Dear fellow stackers; I submitted this to the Australian Financial Review letters for publication last night; ATO tax ruling TR 2011/D3 undermines SMSF estate planning If you had any doubt about our federal government, treasury and the ATO running a ponzi scheme with an agenda to ensure that your loved ones remain wage slaves in perpetuity then ATO tax ruling TR 2011/D3 will dispel that doubt forever. The uniquely Australian SMSF investment vehicle had the potential to evolve into a truly universal pension scheme that over two or three generations could have unshackled the majority of the population from the need of a government funded handouts in retirement via intergenerational SMSFs. In my submission to the Cooper review last year I questioned why SMSFs are treated differently from large retail and industry funds who are allowed to pool reserves from its members investment earnings so that the need to sell down assets is avoided. Instead SMSFs are compelled to entirely pay out the residual as death benefit rather than allowing it to be retained in the fund. The dark forces of excessive fiscal rectitude are cheering the actions of the myopic short term tax revenue raising that our federal government through treasury and the ATO have unleashed on those fiscally literate enough to provide for themselves and their loved ones. Make no mistake our government is a honey badger (genus weasel family) that has set a sweet sticky trap deceptively called a tax free retirement income that is anything but tax free. Australians now pay tax when they contribute to super (euphemistically called concessional contributions) they pay tax on the accumulating earnings inside super for their entire working life and the real kicker when the main breadwinner dies the adult beneficiaries and spouse are slugged with an accumulation tax of 15% inside the fund plus a 16.5% in the recipients hands and the coup de grace capital gains tax where the asset has to be sold to pay for the usurious tax grab. When the then treasurer Paul Keating introduced taxation of earnings, contributions and CGT in superannuation back in 1988 by inserting part IX into the 1936 tax act he was compelled by the opposition to soften the slug by introducing a special tax deduction section 279D also known as the anti-detriment payment that was suppose to prevent the taxing of the dead. In true honey badger form (a carnivorous species with thick skins and ferocious defensive abilities) the old section 279D of ITAA was rewrittenin 2007 into section 295-485 of the ITAA, 1997. The restrictions imposed on SMSFs by the ATO's interpretation by way of limiting what can be applied against the anti-detriment payment through reserves (concessional caps) as well as limits on insurance proceeds and disallowing using other members funds to fund the extra benefit payable has stripped spouses and their adult beneficiaries of SMSFs their full entitlements. What this tax ruling means is when you reach 60 forget about the "tax free" nonsense take your money out while you can because your government are cheating lying bastards. Kind Regards nonrecourse
This does not surprise me much at all. The government and their jackbooted thugs - the ATO - are a bunch of thieving barstads for sure
OK I am not sure what the issue here is - a SMSF is basically a one-person retirement fund so when that person dies what's the problem? They are dead, and regardless of one's personal beliefs in an after life or otherwise, they're not going to care about the tax rate. As for those who are left, as I read that draft ruling,they either take the continuing annuities as a beneficiary (ie they continue to be supported) or get paid out whatever was left over in the fund (ie a windfall of money they never earned). The person receiving the windfall should be making their own arrangements for their retirement rather than relying on the lifetime earnings of an earlier generation.
Spouses and adult beneficiaries (presumably adult children etc) may not have earned the money, but they may have contributed to it either with their own income (eg: spouse) by way of arrangements eg: we live of my income and put an extra 30% of yours in super, or how about not taking that trip to Europe and save it for after we retire when we will have $X from the SMSF. Adult children may not have been able to get that new bike, go to the beach for a holiday, got to better schools or whatever... because of decisions made by parents to put a certain amount of money away for retirement with the knowledge that if the kids inherited it first then at least it would be of a certain amount. They may not have earned it but what right does the government of the day have to their inheritance. Edit for clarity - I didn't mean the whole inheritance, just the fact that it will be minus the taxes deducted.
It's not saying spouses or beneficiaries can't get the inheritance - just the portion of the inheritance which is in the SMSF, the same as any other super fund does.
I was referring to the way it was taxed...sorry, not the whole amount and I guess that also refers to other funds too then.
Well the letter in the financial review was published this morning Tuesday 26/07/2011. Problem was they left out paragraph 5 which dealt with Paul Keating taxing the dead and the anti-detriment provision. This paragraph was central to the argument and went some way to explaining what an anti-detriment payment was. Only a politician as perverse as Paul Keating could think of tax sleigh of hand like that. As for XB there is a problem with your line of thinking mate. When I migrated to this country in 1974 less than 8% of working age Australians were getting some sort of Commonwealth benefit. There was less than 2% unemployed and that was real unemployment not the namby pamby bullshit that we are fed now. If you didn't work you were a bludger full stop. Today one third of Australians aged 18-65 are on some form of Commonwealth hand out. Our hard labour guberment mates have set us us on a financial course that is unsustainable. We now have a generation of Australians who have been taught that the government will look after you they have an employee entitlement mindset....pigs ass on that!!!! In my submission to the Cooper review on superannuation last year I questioned why was it ok for Retail, Commercial and Industry funds to have reserves that could be set aside and used to pay surviving members of the fund but not ok for SMSF's. Although today less than 4% of SMSF's have 4 members (ours does) in future people would if encouraged would look at saving under super as an intergenerational tool. The long term result of this is that probably 60% of Australians could be weaned off the government tit (pension). That would mean there would be enough money for the government to look after the 40% who cannot or will not look after themselves. The Howard government sold Telstra and set up the Future fund that money will pay for all the federal commonwealth employees super as yet again our guberment ran an unfunded super scheme. The states are up a creek without a paddle they are also largely unfunded so the tax payer will pick up the tab yet again. Before Keating came along super was not taxed when you contributed money and was not taxed during the accumulation phase and was only lightly taxed when you drew a pension this is the norm with national pension schemes overseas. Our water mellon treasury boys (green on the outside but red through and through) think that they know better as they don't like intergenerational wealth accumulation in a tax concession environment. The end result of tax ruling TR2011/D3 draft is if it stays in its current form the demographic tidal wave will mean a lot of retirees in future generations are going to be eating dog food.
sounds like actually we have a honey badger posting... Good information to bear in mind nonetheless... cheers.
Yes - IF there is money in the Super fund when the Member dies, the returns it has made during its retirement phase are then taxed at 15%, the appropriate amount paid to the ATO from the capital, with the remainder going to beneficiaries (children, wife, husband etc). So, lets say you have $100,000 in Super the day you retire. Over the years of your retirement, the fund makes a return of say another $100,000 then the member dies. Tax owing would be ($100,000 x 15%) = $15,000 so beneficiaries would receive $85,000. In effect the "tax free" headline of Superannuation is a furfie and should read "tax deferred". BUT there are some things you can do to minimize this tax which are: 1. Take out of Super as much as possible so that their earnings stay under the LITO/SATO limits for the retired which for a single is about $31,000 per year. So take say $400,000 out of your Superannuation and put it in an investment that returns say 7% p.a. in your own personal name. When you do your annual income tax, your personal income will be (7% x $400,000) = $28,000. This $28,000 WILL BE FULLY TAX FREE if you are of the retirement age because of the combine LITO/SATO. And when you die, the capital (in this case $400,000) will go to your beneficiaries in total as there is NO TAX OWING. 2. Another option is the well know "Lazarus" letter. In a SMSF you have a pre-signed but undated letter saying you want to withdraw 100% of the funds from your SMSF. You are free of course to withdraw money from your Super Fund at anytime you want. If you become terminally ill (say cancer or a stroke), a few days before your death, even if you are unable, your kids, wife, husband etc date the letter and then when you die there will not be any tax owing because your SMSF fund balance will read $0 when the member died. This is an unfortunate letter etc to have to do but could save your beneficiaries thousands in greedy tax.
I don't have SMSF yet, but my employer contributions and my 5% sacrifice are initially put in at a percentage of my gross wage tax free. Then they are taxed at my income tax level every 3 months? (every single contribution made over 3 month period) Is this normal?
Personal contributions are taxed by your Super fund every 3 months? Or your employer is with-holding the tax before paying it into your fund account ?
Tax is being paid from my super fund on both personal and employer contributions (all which went into super fund 'tax free') Friend told me shouldn't be paying tax at all, but i wouldn't be surprised if it was legit.
negative I f i have a capital gains event, eg: i sold a business, instead of paying capital gains tax on the gains, i can contribute the gain into my SMSF and not pay tax on it. IANAA, dyodd. ( i am not an accountant, do your own due diligance)
An odd situation. If your gross salary is say $1,000 a week and after tax you take home say $750. If you say to your employer that $100 of that $1,000 is to go into your Super, then it is taxed at 15%, so $85 goes into your super and $15 to the ATO. If you choose to put some of your net salary, in this case $750, into Super then it goes it with no further tax payable. Normally you put in money before it is taxed so you can take advantage of the 15% ta rate. The only reason I can think of as to why your contributions are being taxed by your employer at your PAYE rate AND then by your Super Fund @ 15% is because your employer has not told your fund it is an after-tax contribution, therefore the Super Fund thinks it is just normal employer 9% Super which is taxed @ 15%. So I'd say you are being taxed twice in effect because your employer hasnt told your Super Fund the fact that its an after-tax contribution, not an employer 9% contribution. First, check with your Super Fund that they know its an after-tax or what they call "non-preserved" amount and go from there. You can claim the amount your have been overtaxed back also. Good luck !
