The Tax Office has released its self-managed superannuation fund independent auditor's report (NAT 11466) for use by approved auditors of SMSFs from 1 July 2007. An approved auditor must give the SMSF trustee a copy of this report on the operation of the SMSF. It does not need to be sent to the Tax Office.
Assistant Deputy Commissioner of Taxation, Ian Read, recently gave a speech on the Tax Office's compliance activities in relation to self-managed superannuation funds (SMSFs) and approved auditors. Mr Read revealed that the Tax Office compliance program for the 2007-08 year is being finalised and will be published and released by the Commissioner early in the new financial year. The compliance coverage of SMSFs will increase to around 10,000 cases for 2007-08 (up from around 3,600 the previous year).
The 1 July 2007 commencement for the Government's Simplified Superannuation reforms marks a significant milestone for the superannuation industry. Most of the urgency surrounding the changes has focused on taking advantage of the one-off opportunity to make a $1m non-concessional contribution before 1 July 2007. However, it is important to revisit all of the changes. The key changes, effective from 1 July 2007 (except where otherwise indicated), include:
tax free benefits from age 60 - no tax is payable on superannuation benefits paid from a taxed source to people aged 60 and over, either as a lump sum or pension
simplified tax for under 60s - tax is still payable on benefits paid to someone under age 60, although simplified rules apply
untaxed schemes - benefits paid from untaxed superannuation schemes (mainly public sector schemes) are still subject to tax at concessional rates according to the recipient's age and amount
reasonable Benefit Limits (RBLs) - no longer apply
aged-based deduction limits - have been removed so that employers and the self-employed receive a full tax deduction for contributions until age 75
Government co-contribution - extended to after-tax contributions by the self-employed
contribution limits - contributions are subject to annual limits to curtail the accumulation of excessive benefits in the concessionally-taxed superannuation environment
concessional contributions cap - concessional contributions (eg tax deductible contributions) above the annual $50,000 cap ($100,000 for those aged 50-74 until 30 June 2012) are subject to excess concessional contributions tax of 31.5 per cent (on top of the 15 per cent contributions tax paid by the fund). The excess contributions tax is levied on the individual who can apply to withdraw from their fund an amount to meet the liability
non-concessional contributions cap - non-concessional contributions (eg personal undeducted contributions from the member's after-tax income) are capped at $150,000 per year (or $450,000 every 3 years for those under age 65). A $1m transitional cap applies for non-concessional contributions between 10 May 2006 and 30 June 2007. Non-concessional contributions in excess of a person's cap are taxed at 46.5 per cent and levied on the individual who must withdraw the amount from the fund to pay the tax liability
no-TFN contributions taxed at 46.5 per cent - where a member's TFN has not been quoted to a superannuation fund by 30 June each year, this 'no-TFN contributions income' is taxed at 46.5 per cent in the hands of the receiving fund
contributions returned if no TFN - a superannuation fund must return non-concessional contributions within 30 days where the member has not quoted a TFN
employers to pass on TFNs - an employer must pass on an employee's TFN to his or her superannuation fund within 14 days of receiving a TFN declaration form, or when the first/next contribution is made on the employee's behalf, whichever is the later
compulsory cashing rules - abolished from 10 March 2006 so that people no longer working after age 65 are not forced to take out their superannuation
flexible benefits - greater flexibility over how superannuation can be drawn down in retirement, either as a pension or lump sum, including leaving some money in superannuation or working part-time and continuing to add to it
pension rules - minimum standards for pensions and annuities have been simplified
employment termination payments - (eg golden handshakes) cannot be rolled over to superannuation and must be paid within 12 months of termination of employment. Separate transitional rules and tax treatment apply where the entitlement to a termination payment was established as at 9 May 2006 and the payment is made before 30 June 2012
social security assets test - from 20 September 2007, the pension assets test taper rate will be halved to $1.50 per fortnight for every $1,000 of assets above the assets test free area
portability - the maximum period for funds to process a request to transfer benefits between superannuation funds has been reduced from 90 days to 30 days
lost super - the Federal Government will take full responsibility for the management of unclaimed superannuation
SMSF regulation - streamlined reporting arrangements apply to self-managed superannuation funds (SMSFs) while the Tax Office's SMSF regulatory powers have been enhanced to ensure the integrity of this important sector. SMSF supervisory levy up to $150pa
SMSF trustee declaration - all new trustees of a SMSF must sign an ATO approved form stating that they understand their obligations and responsibilities. The form must be signed within 21 days of becoming a trustee a declaration. It does not need to be sent to the Tax Office but kept with their other records for inspection by the ATO or an approved auditor.
The Tax Office has reminded taxpayers to start thinking about preparing and lodging their tax return by the 31 October 2007 deadline. The Tax Office will again focus on deductions for work-related expenses, rental property expenses and capital gains from the sale of property and other assets. The Tax Office said it will also focus on:
the compliance behaviour of high income earning executives; and
capital gains from assets sold to contribute to superannuation before the new super changes came into affect on 1 July
