Superannuation Newsletter September 2009

Dear #firstname#,

Welcome to the New Financial Year!

Rogerson Kenny Business Accountants will be sending this Superannuation Newsletter as is required, when we believe changes may impact you - it is not our intention to unnecessarily fill your inbox!

In this issue please find a summary of the major budget changes impacting on Superannuation.

Over this coming month, you should be receiving your Annual Tax Statements and final paperwork with regard to your Self Managed Super Fund (if you haven't already). Please feel free to start sending your work in. Please click here to download a list of what we require.

Mark and Jarrod are eagerly awaiting your work! If you have any questions about the below content, please contact Mark Rogerson 03 9802 2533.

If you have any trouble viewing this page, please contact Sasha Dean on 03 9802 2533

All the best,

The Rogerson Kenny team.

Concessional (Tax Deductible) Contributions

From 1st July 2009, Concessional Contributions caps will be reduced by half.

Age at 30th June	Prior to Budget Changes	As of 1st July 2009
Less than 50 years of age	$50,000	$25,000
Over 50 years of age	$100,000	$50,000

Transitional arrangements have allowed for a cap of $100,000 per person per annum to apply between 1 July 2007 and 30 June 2012, for members who are over the age of 50 on the last day of the financial year period. The transitional period will still cease at 30th June 2012, thereby making the concessional cap $25,000 per person per annum for all members making contributions to their superannuation funds from 1 July 2012.

BEWARE: The concessional contributions cap of $25,000 per person (or $50,000 per person if the member is over 50 years of age) is not separate to the Superannuation Guarantee Charge (SGC) requirements or Salary Sacrifice arrangements.

Non-Concessional (Undeductible) Contributions

The non-concessional contribution caps have not changed in essence. When they were first introduced, the non-concessional contribution caps were calculated at three times the concessional contribution caps (i.e., $50,000 x 3 = $150,000). Now, with the above concessional contribution caps being halved, the non-concessional caps are now calculated at six times the concessional contribution caps.
See the below table for the actual figures.

Age at 1 July	Cap per annum
Less than 65 years of age	$150,000 or $450,000 over a 3 year period
Between 65 and 74 years of age (must meet work test)	$150,000
Over 74 years of age	Contributions cannot be accepted*

*Eligible contributions may be accepted up to 28 days after the end of the month in which the individual reaches age 75, subject to meeting the work test.

Account Based Pensions - Drawdown Relief
Rules Post 30 June 2007

From 1 July 2007, there is a single type of pension, with simplified standards, which is known as an account based pension. The tax on the pension will either be tax free (if the member is over 60 years of age) or taxed in accordance with the modified arrangements for those under the age of 60.

TIP: Any pensions commenced prior to 1 July 2007 that meet the current pension requirements, will be deemed to have met the new minimum pension standards. Lifetime pensions that meet the relevant existing requirements can continue to be paid to pensioners.

HINT: for those members who are currently in receipt of a lifetime non-complying pension, it would be well worth considering commuting this and commencing an account based pension. This will enable simplification of the pension type, and a greater majority of the fund's earning being tax exempt (as there will no longer be a requirement of a pension reserve in the Fund, which is not tax free).

Age of Pensioner	Minimum % to be paid from account balance post June 2007	Minimum % to be paid from account balance from 1 July 2009
55 - 64 Years	4%	2%
65 - 74 Years	5%	2.5%
75 - 79 Years	6%	3%
80 - 84 Years	7%	3.5%
85 - 89 Years	9%	4.5%
90 - 94 Years	11%	5.5%
95+ Years	14%	7%

Rules to apply for the 2009/2010 Year

On Friday 13 March 2009, the SIS Regulations were amended to reflect the reduction of minimum pensions to half the minimum amount as outlined in the SIS Regulations. This was the government's response to public concern that due to the global financial crisis there was a sever reduction in most member's superannuation account balances, and therefore pension members were crystallising losses in order to provide liquidity to pay pensions.

In the 2009 Federal Budget, it was announced that the drawdown relief for account based pensions would be extended and therefore apply for the 2009/2010 financial year. As a result, the minimum annual pension amounts for the years ended 30th June 2009 and 30th June 2010 are listed in the right column in the above table.

PLEASE NOTE: a Transition to Retirement income stream still has a 10% maximum withdrawal cap (based on the fund's balance as at 30th June of the previous financial year).

Temporary Reduction of the Government Co-Contribution

For the year ended 30th June 2009, for ever tax dollar a person contributed to their superannuation fund, the Government will contribute $1.50, up to a limit based on the person's total income, subject to a maximum of $1,500.

The co-contribution is means tested so that if you have a total income of $30,342 or less per year and you make a personal contribution of $1,000, you will be eligible to receive the maximum co-contribution of $1,500. After that, the maximum co-contribution is phased out at 5c for every dollar earned over $30,342 so that if you have a total income of $60,342, you are no longer eligible for the co-contribution.

Rules to apply from 1 July 2009
There will be a temporary reduction in the Government Co-Contribution matching rate for non-concessional contributions made in the five years from the 2009/10 financial year through to the 2013/14 financial year.

The current and adjusted Government Co-Contribution rates are as follows:

Contribution Year	Matching Rate %	Maximum Co-Contribution
2008/2009	150	$1,500
2009/2010	100	$1,000
2010/2011	100	$1,000
2011/2012	100	$1,000
2012/2013	125	$1,250
2013/2014	125	$1,250
2014/2015	150	$1,500

Prior to 1 July 2009, voluntary salary sacrifice contributions have not been included in income when determining eligibility for payments such as the co-contribution. From 1 July 2009 however, voluntary salary sacrifice contributions will be included as part of a member's income to determine eligibility.

PLEASE NOTE: passing of legislation is pending.

Changes to Definition of Residency

From 1 July 2007, the definition of a resident superannuation fund has been replaced by "Australian Superannuation Fund". Whereas under the old definition there was a two year temporary absence rule, the new definition has introduced a more general requirement that the central management and control of the fund "ordinarily" be in Australia.

To meet the definition of an Australian Superannuation Fund, a fund has to satisfy all three of the following tests:

The fund was established in Australia, or any asset of the fund is located in Australia at that time;
At that time, the central management and control of the fund is ordinarily in Australia; and
At that time, either the fund had no active members, or had active members who are Australian residents and who hold at least 50% of the total market value of the fund's assets attributable to superannuation interests OR the sum of the amounts that would be payable to active members if they decided to leave the fund.

Borrowing Within a Self Managed Super Fund

A Self Managed Super Fund can now borrow to invest in an asset. When this became law on 24th September 2007, the whole Self Managed Super industry were bracing themselves for the onslaught of trustees wanting to gear their fund and borrow to buy property and follow the love Australians generally have for property ownership.

However, this has not been the case. Rogerson Kenny have had a few clients take advantage of the new rules and there have been several enquiries. The clients who have borrowed have done so to buy business real property to operate their business out of - this is perfectly legal to do so, and a prudent retirement strategy.

Please see below a few points that may clear up what you can and can't do with regard to borrowing in your Self Managed Super Fund:

The rules on what assets you can and can't acquire have not changed. They are exactly the same, but now you can borrow to acquire them.
A member can lend to the super fund to buy the asset (providing the arrangement is at commercial rates)
If you are a business owner, you can borrow to buy business real property in your super fund, operate your business out of the property and have the business pay rent to your super fund.
The banks will lend to an LVR of approximately 65% on commercial property and 75% LVR for residential property
You can acquire business real property from yourself or a related party, but you cannot do this with a residential property
The total cost to administer this structure is approximately $10,000 (legal, bank and accounting fees)

For a short video on how a Super Fund can Borrow, click here

Rogerson Kenny Business Accountants - P.O. Box 323 Mt Waverley Victoria 3149 Ph: (03) 9802 2533
F: (03) 9802 0590 E: mail@rogersonkenny.com.au

This update is designed as a summary of taxation information and is not intended to be taken as advice.
Rogerson Kenny accepts no liability for decisions made according solely to this information.
Please contact Rogerson Kenny for an interview for more information.