TWO ISSUES REGARDING SUPERANNUATION:

By February 13, 2017Uncategorized

CLEARING HOUSES

With the SuperStream deadline having now
passed, the ATO is reporting a spike in the
number of employers who are now using
the ATO’s Small Business Superannuation
Clearing House (SBSCH). One of the
advantages of using the SBSCH is that
employers are automatically SuperStream
compliant in relation to those Clearing House
contributions. The other obvious advantage in
using the SBSCH is that it streamlines your
superannuation processes. Instead of making
separate payments into each employee’s own
nominated superannuation fund, you make
a single payment to the SBSCH which then
passes the payment on to each employee’s
fund. If this sounds appealing to you and you
are eligible to use the SBSCH (i.e. have less
than 20 employees or a turnover of under $2
million), you can sign up at www.ato.gov.au
(type ‘clearing house’ into the search box at
the top of the page).

For employers that are not eligible for the
SBSCH, you may wish to engage a commercial
Clearing House – many employer default funds
have such facilities. Commercial Clearing
Houses likewise streamline your obligations by
generally requiring just one payment from you.
However, it’s important to note that they may
or may not be free of charge, and may or may
not be SuperStream compliant.

With the increased use of Clearing Houses,
to meet your quarterly Superannuation
Guarantee obligations by the due date, it’s
important to be aware of the timing issues
that apply to Clearing House contributions.
In respect of commercial Clearing Houses
an employee’s Superannuation Guarantee
contribution is taken to be paid on the date
it is received by the employee’s fund (not the
date that a Clearing House receives it from
an employer). Therefore, as an employer
you need to be aware of how long it takes
for your commercial Clearing House to
process the payment – some take as long
as 10 business days. In order to meet your
Superannuation Guarantee obligations by the
due date, check with the Clearing House for
their processing times.

On the other hand, if you are using the
SBSCH your Superannuation Guarantee
obligations are met on the date the SBSCH
accepts them. Getting the timing right is of
great importance. If you are even one day late
for the quarterly deadline, you are required
under the law to raise a Superannuation
Guarantee Charge assessment, and pay the
late amounts (based on a wider concept of
‘salary and wages’), plus nominal interest and
an administration fee per employee.

RESIDENTIAL RENTAL
PROPERTIES
For a number of reasons, SMSF members are
keen to acquire high-growth assets within
their portfolio such as residential property.

These reasons include:
• Rental earnings on the property are subject
to concessional rates of tax (15% or 0% if the
asset is supporting a pension), as are capital
gains when the property is sold

• By acquiring ‘big ticket’, growth assets, you
can build up your superannuation savings
faster than by making contributions, and

• Superannuation assets are, generally speak-
ing, protected from creditors in the event
of bankruptcy.

However, you should exercise great care in
purchasing residential property through your
SMSF, and be aware of the following issues:

RELATED PARTIES
You generally cannot acquire residential
property from a related party of the SMSF
(e.g. yourself, another member of the SMSF
or a relative). This will most likely breach the
in-house asset rules which require in-house
assets to be no more than 5% of the value of
your SMSF’s total assets. Therefore, your only
real option is to purchase residential property
from a third-party with no direct or indirect
ties to you or other members of your SMSF.
USE

If you do acquire residential property legally
(i.e. from a non-related party), the property
must not be lived in by a member of the
SMSF or any related parties. Furthermore, the
property cannot be rented to any member or
any related party of the member, even where
market value rent is being paid under a bona
fide lease agreement.

BORROWING
Often SMSFs do not have the necessary
cash on hand to acquire big ticket items
such as property. Therefore, their only
option is to borrow. In this respect, there
are two main options:

• Third party lending under a limited re-
course borrowing arrangement (LRBA).
Most major banks have funding packages
specifically tailored to meet the strict re-
quirements of LRBAs. A word of caution
however! These arrangements are complex
and expensive and should therefore only be
entered into following consultation with
your advisor.

• Self-funding under a limited recourse
borrowing arrangement (LRBA). The
SMSF can borrow from a member or from
another entity within the family group. The
advantage of doing so is that a reduced rate
of interest can generally be charged to the
SMSF (note it must still be commercial and
acceptable to the ATO), and some money can
be saved by not entering into an LRBA with
a bank which can be expensive. It is essential
however that any borrowing arrangement
from a related party be fully documented
and will still require a LRBA be entered
into with appropriate structures in place.

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