Discussion in 'Superannuation' started by nonrecourse, Aug 2, 2017.
Welcome back NR, even if it's for a short visit. All the best with your new venture!
Re: The gold bars. No you cant, they have to be held in storage in a bank or vault, you aren't allowed to hold them. Also now your super will be drip fed back to you with new laws that don't allow a mass withdrawal despite it being 'Your money'
I don't partake in super at all anymore. Not even SMSF, I have my own business and will look after myself I don't need to pay shit tons of fees to have criminals mind my future for me,
I would love to know where the 8% yields are going to come from required to keep super in the black with a 1.75% cash rate. And you have a say in a general idea of where it goes, IE stock market, Property and the like but even that is a warped market because the Central banks and super funds are only ones left buying stocks in over valued companies like Apple, Property is in a massive bubble and cash is deflationary. So its like you have the choice of getting Aids or Cancer take your pick, All these issues have be caused by poor banking practices.
Everyone seems to forget 2008 fairly quickly I guess that's is what allows banks to rinse and repeat recessions every decade. It is always the pension funds that get sold the bed debts by the banks look at whats happening in the US
Time will tell I suppose
You just need to document what you do and why. You can store gold and silver bullion at home and sit on a throne made of them if you want, it is totally legal and your risk.
Quick link, but I can find a more authoritative one if you like.
They are not mutually exclusive, and SMSF's are more tax advantageous than businesses.
I have both.
Interesting, I was speaking to a SMSF group and they said I couldn't hold it. Not a bad way to cash out of the theft I suppose
Just be careful, that doesn't include coins or "collectables".
It also wouldn't be illegal if your gold or silver bullion were to, I don't know, get lost in a boating accident or something, you signed off on the risk.
I don't get it, where is the "theft"? Please be detailed.
You are paying 28% company tax on your business profits, you can cut that to 15% by putting it into your super.
Also, there is no capitals gains tax on property held in SMSF in the pension phase, and only 10% in the "accumulation" phase. Much more beneficial than holding it privately or in a company.
It's not strictly against any SMSF rules to run a business out of a super fund but you must be careful complying with the sole purpose test. A diligent auditor would have to question if the reason for running the business in there was to provide benefits in retirement or take advantage of the 15% tax rate. I think I read the ATO would be looking quite closely at this in future.
Outside of super, (if it's a small business - now less than $10M turnover) the business has the opportunity to make salary sacrifice wage contributions of $25k per member (taxed at 15% in the fund for you, partner and any adult children) and also pay wages up to tax free thresholds, take advantage of all of the small business concessions (including CGT concessions on sale of goodwill - if you are building a goodwill business for sale) and ultimately the retirement exemption. This allows you to get a pretty significant amount into the fund on retirement if you wish, all exempt from CGT.
Also keeps the money outside of super if you have need of it prior to retirement.
Not saying it's not a good idea having the business in there, just that there are options - like having it own the units in a unit trust which owns business real property. Always seek professional advice and you to need to get advice which is suited to your own circumstances.
As someone who spent 25 years building our SMSF to provide for us in retirement I am in the last stages of unwinding and transferring our assets out
Below is an analysis (not mine from an SMSF group I use to belong to) of the consequences of what our fiscally inept politicians on both sides have served up.
Dividend Imputation and Franking Credits
All governments see large blocks of money and exploit them at the cost of individuals. Large companies just rearrange their affairs to avoid governments.
Dividend imputation Franking Credits
•Old times. A company would make a profit. After the profit was taxed then the company would keep a % and the rest paid to shareholders by a dividend. The dividend would be taxed again at the shareholders personal tax rate. The same money was taxed twice.
•Keating introduced if a companies profit was taxed, the shareholder should not have to pay tax on the same money and introduced a technical way of offsetting the shareholders tax liability. The system was dividend imputation which produces franking credits.
•Shareholders found if they had a large % of fully franked shares they could eliminate any tax they may have to pay in either their personal or super fund. Some shareholders brought so many shares that they not only wiped out their tax liability but left EG $20,000 of excess taxed offsets with the ATO.
•Howard in 2000 said the ATO would refund the excess tax offsets to the individual tax payer. A $1.5 mill SMSF, all in bank shares, meant that the ATO sent a $30,000 each year.
•EG a fund earning $75,000 in dividends , gets $30,000 of excess franking credits from the ATO for a total return of $105,000. PS. 12 countries initially followed the Australian model, all shut it down as it cost their tax revenue to much.
•The ALP is proposing not to refund excess franking credits for a very specific group of people. Those effected are SMSF and personal tax payers with a high % of their investments in fully franked shares. The full imputation system will be keep for all others.
•ALP says it will not affect industrial and retail super funds. Agreed, most of the funds paying pensions keep the excess franking credits to pay the tax liabilities of those in the fund who are in accumulation. Translation; Industry & Retail fund pensioners are being ripped off.
•After pressure the ALP has stated it will refund excess franking credits to Centrelink pensioners or part pensioners as it will have little impact on the budget. If the pensioner is also in a SMSF prior to 28 March 2018 then the entire fund will have excess franking credits refunded.
•The Batman by election results virtually guarantees that if the ALP wins the next federal election the policy of the removal of refunds of excess franking credits will be implemented from 1/7/19.
•In Batman, ALP polling of excess franking credits removal was done on over 60 year olds for 5 days prior to the bye election and it was not a significant vote swing factor.
•This will also probably embolden ALP to bring in negative gearing and CGT discount changes that will again impact asset rich again. ALP has also stated they want any superannuation payments above $75,000 to be taxed. Remember these are not law yet and probably will be modified by negotiation if the ALP win.
•Translation: A populace policy that has little visual impact for the majority of voters who do not understand/care about the imputation system. Unless there is a significant improvement in general financial literacy amongst the populace and/or a big improvement in debating skills by any opposing members of parliament some of this will be law if the ALP wins the next election.
•As Ross Garnut said “Most people above 60 vote with the coalition. The ALP and coalition know voters above 60 are unlikely to change their vote. So all sides of politics exploit superannuation with little electoral impact.”
•Lets look at the impacts of non payment of excess franking credits.
•Most SMSF funds in pension mode with a high proportion of fully franked shares will lose about 15 to 30% of their income.
•Those with hybrid investments (eg CBA Pearls etc) that contain franking as part of their annual returns please read your terms and conditions. Your income and value of the hybrid may drop significantly under the ALP proposal.
•But there is another potential impact. SMSF’s own 13% of the ASX. The majority of it in banks, BHP, RIO, supermarkets and Telstra. If excess franking credits are not refunded, many shareholders will rearrange their portfolio’s to either get shares with higher dividends or more growth. The value of these shares may fall in value.
•Pimco, one of the worlds largest funds sold Australia banks and property bonds after the ALP announcement. Pimco does not benefit from franking credits but understands the potential share value loss from the announcement.
•Each person/SMSF trustee will have to model the potential impact of the removal of excess franking credits. Why? There are some very weird outcomes for those who have a large % of franking credits in their SMSF or personal investment portfolio. EG.
–A SMSF may be better selling low dividend fully franked shares and buy higher dividend REITS with fewer franking credits and capitol returns.
–For some it may be better to close an SMSF and have all their investments in their personal name.
–The richer the SMSF is the less impact the proposed changes appear to have.
–If you close your SMSF and transfer to an industrial fund or Challenger type annuity you may get better returns with less hassle.
Modelling of ALP proposal
•A single person SMSF all in bank shares loss of franking credits:
–A $1 mill SMSF will lose $21,000/year or 30% of income.
–A $10 mill SMSF will lose $210,000 – $63,000 (offset accumulation account tax) therefore a 21% loss of income.
•A SMSF that is shut down and funds moved to personal account.
–A $1.5 mill SMSF moved to personal account will have the same income in either mode.
–A $2.0 mill SMSF moved to personal account will result in a $3000/year GAIN in income.
–Reason why. The excess franking credits not paid in the SMSF are used in your personal account to offset your tax liabilities. BUT this assumes you will not make any capitol gains in your SMSF.
•A SMSF is transferred to an industrial fund. Australian Super claim a return of 9 to 12% over the last 7 years for balanced retirement funds. Challenger claim a 7% return for their annuities. In both cases there are fees but the returns are above 6% and you don’t have to pay for a SMSF and they just send a cheque each month. The ALP changes will not significantly effect these funds.
•Finally, there are some issues you will need to think about prior to 1/7/19 (under the assumption of an ALP election win and the introduction of removal of excess franking, changes to CGT and negative gearing).
–If you have a high % of fully franked shares will you need to rearrange your portfolio to optimise its income and taxation.
–If you have EG shares or rental properties with large capitol gains consider selling them early to optimise the current Capitol gains discount which may only apply up to 30/6/19
–Grandfathering may not apply. When the government introduced the $1.6 mill Transfer balance cap it did not apply grandfathering of existing superannuation funds
–Don’t wait until an election early next year as the share and housing market will be unpredictable.
Here is another little gem that so many of the people who belong to this SMSF that I attended for over 10 years are facing
Here is a live case that you all might want to ponder over.
I personally know of a 71 year old homeowner widow living in my area.
Her total assessable assets (2016/2017 Tax year) amounted to $603,000 that was made up of $507,000 in her SMSF (that gave her a healthy return of around 9.75%); $66,000 in Bank accounts; $25,000 Car, and $5,000 garage sale value of her home contents.
She is NOT able to get even a part Age pension because the assets test cut off effective 20 March 2018 is $556,500.
(ie. she is over the ASSETS TEST cut off by $46,500 with a successful growing share portfolio).
Her SMSF is in Pension phase and her annual drawdown (minimum 5%) is NOT taxable. Her portfolio is well balanced but slightly weighted towards the financials giving her a decent return that included Franking Credits of around $11,000 that she stands to LOSE "IF" Labor wins the next election.
Hardly the type of wealthy self funded retiree that Bill Shorten is gunning for.
And the scary part is that she is not one of 50, nor one of 100, that I know of. She is one of 'thousands' that I personally know of, and believe me, they are FURIOUS & ANGRY with the constant tinkering of Super that never seems to end.
Another scary part is that she was told that if she wants to retain her franking credits she should close down the SMSF and transfer her super funds to an INDUSTRY SUPER FUND ????? because they have been miraculously exempt from Bill Shorten's tax grab.
Share this around with people who do not understand the impact this 'badly thought out flawed policy', (based on 'out of date' data) will have on Self Funded retirees with modest income and assets; who made their retirement decisions based on a bipartisan policy thats been in place since 2000.
Yes, you are right in everything you say. When they first brought this idea to light they said it would only affect a small minority. That is NOT TRUE, it affects anybody who has any shares at all outside of industry super funds. I'm thinking I should just blow my super balance on a new car, overseas holidays, cruises and other luxuries and then just hold out my hand and get a full tax payer funded pension, is that what Shorten really wants?
Rather than blowing your super money it may be worth looking at how you can use that extra cash to purchase a bigger and better home and then go for the full pension.
When you purchase the more valuable home put in place a redraw facility. As you now are below the qualifying threshold for the pension your home may be used as a piggy bank.
Not sure if centre link is across this sidestep but now that both sides of politics are into screwing the self reliant its game on.
Never do anything illegal. Tax avoidance and lying is not legal however tax minimisation and using the tax laws and pension entitlements to your advantage is most certainly the yield that will be harvested from punishing those who have worked their entire life to be self supporting.
Think and grow rich.
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