• Quarterly update – June 2015

    This webinar discussed:

    • refund of excess non-concessional contributions
    • recent ATO alerts and determinations
    • SuperStream – what it means for you
    • compliance update.
     

    See also:

    Your questions answered

    The following questions were asked during the webinars we ran in June 2015.

    The questions have been separated into the following categories:

    TA 2015/1 – Retirement planning / dividend stripping

    Is there any way that a person can use retained earnings in their company to save for their retirement through their SMSF?

    Yes. There are a variety of ways that they might do this depending on their own circumstances and the circumstances of their company and SMSF.

    For example, a person can pay themselves dividends from the company provided that the company’s governing rules allow it. The person would need to include the dividends in their personal income and pay any tax that is due on that income. They can then contribute the money to their SMSF as personal contributions provided they don’t exceed the non-concessional contributions cap.

    While there are a variety of acceptable ways to use the retained earnings in a person’s company to save for retirement, there are also unacceptable arrangements – and Taxpayer Alert 2015/1 draws attention to one of these.

    See also:

    • TA 2015/1 Dividend stripping arrangements involving the transfer of private company shares to a self-managed superannuation fund

    ATO ID 2015/10 – Buy-sell agreements, insurance and the sole purpose test

    I thought that SMSFs could buy life insurance for members. Why is it a problem if there is also a buy-sell agreement?

    An SMSF can purchase an insurance policy that will pay a benefit to a dependant of a member if the member dies. An SMSF can also provide insurance for a member for an event that is consistent with another condition of release of the member's superannuation benefits.

    However, in the case described in ATO ID 2015/10, the manner and circumstances in which the SMSF came to hold the insurance policy lead to the conclusion that the overall arrangement breached the sole purpose test.

    See also:

    SuperStream

    Does my SMSF need to sign on with a clearing house to accept SuperStream payments?

    No. SMSFs do not need to register with a clearing house to accept SuperStream payments.

    Clearing houses, like the one that the ATO provides, are a service that some employers choose to use to make it easier for them to make payments for their employee’s super.

    All an SMSF needs is:

    • a bank account
    • an electronic service address (see next question), and
    • an ABN.

    When the SMSF receives a payment directly from an employer or via a clearing house, the money will be deposited directly into the SMSF’s bank account and the SMSF will receive a message through their electronic service address that includes information like who made the payment and which member it’s for.

    See also:

    Can I use my email address as the electronic service address?

    No. SuperStream contributions messages are not emails and you can’t receive them through an email account. SMSFs need to have an electronic service address and, once SuperStream applies to their members' employer, they will need to provide their electronic service address to the employer before the employer can send contributions to them.

    If an SMSF does not have access to an electronic service address through an existing service provider, it will need to register with an SMSF messaging provider.

    The SMSF messaging provider will provide the SMSF with an electronic service address (alias) that it can give to its members’ employers. When an employer pays a contribution to an SMSF, they will also send a message to your electronic service address using the SuperStream standard. Your SMSF messaging provider will receive the employer contributions message and send it to you in whatever format you have agreed on. Some SMSF messaging providers charge a fee whereas others do not.

    See also:

    Is it advisable to have an electronic service address just in case we get asked for one?

    In many cases, yes, as unless your members' employer is a related party of the SMSF you will need to have an electronic service address.

    While some messaging providers charge a fee, there are others that do not - so you may not need to pay anything to get an electronic service address for your SMSF. It would also mean that you will be able to put it on the SMSF annual return which will mean that the ATO will be able to pay your SMSF payments for super co-contributions, low income super contributions and ATO-held super (if applicable).

    What happens if an SMSF does not provide its bank account and electronic service address details to a member’s employer?

    If an employer doesn’t have the required information by the time they need to make their first SuperStream payment, they won’t be able to send the contribution to the SMSF and may have to pay the contribution to their default fund to meet their super obligations.

    The employer could also refer the SMSF to us and we could impose a penalty.

    Does an SMSF need to get an electronic service address if all the members of the SMSF are employed in their own company?

    SuperStream will not affect an SMSF if the only contributions it receives are from related-party employers. An example of a related-party employer is where a member receives employer contributions from their own business.

    However, an SMSF would need to comply with SuperStream if a member worked for an un-related party employer (in addition to the work that they did for their own company) and that employer made contributions to the SMSF on behalf of the member. In order to comply with SuperStream, the SMSF would need:

    • a bank account
    • an electronic service address, and
    • an ABN.

    See also:

    How can clients that don't use computers comply with SuperStream?

    SuperStream is part of government policy to increase the efficiency of business through greater electronic systems. Part of the SuperStream change process is for employers to consider their current business practice.

    Clients who do not process electronic payments themselves, may be able to make use of a commercial clearing house or the free Small business superannuation clearing house (for employers with 19 or fewer employees).

    See also:

    Exempt current pension income

    If I only make a single payment every year, do I have a series of payments as required to satisfy the definition of an income stream in TR 2013/5?

    An income stream is generally defined as a liability of the fund to pay a member a series of periodic payments that relate to each other. Where a fund has a liability to make a single payment each year for a number of years, this can satisfy the definition. However, if the liability is only to make a single payment for one year, this will not meet the definition of an income stream.

    See also:

    • TR 2013/5 Income tax: when a superannuation income stream commences and ceases

    Can the SMSF underpay their minimum pension payments by 1/12th every year?

    No. No underpayment of the minimum pension amount is allowed by law.

    If an SMSF fails to meet the minimum pension payments, we may allow an exception for a small underpayment due to a genuine mistake or factors outside the trustee's control, where certain conditions have been met. However, this will only apply on the first occasion; if an SMSF fails to meet the conditions again, they would need to write in so we can determine whether an exception can be applied.

    See also:

    Misuse of SMSF auditor numbers

    Are you able to tell me which SMSFs have quoted me as their auditor on their SMSF annual return?

    At this stage, we are not sending out lists of SMSFs to auditors. If you are concerned that SMSFs may have misused your auditor number, we encourage you to contact us. You can provide us with a list of the SMSFs that you actually have audited and the years that you have audited for each SMSF. We will check your list against our annual return data and investigate any discrepancies.

    You can contact us at ATOSMSFauditorteam@ato.gov.au.

      Last modified: 21 Jul 2016QC 49079