Author Archives: Rebecca Edwards

About Rebecca Edwards

With a background in aged care management, Rebecca brings hands on experience and insight into our elder law and aged services areas as well as a thorough understanding of complex estate planning issues and disputes.

Does your SMSF Deed need a post 1 July check up?

On 1 July 2017, significant changes came into force and many more are proposed as a result of the recent federal budget.  So if you haven’t already reviewed your SMSF Deed, do you really need to?

The answer is YES – all SMSF Deeds should be reviewed to ensure that they are up to date and reflective of the changes that have occurred.  SMSF Trustees should really aim to review their SMSF Deeds at least annually as well as when there are significant changes in:

  • Their financial or personal circumstances; and
  • The law governing SMSFs.

Seeking advice from a SMSF specialist lawyer and accountant will certainly offer peace of mind to SMSF Trustees and ensure that the SMSF continues to be compliant and effective.  It is the responsibility of the SMSF’s Trustee to review the Deed before making any decisions or taking any actions so ensuring the Deed is valid and current is an integral part of being an SMSF Trustee.

There are a broad variety of issues that need to be reviewed in an SMSF Deed including:

  • Whether an SMSF member can roll back funds in their retirement pension account to their accumulation phase;
  • The ability to create various death benefit instructions. This is so death benefit recipients do not exceed their transfer balance cap when receiving a death benefit;
  • The ability to roll over a death benefit without losing its death benefit status.
  • Trustees must not accept contributions in certain circumstances and refund contributions that should not have been accepted;
  • Altering the terms and conditions of an income stream. This will allow reversionary beneficiary nominations or will allow changes to the nomination of a reversionary pensioner without stopping the pension; and
  • Determining whether to retain or cease transition to retirement income streams.

Importantly, this list is not exhaustive and there are many other issues that should be examined when reviewing the SMSF Deed including for example, for older Deeds (or poorly drafted Deeds) there may be other issues that need attention or consideration.

A review of the Deed by a qualified SMSF specialist lawyer would bring any such issues to light.  Failure of SMSF Trustees to ensure adequate review of the Deed may mean that the Deed does not permit certain actions and in a worst case scenario, negative financial consequences from issues of non-compliance may occur, for example.

To book your post 1 July 2017 SMSF check-up, contact us today.

SMSF incentives for those looking to downsize their home

As we grow older, it may become more attractive or perhaps even necessary to downsize our homes.  Downsizing may mean moving to more suitable accommodation, a release of equity to support retirement plans or maybe, a move to aged care or retirement living.

Potential benefits of downsizing

From 1 July 2018, homeowners over 65 years old will be allowed to make non-concessional superannuation contributions of up to $300,000 each from the proceeds of the sale of their home if they meet certain criteria such as having lived in the home for at least 10 years.

In summary:

  • Non-concessional contributions to superannuation for each homeowner of a maximum of $300,000 from sale proceeds (that is $600,00 per couple if they were both owners of the home);
  • An exemption from the work test for this cap;
  • Homeowners within excess of $1.6 million in superannuation still able to make these contributions but they will continue to be capped to investments of $1.6 million into income streams; and
  • The full superannuation fund balance fully assessed for Centrelink/Veterans’ Affairs and aged care purposes.

There are also other potential benefits including earnings on the invested funds will be taxed at the superannuation tax rate of 15%, or may be tax-free if rolled over into an income stream, rather than the homeowner’s marginal tax rate.

What next?

It is essential that before downsizing, you seek good quality legal and financial advice about the implications of doing so.  While there are potential advantages to downsizing, in some instances, there may also be unexpected negative consequences.

If you are considering downsizing, contact us for comprehensive legal advice and peace of mind.

 

SMSF Pension Payment Deadline Looms

The SMSF Association has issued a warning to self-managed super fund (SMSF) members in the pension phase to ensure that they have met their minimum pension payments by 30 June.

The SMSF Association’s Chief Executive Officer John Maroney noted that given all the changes underway in SMSF’s, it would be understandable if members “overlooked the compliance obligations as they relate to pension payments“.

Failure to make the minimum pension payments by 30 June could result in negative financial consequences for members including:

  • the assets supporting the pension account are deemed to not be in retirement phase for the entire financial year, meaning it loses its tax exemption status and earnings;
  • capital gains of the fund will be taxed at 15% (or 10% for discount capital gains); and
  • in addition, members in transition-to-retirement phase should ensure that they don’t exceed the maximum payment.

With 48% of SMSF members in pension phase and this figure growing rapidly year on year, the minimum pension payment is an issue affecting many SMSF members.

Members should also take the opportunity to review their SMSF Deeds and Death Benefit nominations before 30 June to ensure they are compliant and cover the significant changes coming into force on 1 July 2017.

If you have any concerns or queries regarding your SMSF, contact us for further advice.

The best Will in the world?

The world is becoming more of a melting pot of cultures as people migrate around the globe.

Australians traditionally like to spread their wings and we are a nation of jet setters with around 1 in 20 of our population living overseas at any one time.  This love of travel means that Australians often die with international assets.

This globalisation of our affairs creates special challenges for lawyers as we need to work not only within the State and Federal Australian legal system but more increasingly within international jurisdictions.

How many wills do you need?

When advising our clients with overseas assets about their estate planning, we as lawyers need to determine how best to document their wishes.  That is, whether a client should have:

  1. A single will dealing with all of their assets regardless of location; or
  1. Multiple wills – one for each country where the client holds assets.

Each client’s circumstances will need to be carefully considered and their estate planning documents carefully reviewed to ensure the appropriateness of using multiple wills.

Clients and their lawyers will need to consider a variety of issues when ensuring the client’s will/s distribute their estate in accordance with their wishes and in accordance with the legal system in the country that assets are held in.

What issues need to be considered?

If you have overseas assets, you need to consider – in conjunction with your lawyer and tax accountant:

  1. Whether the country you own assets in will recognise a will made elsewhere;
  1. Are there any specific requirements when making the will such as who can be a witness or how the will must be executed;
  1. Forced heirship exists in certain countries and this may mean that your wishes simply cannot be carried out because the law decides who shall receive their estate when they die;
  1. Taxation issues needs to be considered and you may be best placed to seek specialist tax advice as part of their estate planning;
  1. Cultural differences may exist such as the refusal of some nations to acknowledge trusts as a proper legal entity whereas often lawyers in Australian advise their clients to include certain trusts in their estate planning strategy; and
  1. Your family dynamics and who might be able to challenge your will and how?

How to make sure your wishes are carried out when you die?

If you have (or intend to have) international assets, we recommend that you seek legal and taxation advice about the best way to ensure that your wishes are carried out in the event of your death.

Lost Superannuation for Executors of Deceased Estates

 

 

Transcription:
Hi, I’m Rebecca from CRH Law and I’m talking to you today about lost superannuation for executors of deceased estates.

Superannuation is, for many, one of their most significant assets. When you factor in the insurance components that many of us have, the death benefit payable to an estate or to a beneficiary can be quite significant. However, unfortunately many people often have numerous superannuation funds that they do not keep track of. This means that often there is lost superannuation, which can be difficult for an executor to locate or find when a person has died, particularly because there is often no paperwork to alert the executor to the existence of that superannuation.

What can an executor of an estate do to locate the lost superannuation? Well, firstly, an executor can speak to family and friends to determine whether they are aware of the existence of any such funds. However ultimately the executor’s responsibility is to ensure that they gather all of the assets of the deceased’s estate together. An application to the Australian Tax Office could be a prudent part of the executorial role.

The ATO holds significant records about lost superannuation. They are able to provide executors with details about existing funds that members may have. The application form is relatively straightforward, however the executor will need some significant information about the deceased person to enable the ATO to do their searches. The executor should provide on the form the tax file number for the deceased if known, the date of birth of the deceased, and also any previous employment history or addresses for the deceased person as well. All of this information helps the ATO to do a faster and more thorough search.

If there are any records that are located, the executor will be advised of the funds within which the deceased held super, and can write to those funds then to look to have the superannuation released to the estate or to beneficiaries.

Is it time to update your Self-Managed Super Fund Deed?

One of the most common questions we are asked is when should a self-managed superannuation fund (“SMSF”) deed be updated.

In our experience, we believe that there are a number of circumstances that give rise to the need to consider whether changes are needed to your SMSF deed:

Changes in the law

Sometimes changes to the law mean that changes need to be made to SMSF deeds.  Having a non-compliant SMSF can have significant negative consequences and it is important to review SMSF deed regularly to ensure compliance with the current legislation.

Time passes and deeds age

There have been many dates of significance in the area of SMSFs.  For example, the introduction of the Superannuation Industry (Supervision) Act 1993.  If your deed pre-dates this then it will almost certainly require major updates.  In 2007, there were further significant changes to the law governing SMSFs and deeds not updated since then would also, likely benefit from being updated.

In addition, there have been many minor changes to the legislation over the years which may mean that updating your deed could be beneficial.

Changes in the nature or purpose of the SMSF

If you intend to change the way you use the SMSF or perhaps do something new or different such as changing from accumulation to pension phase or if you are thinking about borrowing through the fund, then before taking any steps, you should review the deed and consider whether there are any update required.

So when to update?

We recommend that you review your SMSF deed at least annually to ensure that your deed does what it is supposed to both in terms of the law and your circumstances. Other circumstances which will require a review of the deed are:

  • After changes to legislation that impact on SMSFs;
  • If it has not been updated in the last 5 years ; and
  • Where you want to do something in your SMSF which is not allowed under the current terms of the deed.

So, is it time to update your SMSF deed?  Talk to us to find out more about reviewing and updating your SMSF deed.

Capital Gains Tax Confusion

There has been a lot of press this week about what the government will and won’t do in relation to CGT. Here is a summary of what occurred. Unfortunately it is still a “watch this space” for superannuation trustees.

It was suggested that the Prime Minister has been contradicted by those within his own office regarding potential changes to capital gains tax (CGT) discounts and in particular those available to Self-Managed Superannuation Funds (SMSFs). On Monday, Malcolm Turnbull stated that there will no changes to CGT. However, in leaked information circulating among Coalition members on Tuesday, the Prime Minister’s dismissal of changes was contradicted entirely. So for now it appears that the possibility of change to the CGT is well and truly alive.

The leaking note seems to suggest that while changes to the CGT for individuals are off the table, the Coalition are still considering potential changes to other areas that are subject to CGT.

A spokesman for Malcolm Turnbull attempted to clarify the confusion in a statement given to Fairfax Media stating that the PM’s comments on Monday dismissing change to the CGT actually only related to CGT changes for individuals and did not dismiss the possibility of changes to CGT in areas including superannuation.

Labor recently announced that CGT concessions would be reduced to 25 per cent from the current 50 per cent from 2017 as they seek to restrict negative gearing to new property only.   In response, the PM countered that such policy would “smash” the country’s property values.

Saul Eslake, a leading economist stated “there is almost nothing they [the government] can do on CGT having ruled out Labor’s proposal”.

He went on further to say that, “the Henry review proposed reducing from 50 per cent to 40 per cent the CGT discount and Labor is proposing going to 25 per cent, that’s quite a big change.” “I’m assuming from what he [Mr Turnbull] said yesterday he is ruling out doing what Henry recommended, which is a pity, it was sensible, there is no reason the Coalition couldn’t have done it.”

Mr Eslake said that in his opinion the government has only four measures left for reform given what they have ruled out so far. He suggested that they are:

  1. Tightening the rules on the tax treatment of superannuation which alone could raise in excess of $6 billion per annum;
  2. Taxing trusts in the same way that companies are taxed;
  3. Altering fringe benefit tax arrangements; and
  4. Changing down Australia’s high tax free threshold for those who earn the highest.

Watch this space for further updates.

Does my Will need to be fair?

 

Transcription:

This is Rebecca Edwards at CRH Law talking to you today about whether your Will needs to be fair. The short answer to the question, “Does your will need to be fair?”, is no, it does not. As a Will-maker, you’re entitled to make your Will in any way you choose fit. Your Will should be a reflection of your wishes, regardless of whether a beneficiary or potential beneficiary feels that your Will is unfair. However, you should be aware that there are certain laws which allow eligible beneficiaries to bring challenges or claims against your estate where they feel that they have not been provided for or where they feel that they have been inadequately provided for.

There are certain people who are eligible to bring a claim against a person’s estate, where they feel that they have been unfairly provided for. These people include spouses and de facto spouses in some circumstances, children and also stepchildren in some circumstances and also dependents. On the one hand, a Will-maker has the right to make their Will in any way they choose but this needs to be balanced against the potential risks of someone bringing a challenge against your estate. As estate planning lawyers, there are certain things that we can do to help you make sure your wishes are carried out in your Will and also to structure your assets in such a way that it reduces the risk of challenge to your estate. There are also a number of other things that we can help you to put in place to ensure that your Will and your wishes are carried out.

NDIS ROLL OUT DELAYS

Reports by the Daily Telegraph highlight that many Australians are still waiting access to the long awaited NDIS. Ms Folbig, a Sydney mum has accrued a $300,000 disability debt caring for her two disabled children as she awaits the roll out.

Up to 9,000 people have so far benefited from trials of the $22 billion NDIS and most participants applaud the extra help they have received from the scheme. However, there are still 450,000 families and individuals waiting to get a disability plan and who do not know when the scheme will reach them.

The scheme is expected to be fully rolled out in the ACT by 2016, by 2018 in NSW and all over the country by 2018-19 but which regions will get it when has not been revealed.

The minister in charge of the NDIS, Senator Mitch Fifield, told The Sunday Telegraph the Federal Government is “not looking for a reason or a rationale to delay” the scheme. “We want it to be rolled out as quickly and effectively it can be,” he said. However, he conceded it could be another six months before the plan for the full rollout is public in mid- 2015 with bilateral negotiations with each state now underway.

It is likely the scheme will be rolled out in a different way in each state with some considering a geographical rollout, others by age cohort and some looking using a waiting list approach that will provide services to those who have none first.

From July, the government began collecting $3.5 billion a year through a half a per cent hike in the Medicare Levy to fund the NDIS but has so far spent just $400 million. Disability groups fear there could be pressure to delay the scheme to prop up the budget. Senator Fifield says the scheme was funded for the next four years in the May budget.

“People need to see commitment to the timetable being made real and that it has all the elements to allow for it to be in place,” spokesman for the Every Australian Counts Campaign, John Della Bosca, said.

To move to full rollout, the scheme will need to expand from the current 9000 participants to 460,000. The current 100,000-strong workforce needed to support the scheme will have to double.

There are already disagreements over whether the $38 an hour funding for care under the scheme is adequate and some providers are closing their doors because they cannot break even. The funding will be cut next year to $35.77 an hour.

A State of the Disability Sector report, to be released this week, has found four out of five disability service providers believe the policy environment they are working in is uncertain and seven out of ten think the government is not responding to their needs.

National Disability Services says providers need a plan for the full roll out from the government so they can plan their services to meet the demand. Some families in trial sites for the NDIS are still facing 12 month delays to acquire equipment like standing frames and wheelchairs.