Ask Max: Your questions answered

Rollover periods, contributing in pension mode, SMSFs and non-residents, super bank accounts and more.

PORTFOLIO POINT: Max Newnham has spent 30 years working with – and writing about – small businesses and SMSFs. Each week he draws upon this experience to answer the questions of Eureka Report members.

This week:

  • How quickly must a rollover request be actioned?
  • Can I still contribute once my fund is in pension mode?
  • Will an off-market fund transfer trigger capital gains tax?
  • Can non-residents start a SMSF?
  • Does having an online bank super account infringe any rules?
  • Does babysitting for our daughter satisfy the work test?
  • How long can it be before my SMSF generates a return?

How quickly must a rollover request be actioned?

I am setting up some investments and separately an SMSF for my wife and I. It is well over a week now since my current superannuation fund confirmed the rollover had been actioned yet the money is still to hit my SMSF account. Can you confirm if there is any legislation or requirements for these payments, some of which are quite substantial and while delayed leaves the holder "out of the market", to be made in a timely manner?

When the new superannuation system started on July 1, 2007 superannuation funds had to action a request for rollover within 30 days of receiving all required information instead of the previous 90-day limit that applied.

Can I still contribute once my fund is in pension mode?

I have turned 60, have an SMSF and am looking to move into retirement mode in the next year or so. However, I would still like to keep the option of doing some work if requested by long established clients from time to time. Is this possible once I have moved my SMSF into the pension paying mode?

A super fund can have many different types of accounts for its members at any one time. When you start a pension your accumulation account ceases and you then start a pension account within your fund. If you want to make further contributions once you have started the pension these will be made to an accumulation account.

Will an off-market fund transfer trigger capital gains tax?

I am planning to change the trusteeship of my SMSF from individual trustees to corporate trustees. My online broker and CHESS sponsor advised that in order to change from individual trustees to corporate trustees for all my listed securities in my SMSF, off-market transfer forms need to be completed for each of the listed securities. This would transfer them from the existing account in the name of individual trustees to a new account to be set up under the name of the corporate trustee.

Will the transfer of listed securities (or any assets) from individual trustees to corporate trustees trigger a CGT event? For each of the off-market transfers we need to nominate the consideration or value for the transfer. Should we nominate the market value of the security on the day of transfer or the initial acquisition cost of the security as the consideration?

The change in the designated owner for CHESS sponsorship for you as trustee to that of a company does not constitute a CGT event. This means there will be no tax consequences of changing the trustee of your SMSF. As there is no CGT event there are no guidelines or requirements stipulating the value on the share transfer forms. As there is no CGT or stamp duty payable you could put either the original purchase cost or the market value at the date of transfer.

Can non-residents start a SMSF?

I am 64 with around $1.25 million in two super funds, one being an industry fund. My wife is 56 with about $170,000 , also in an industry super fund. We are both retired and are currently non-residents for tax purposes, but plan to resume full Australian residency in a year or so. I have read several articles in Eureka Report regarding the benefits of SMSFs and am interested in transferring our super into an SMSF. Also I'm getting increasingly annoyed about the amount of fees that I have been paying. Can we as non-residents open a SMSF and if so would my wife and I be able to combine all of our super into one SMSF?

As non-residents for taxation purposes you will not be able to open an SMSF yet. If you are worried about the fees, and if the high fees apply to your non-industry superfund, you should consider rolling all superannuation to the cheaper industry fund.

Once you have returned to Australia you could set up your SMSF and roll over your super for both of you from the industry funds into the SMSF then. An SMSF can have up to four members. There are a number of tax and financial strategies open to you prior to you turning 65, and even before you return to Australia. You should seek advice from an accounting firm that specialises in this area before turning 65.

Does having an online bank super account infringe any rules?

I have had personal online bank accounts with a particular bank for some time. Recently I also opened a specific SMSF online investment account with the same bank. This account is also accessible via the same login as the personal accounts. Can you please let me know if this infringes the rules relating to keeping SMSF asset separate and distinct from personal assets?

As long as the new online account is clearly shown as being held by you as trustees for your SMSF, and you do not inadvertently incorrectly transfer money either into or out of the account, you should not have any problems with what you are intending to do. To be on the safe side you should check with the auditor of your SMSF.

Does babysitting for our daughter satisfy the work test?

We run our own SMSF, are between 68-73 and retired. If we work the required 40 hours in four weeks are we able to each contribute $150,000 to our super fund? If so, is being paid by our daughter for babysitting services at her house, while she is away on business, a legitimate “gainfully employed” situation? She would pay us for this time at a figure to be agreed. If we did this for eight days, would that constitute 192 hours each, or 96 hours each?

Under the work test once someone who is 65 or older must work for 40 hours in a continuous 30 day period to be eligible to make a contribution to superannuation. This can include any work including babysitting. Your problem will be the personal relationship you have with your daughter.

If you have previously been doing unpaid babysitting for your daughter this could be a problem if the ATO investigated your situation. On the other hand if this is a one-off situation due to your daughter being away on business, she has obtained cost estimates from a commercial supplier of these services, and detailed records were kept of who did what work and how long they took, that should strengthen your case for satisfying the work test.

Due to the nature of your situation I would suggest that you contact the auditor of your fund and ask them for guidance in relation to what you need to do to make sure you meet the work test.

How long can it be before my SMSF generates a return?

If my SMSF borrows to buy an investment property, how long do I have to renovate and make the property habitable and show a rental return?

There is nothing stipulated in the regulations as to how long before trustees have to generate income from any investment made on behalf of an SMSF. When it comes to SMSF’s, apart from investments that are banned such as buying residential property for members and associates, it is the investment strategy of the fund that dictates what a fund can buy.

Max Newnham is a partner with TaxBiz Australia, a chartered accounting firm specialising in small businesses and SMSFs.

Note: We make every attempt to provide answers to readers’ questions, however, answers are of a general nature only. Subscribers should seek independent professional advice for more in-depth information that is specific to their situation.

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