How to get out of a SMSF

Sometimes a self-managed super fund (SMSF) isn’t for you. While that is ok, getting out of an SMSF can be a tricky and complicated process.

Every individual involved in an SMSF is responsible for their part. No decision can be made on their behalf or outsourced to another member or industry professional. Once deciding to leave your SMSF, you must approach carefully to avoid penalties and damages or disruptions to the remaining member funds. To successfully remove yourself you will need to:

• Notify the ATO within 28 days
• Remove all assets from the fund, whether paid out or transferred to a new account, leaving it empty
• Have a final audit of your fund
• Complete your reporting

SuperStream to be extended to SMSF rollovers

First introduced in 2015, SuperStream is a government standard for processing superannuation payments electronically in a streamlined manner. Currently, SuperStream can only process rollovers between two APRA funds electronically but a change coming into effect on 30 November 2019 will now see this process extend to self-managed super funds (SMSF). This means rollovers between an APRA fund and an SMSF can be processed through SuperStream later this year, and the time taken could even be reduced to three days.

The streamlining of the rollover process between all funds aims to increase efficiency and reduce compliance costs. An example of this is the removal of the requirement to draw a cheque when rollovers are made from an SMSF to an APRA fund. Further, direct transfers between funds will give greater confidence when tracking the whereabouts of your money.

For a fund to receive a rollover, trustees will have to provide the ATO with the fund’s requested information – such as ABN, bank account details and internet protocol address – at least 10 business days before the fund receives the rollover.

Superannuation for Women

It’s no secret that the median super balance for Australian women at the time of retirement is significantly lower than that of their male counterparts. The Australian Commission & Investments Commission (ASIC) have reported that men retire with about twice the amount as women. The discrepancy is reportedly even higher between Mums and Dads. Between lower wages and a higher likelihood of having an interrupted working life for women, women also tend to live longer and thus require more super to cover more years. Unfortunately, between personal finances, business financial capabilities, and governmental policies, actions to close this gap can be limited.

Where viable, private companies can consider:

• continuing paying superannuation to staff during parental leave.
• paying full-time super benefits to part-time parents. This has already been implemented by Viva Energy (a Shell subsidiary). From the ABS, women are much more likely to be working part-time than men.
• increasing the percentage of base salary put toward their employees’ super accounts.

A guide to consolidating your super

Merging your super is vital to maximising your retirement savings.

Changing jobs over the years will put you at risk of losing some of your super if your previous employers have set up accounts you have forgotten about. Fees will erode the balances on these inactive accounts and result in you losing your hard earned super. You should also consolidate to maximise the interest accrued on your single super balance.

Merge your super with this checklist and keep your super savings on track for success.

Research your fund’s policy
Compare your active super accounts so you can make the right choice about which one you should close. You should assess:

• Exit fees
• Insurance policies
• Investment options
• Ongoing service fees
• Performance of the funds

Rollover process
Once you have made your decision, you can combine your super balance by:

• Requesting to merge your accounts through your chosen super fund
• Apply through your myGov account or the ATO

Keep in mind that funds will take time to process your request and rollover.

Authority for super complaints introduced

The new Australian Financial Complaints Authority (AFCA) will make it easier for individuals and small businesses to make complaints about their superannuation financial firms.

The Coalition government has responded to criticisms of previous dispute resolution bodies by creating a new financial disputes framework. AFCA has been described as a “one-stop shop” that will improve outcomes for consumers and increase the efficiency of the dispute resolution process.

AFCA’s jurisdiction
AFCA has been given authority over a range of complaint areas including:

• Superannuation annuities
• Corporate, industry and retail super funds
• SMSFs (handled under investments and advice jurisdiction)
• Approved deposit funds
• Small funds
• Retirement savings accounts
• Trustees, insurers and decision makers of relevant super bodies

What you can make complaints about
Your super complaint to AFCA must adhere to its governing rules. AFCA has specific time limits for complaints but no monetary limits.

You can make complaints about:

• The advice you were given about a superannuation product
• Fees or costs that were incorrectly charged or calculated
• Information you weren’t given about the product including fees or costs
• Errors in the information provided to you; for example, if your benefit statements are incorrect
• Decisions your super provider has made
• Payment of a death benefit
• Giving instructions that were not followed
• Transactions that were incorrect or unauthorised

Employer SuperStream checklist

Employers must make superannuation contributions on behalf of their employees. SuperStream is the ATO’s electronic and standardised solution that streamlines the super payment process.

Using SuperStream for employers means:

• You can use one online channel to pay multiple funds
• Less room for error during data entry, due to fewer steps
• Transactions reach funds faster

Obligations
You must make contributions to a super fund through a SuperStream solution unless you are eligible for the following exemptions:

• Personal contributions if you are self-employed or a sole trader and make after-tax contributions to a super fund for yourself
• Contributions to your SMSF where you’re a related party employer. For example, if you are an employee of your family business and your super guarantee contributions go to your SMSF.

Step-by-step guide
Once you have decided that SuperStream is right for you, the following steps will help you stay compliant:

• Choose an option: you can choose from a payroll system, your super fund’s online system, a super clearing house and a messaging portal
• Collect information and update your records: refer to the ATO for an exhaustive list of the information you will need from your employees
• Pay the SuperStream way: pay as soon as possible so you can get used to the system

ATO warns of illegal early super release

The ATO has issued a warning to the public regarding illegal early release of super schemes, which are subject to severe penalties.

There are strict rules around when you can access your super so your current decisions do not jeopardise your quality of life in retirement. The ATO has reminded the public you may only access your super early if you have experienced severe financial hardship or you have reached the preservation age and have stopped working.

How these schemes work
The promoters of these schemes:

• Encourage you to transfer or rollover your super from your existing super fund to an SMSF to access your super before you are legally entitled to
• Target people under financial pressure or those who do not understand super laws
• Claim you can access your super and put the money towards anything you want which is not true
• Charge high fees and commissions, presenting the risk of losing some or all of your super to them
• May request your identification documents which can result in identity theft

Penalties:
Penalties apply to promoters and individuals who illegally access their super early. If you illegally obtain your super early, it is included in your assessable income even if you return the super to the fund later. If you are an SMSF trustee, you may be fined up to $420,000 and liable for jail terms of up to five years. Civil and criminal penalties apply to promoters.

Paying super to contractors

The ATO classifies contractors paid for their labour as employees for superannuation guarantee purposes. This is the case even if the contractor quotes an Australian Business Number (ABN).

Eligibility requirements
Super contributions must be made for these individuals if you pay them:

• Under a verbal or written contract that is wholly or principally for their labour- that is, more than half the dollar value of the contract is for their labour
• For their personal labour and skills- which may include physical labour, mental effort or artistic effort and not to achieve a result
• To perform the contract work personally – they must not delegate.

You do not pay super to a person when you make a contract with someone other than the person who will actually provide the labour, like a company, trust or partnership.

How much to pay
The minimum super amount you have to pay is 9.5 per cent of each worker’s ordinary time earnings. For contractors, employees calculate the minimum super amount on the labour component of the contract. The ATO will accept their market values of the labour if the values of the various parts of the contract are not detailed in the contract.

SMSF trustee investment strategy checklist

SMSF trustees have the freedom to invest as they choose to grow their retirement savings, which is why it is vital that they check in on their investment strategy regularly. Maximising your retirement nest egg depends on how well your investment strategy functions at different phases in your working life. This is why your investment strategy should shift according to your changing financial circumstances. A new job, fluctuating markets, changes in tax laws or your retirement drawing closer may mean it’s time to switch up your investments.

Here is a checklist to get you started.

• Map your risk profiles
• Consider circumstances including risk, diversity, liquidity and member’s circumstances
• Take out insurance for members
• Confirm all fund investments comply with super laws and are allowed under a trust deed
• Plan to regularly review your investment strategy
• Document any decision about investment strategy

Trustee reporting obligations checklist

Trustees must comply with reporting obligations to avoid penalties from the ATO.

The following trustee reporting checklist to make sure you are stress-free at tax-time.

Trustees must:

• Value the funds’ assets at their market value at 30 June
• Pay any minimum annual income stream payments required under super laws
• Get an actuarial certificate if required
• Prepare the fund’s end of year financial accounts and statements
• Appoint and approve a SMSF auditor not more than 45 days before the SMSF annual return is due
• Lodge your SMSF annual return by the due date
• Lodge your transfer balance account reports if required
• Review the fund’s investment strategy and document the review
• Maintain all the fund’s records as required under super law