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Borrowing in SMSF become more popular.

Since 2007 self-managed superannuation funds, adhering to specific requirements, have been able to use borrowed monies to purchase investments. These structures, referred to as limited recourse borrowing arrangements (LRBAs) have been getting more and more popular.

In 2009 there were $500,000,000 worth of borrowings, this increased to $1,400,000,000 by 2011, $2,660,000,000 in 2013 and $2,800,000,000 in 2014. Whilst this looks like a large amount, it represents less than half of one percent of all SMSF assets.

Largely LRBAs have been used to purchase commercial properties, however, residential investment properties are becoming more popular.

Before entering into any borrowing arrangements it is important to seek professional advice.

With the beginning of the new financial year, there have been increases in concessional contribution caps for many people. For people 49 and over on the 30th June 2014 your new contribution limit increased to $35,000. For everyone under 49 contribution limits have increased to $30,000.

If you currently have a salary sacrifice in place, now might be good opportunity to adjust the amount to ensure you take full advantage of the increase. For substantially self-employed people, keep in mind the increase is available for you as well.

In line with the increase in the concessional contribution cap is an increase in the non-concessional cap from $150,000 to $180,000. Always be careful when considering making large superannuation contributions and if in any doubt seek professional assistance.

There has been a lot of coverage of the new ATO penalty regime that came into force on the 1st of July 2014. Whilst it is true that the regulator now has access to a raft of potential financial penalties that can be imposed on trustees of self-managed superannuation funds, it is most important to note, there is exactly no penalty for following the rules.

The new penalties, which are imposed on the trustees not the fund, range from $850 to $10,200 depending upon the deemed severity of wrong doing. The big ticket items, providing financial assistance to members or relatives, inappropriate borrowings and breaching in-house asset rules generally require a deliberate action by the trustee.

It is interesting to note, since the penalties are imposed on the trustee, where there is a corporate trustee there is one penalty, whereas, if there are multiple individual trustees, each trustee may be personally liable for the whole penalty.

If you have any doubt about the appropriateness of a transaction you are considering be sure to seek professional advice. It is easier to not enter the transaction than to try to unwind it and face financial penalties.

Military Superannuation

From 1 July 2016, the Government will establish a modern fully funded, accumulation superannuation scheme called ADF Super - for new members of the Australian Defence Force (ADF).

The existing Military Superannuation and Benefits Scheme (MSBS) will be closed to new members from 1 July 2016.

ADF Super will apply to those joining the ADF from 1 July 2016 and those serving and returning members of the MSBS who choose to join the new scheme.

Importantly, current members of the MSBS who are serving or who leave and rejoin the ADF from 1 July 2016 can choose to stay in that scheme, or to join ADF Super.

There will be no compulsion to transfer to the new arrangements.

Under the new arrangements, the Government will pay a 15.4% contribution to a member's chosen superannuation fund.

The contribution rate will increase to 18% for any period in which members are serving in war-like operations.

Serving ADF personnel covered by the new arrangements will also be covered by statutory death and disability arrangements consistent with the defined benefit arrangement currently in place under the MSBS.

The new arrangements will allow ADF members to choose which superannuation fund they belong to and, for the first time, give those members the ability to transfer their accumulated benefits to a new fund if they leave the ADF.

There will be no change to the superannuation arrangements for existing MSBS members, but they may elect to be covered by the new arrangements. There will also be no requirement for ADF members to contribute to their superannuation under the new arrangements.

The Minister for Defence, Senator David Johnston, said this will provide greater flexibility for individuals in how they manage their finances at various stages of their working life.

According to the Government, the new arrangements will be more flexible than the MSBS, as members will be able to transfer superannuation benefits to a fund of their choice.

ADF Super will be managed by the Commonwealth Superannuation Corporation. The introduction of new fully funded arrangements will reduce the Government's unfunded superannuation liability by an estimated $126bn by 2050.

Date of effect - The measure will apply from 1 July 2016.  

If you have any question please call us - 02 6927 0500

Source: Budget Paper No 2 [p 75]; Minister for Defence and Minister for Finance, joint press release

Special Client Alert Budget 2014

Budget 2014

After weeks of speculation, Treasurer Joe Hockey has handed down his first budget.

The flavour of the whole budget came down to a few key words "It is time for us, for all of us, to contribute and build".                 

The budget asks everyone to contribute and it delivers some building blocks for future economic growth.

Click here to read the key announcements that may affect you, your family and the business community.

RBA Rates on Hold

With the Federal Government proposing significant cuts in its upcoming budget, the Reserve Bank of Australia has decided to keep the official cash rate on hold at 2.5 per cent at its meeting today. The RBA has kept the cash rate on hold since last August, maintaining a period of interest rate stability.

This is good news for property buyers and homeowners, who are taking advantage of low interest rates to get ahead. There has been a lot of activity in property markets across the country, with high auction clearance rates a feature during the busy autumn selling season and investors leading the way amongst buyers.

One of the major factors influencing the RBA to keep the cash rate unchanged at its historically low level is the high Australian dollar, which is impacting our export markets and general economic recovery. Analysts agree that we can expect interest rates to remain low as long as this situation continues.

In light of the low interest rate environment, there is a lot of competition in the loan market. Lenders are offering some great deals to those looking to purchase their first home, invest or refinance. To find out more about how the low interest rates could help you get ahead, just give us a call.

Keep an eye on your pensions

Running a pension through your self-managed superannuation fund can be a very tax effective way to build for and fund your retirement.  Earnings on assets in your super fund that are used to fund a pension are tax free (i.e. effectively 0% tax rate). There are however, a few things you need to bear in mind.

There is a minimum pension payment that must be made prior to the end of the financial year, this minimum pension is based on your age at the beginning of the year and the balance of your account. The following table shows the current minimum pension requirements.


Minimum Pension
















For anyone under 65, who has not retired, there is a maximum pension of 10% that can be drawn in each financial year.

Pension payments must be made in cash. Once the payment is made, the money can be used at your discretion and in certain circumstances (e.g. under 65 years old) can be re-contributed to your super fund.

New penalty regime

The former government left 92 pieces of proposed but unlegislated tax and superannuation measures in the pipe line. Of these proposals, one measure that has passed and comes into effect  on 1 July 2014, is the new penalty regime for Self-Managed Superannuation Funds.

Currently the ATO has limited options to penalise trustees for not abiding by the rules, including causing the fund to become non-complying, costing the fund up to 46.5% of its value, or imposing civil penalties on the trustee.

The new measures create a range of penalties that become incrementally more expensive depending upon the severity of the breach. These penalties are imposed on the trustee, not the fund, and cannot be reimbursed from the fund.

Some examples include;

$850 for failing to provide ATO with requested information

$1,700 for failing to prepare financial statements

$10,200 for lending money to relatives


New contributions opportunity on the horizon

Superannuation contribution limits will increase from 1 July 2014, with the increase depending on your age as at 30 June 2014.

In the 2014/15 financial year the concessional (deductible) contribution cap for people 49 and over as at 30 June 2014 will be $35,000 (it was also $35,000 in 2013/14, but only for those aged 59 and over at 30 June 2013)

The general concessional contribution cap for younger Australians increases from $25,000 for those aged under 59 at 30 June 2013 to $30,000 for those aged under 49 at 30 June 2014.

By virtue of the fact that the non-concessional (undeducted) contribution cap is 6 times that of the general concessional cap, this cap will increase to $180,000 from 1 July 2014 regardless of age. Similarly, the current 3 year "bring forward" rule for undeducted contributions for people under 65, which allows contributions up to $450,000 in a three year period, will increase to $540,000.

To put this into perspective, a couple aged in their 50s may be able to contribute $1,150,000, (being 2 non-concessional contributions of $540,000 and two concessional contributions of $35,000) without breaching their cap.

Financial Year

General Concessional Contribution Cap#

Contribution Cap for older contributors*

Non Concessional Contribution Cap

3 year "bring forward" Contribution Cap











# Members under 59 at 30 June 2013 and people under 49 at 30 June 2014

*Members over 59 at 30 June 2013 and over 49 at 30 June 2014.

Satisfaction in retirement

As seniors week draws to a close it a good time to remember that a great financial situation is key to a successful retirement but that's not all that requires planning. True happiness comes from lifestyle.


Retirement should never be a sudden decision or a rushed experience. The most successful retirements in terms of satisfaction and enjoyment are planned and involve goals and milestones relating to lifestyle.


According to Dr Tim Adair, Director of the National Seniors Productive Ageing Centre, planning for one's retirement lifestyle should begin well before retirement. It should include a strategy to transition out of the workplace and a dedication to filling one's retired life with meaningful and rewarding activities.


"Just as it is with finances, the earlier you begin planning your retirement lifestyle the better your lifestyle consequences will be", Adair says. And he's not voicing an uneducated opinion.


Adair's organisation undertakes research into issues affecting those over the age of 50 and acts as a link between the academic community and the public by communicating vital knowledge.


"Many people find work is a major part of their identity so sometimes it's not a good idea to suddenly retire", he says.


"There are options including moving to part-time work or taking long-service leave then returning â€" sometimes retirees tell us that all they really needed was a long break from work. Another possibility is to move into a mentoring role so your experience and knowledge continues to be utilised, appreciated and valued."


While you don't need to have specific activities diarised every day for the next three decades, you should at least develop a broad understanding of the types of undertakings that will fill your time. Golf and gardening are fine, but not enough to fill seven days each week.


"There are social and health issues to consider. Are you healthy and do you eat well? Have you thought hard enough about where you're going to live, whether living in a big, empty house or whether moving away from your community to a small holiday house down the coast is a good idea?"


Finally, Adair says, plan for learning and personal growth. This could come via travel, courses, volunteering, consultancy work or preferably a mix of everything.


"Education and travel enrich lives and keep people physically and mentally active. Research proves

physical and mental activity prevent dementia further down the track so any activity that sees people developing knowledge, meeting new people and having meaningful experiences will add to quality of life."

Call us today, so we can help you have a successful retirement - Wagga 02 6927 0500 l Cootamundra  6942 0300
l Young 6381 4200