or take timely corrective action by 30 June 2016.
Please seek professional advice to ensure that your Fund’s Non-Bank LRBA complies with the ATO requirement if necessary.
You may visit ATO’s website
and watch ATO’s video for further information about LRBA’s.
While managing our first-ever family SMSF, we have been struggling at times to be in compliance with regulations. Fortunately, we have been receiving satisfactory assistance from ESUPERFUND for our queries where ESUPERFUND’s responses are invariably timely and comprehensive. In particular, ESUPERFUND goes the extra mile to provide assistance to non-SMSF issues which greatly assisted our specific circumstance on government pension topics.
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