Ask Max: Your questions answered

Stamp duty on asset transfers, reversionary pensions, and more.

Summary: This article provides answers on stamp duty payable on asset transfers, the process of reversionary pensions, paying excess contributions tax, steeping into a trustee role, the ATO’s treatment of pension underpayments, counting super assets for deeming, salary sacrificing lump sums, and making super contributions at 65.
Key take-out: Once a person reaches pension age the value of their financial assets, including amounts in superannuation, are counted under the assets test for age pension eligibility.
Key beneficiaries: SMSF trustees and superannuation accountholders. Category: Superannuation.

Is stamp duty payable on a business premises transfer?

My business partner and I own our business premises in our respective family trusts. We thought of selling the building to a new SMSF in which we are the members. Someone suggested we might not have to pay stamp duty on the transaction as the beneficiaries will not change. Is this correct? Also, after reading one of your other articles it may be beneficial to self finance the transaction.

Answer: Whether you will have to pay stamp duty on the transfer of the property will depend on the state in which it is located. Some states do not charge stamp duty when there is no change in beneficial ownership. As the property will be transferring from two family trusts, your ability to claim an exemption is complicated. You should seek advice from a lawyer that specialises in this area of law.

What is the process, and benefits, of reversionary pensions?

My wife and I are the members of our SMSF, our accounts are both in the pension phase and we are both over 60. In the event of death we currently have beneficiary binding nominations, each to the other. Our accountant suggested we should consider reversionary pensions but seemed vague about the process and benefits. Can you please outline the process and briefly any benefits and disadvantages?

Answer: You would first need to commute your current pensions and then prepare the documentation for reversionary pensions to take their place. By doing this, when one of you dies the pension will automatically pass to the survivor. If you don’t do this, when one of you dies and you want the deceased’s pension to be paid to the survivor, more documentation must be done at that time.

Are excess contributions classed as taxable or tax-free super benefits?

I have a SMSF account. Over a two-year period I have exceeded the concessional contribution cap by $17,000 and $16,000 and the ATO charged me excessive contribution tax of $10,000 in one financial year. The ATO then mentioned in their letter that the excess concessional contribution will then be treated as non-concessional contributions.

However, I did not breach the non-concessional threshold. I am in accumulation phase and opted to withdraw money from my SMSF to pay the excess tax. Is the $10,000 withdrawn to be allocated entirely to the taxed component in my member fund? Since the $33,000 has had an extra 31.5% tax and is now treated as a non-concessional contribution, should that amount of $33,000 be allocated to the tax-free component in the member fund?

Answer: Unfortunately under the punitive excess super contributions system currently in place the contributions are still classed as taxable super benefits and not tax-free benefits.

Can a child step into the trustee role of a deceased parent?

Do you have a book or a consolidated set of your articles concerning the current and future duties and responsibilities of trustees and executors of an SMSF currently in pension mode? At the moment my wife and I successfully run the SMSF investment side of the portfolio, and the accounting returns are prepared by the accountant. More knowledge would set our minds at ease. We currently have a BDN and wills in place and are wondering when one of us passes on, can one (or all of our three children) take up this role to support the remaining parent who might be passed caring?

Answer: Being a Eureka subscriber you should have access to all of my Q&A columns. I wrote a book four years ago called “SMSFs – A survival guide” that, although most of the contents are still current, some parts are out of date due to changes to laws and regulations. I am currently in the process of converting this book into a website for trustees of SMSFs that will be kept up to date.

To minimise the disruption to the activities of your SMSF when one of you dies, and to reduce the amount of paperwork and stress for the surviving member, you should consider appointing a company to act as trustee now. If you did not do this, one or all of your three children could become trustees to assist the surviving member. Having your three children would make the management of your SMSF very cumbersome.

Does the ATO class pension funds as non-compliant if they have underpaid?

I have been interested in your comments regarding account-based pensions requiring to meet the minimum pension payments to remain compliant. I normally submit my fund accounts to my accountant in August but do not receive my audited outcome until February the following year. I pay members pensions based on my own assessment of the balance of the fund at end of June and then adjust the annual amount once I have the final audited figure.

If I pay myself less than the 5% minimum requirement because of the delay in auditing and I was to die would the Tax Office deem my fund to be non-compliant if I have underpaid the fund members (my wife and I) a thousand dollars or so?

Answer: The ATO has softened their position on this point. Where the underpayment is minor they will not class the fund as non-compliant from a pension point of view. If you had instead been paying one annual pension payment a year, and died before the payment was made, there is a high likelihood the fund would not be classed as being in pension phase.

Are assets in superannuation counted for deeming purposes?

I am aware that the principle place of residence is exempt from the asset test for assessment of full or part pension. However, would you please confirm that assets held in a SMSF are assessable at face value and if deeming for the purposes of income comes into play.

Answer: Once a person reaches pension age the value of their financial assets, including amounts in superannuation, are counted under the assets test for age pension eligibility. If a person’s account is in accumulation phase the deeming rates are applied to the value of their superannuation under the income test. If they are receiving a pension the net value they receive, after allowing for the purchase price of the pension, is counted.

Can I salary sacrifice part of a lump sum payment into super?

I am 69 and retiring from my job on June 30 this year. On 12th July 2013 I will receive my final payment of $106,385. This is made up of $77,195 in accrued long service leave and $29,190 in accrued annual leave. Can you tell me if it's ok for me to salary sacrifice $25,000 into my super account for the financial year 2013/2014?

Answer: When you resign and are eligible to receive a lump sum amount for annual leave or LSL you cannot salary sacrifice any of this lump sum as a super contribution. You could instead delay your day of retirement and receive your annual leave entitlement as paid leave and salary sacrifice from these payments. Before making a decision you should seek professional advice.

Can a $450,000 super contribution be made when a person turns 65?

I am 71, my wife is now 65, we are both still working and we are both in transition to retirement mode. My wife deposited $150,000 to our SMSF before the end of the 10/11 year and also a further $150,000 before the end of the 11/12 year. We planned that she would deposit a further $450,000 before the 12/13 year end on the basis that she was still 64 at the start of the 12/13 financial year. Is it correct that she can safely make the $450,000 contribution to her SMSF before the end of this 12/13 financial year?

Answer: A person can make the $450,000 non-concessional contribution in the year they turn 65. If this is done before they turn 65 there are no futher requirements to be met. If the contribution is made after they turn 65 they must pass the work test for that year. If your wife has worked 40 hours in a continuous 30-day period in this 2013 year she will be able to make the $450,000 contribution.

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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