Experiences of Current and Former Members †Assignmenthelp.com

Question: Discuss about the Experiences of Current and Former Members. Answer: Introduction: According to the taxation ruling of TR 2010/1 Contribution spilling can be defined as the means of splitting contributions once in a year at the end of the fiscal year and transferring some of the amount to the account of the spouse (Barkoczy 2016). The is generally regarded as one of the useful methods of transferring amount it represents that an individual can be able to create balance amid each partner and can make the use of all the available tax incentives. Contribution splitting allows the members with the facilities of accumulation account in order to split the employer contributions along with some of the personal contributions with their spouse. There are few elements that needs to be considered in splitting the superannuation fund with the spouse that are as follows; Under the preservation age, irrespective of whether they are working or not; Amid the preservation age of 65 or not permanently retired. An individual can split the contributions with the husband, wife or a defacto who is living with them (Woellner et al. 2016). However it is worth mentioning that contributions cannot be split with a spouse who has attained the age of 65 or above. There are certain amount of rules under the contribution splitting schemes which are as follows Contributions that can be split: An individual can transfer the following contributions from their respective account in the account of their spouse which are as follows; 85 per cent of the employee (prior-to tax) contributions 85 per cent of the salary sacrifice (prior-to tax) contributions 85 per cent of the personal contributions for which an individual can claim deductions An important rule to be considered in this case is that contribution splitting can be only implemented for the contributions paid in the superannuation during the present or previous financial year. What contributions can be split? Government co-contributions Any form of investment earnings on the contributions Lump sum amount of transfers from the overseas super funds Any amount of money where an individual can roll over from another super fund Amounts that are subjected to conditions of family law As evident from the present case study it can be stated that Lillian and Boris have a combined sum of $600,000 within their self-managed superannuation fund named LaB SMSF. The maximum amount of before tax contributions Lilian and Boris can split is 85 per cent of the before tax employer and salary sacrifice contributions. The amount of 85 per cent is subjected to concessional contributions made for the financial year. Furthermore, Lillian and Boris will have to leave a minimum amount of $5,000 to be left in their respective account after the split unless they are closing the account entirely (Robin 2017). The minimum amount the couple can split is $5000 and the maximum amount the couple can split is the $510,000. Acquiring a property to rent out is considered as one of the popular forms of investment in Australia (Bird et al. 2016). Houses and units are much easier to understand than several types of investments as where and what Lillian and Boris acquire it will ultimately affect their return on investment. There are certain considerations and implications for making investment in the property. As evident from the present scenario purchasing and managing the property from the Self-managed Superannuation Fund as investment property for Lillian and Boris can be costly and will create an impact on the overall return. For Lillian and Boris some of the costs involved in the property investment comprises of the cost involved in stamp duty, conveyance fees and the legal cost involved in the ownership. Given the fund of $600,000 from their Self-managed Superannuation Fund whey Lillian and Boris own or acquire the property they will be accountable for the ongoing cost such as insurance, body corporat e fees, land tax, property management fees, repairs and maintenance costs. Certain considerations and implications in acquiring the property consist of less volatility of the property than investing in shares or other forms of investment for Lillian and Boris. In addition to this, there are certain considerations such as a large of the property expenditure can be offset against the income for the purpose of tax (Bird et al. 2016). Certain implications on acquiring the property is expenses such as stamp duty, legal fees and fees involved for the real estate agent in making and purchasing the property that will make it very expensive for Lillian and Boris. Implications such as loss resulting from the fall in value of property are generally known as negative equity. If Lillian and Boris continue to lease the commercial premises they must include the full amount of rent they earn in their income tax return. However, an individual can claim deductions for their related expenditure for the period the property is leased or available for lease. Generally Lillian and Boris can claim an immediate deductions for the expenditure related to the management and maintenance of the property. However, Cost incurred for acquisition and disposal of property are generally included in the cost base of the property acquired for the purpose of capital gains tax. Lillian and Boris can gain the access of the superannuation in their SMSF account if they; Reach the age of preservation at least 55 depending on the date of their birth and retire on permanent basis from the workforce Permanently retired if Lillian and Boris have the present intention of never again becoming gainfully employed for a period of 10 hours or more than that each week If Lillian and Boris reach their age of preservation and gain access of their super as the non-commutable pension If they reach the age of 60 and cease employment If they cease employment with the provisional employer and have preserved the benefit which is not more than $200 However, Lillian and Boris are required to meet one of the following early release conditions They are required to pay a release authority from the ATO Turn the age of 55 The maximum amount they can receive from the SMSF funds is $510,000 Tax implication of Lump sum Taxation of Super Lump sums Age Taxable component of taxed element Max rate of Tax 60 years and above Non-assessable non exempt income Preservation age to 59 First $195,000 (low rate of cap) 0% Balance beyond $195,000 (low rate cap) 15% Below the age of preservation Entire Component 20% Tax implications of Income Stream Taxation of Income Stream Benefit Age of deceased during death Type of death Benefit Age of benefit Max rate of Tax Untaxed Element Age 60 years and above Income Stream Any Age 0% NANE Marginal tax rate Less 10% tax offset Below the age of 60 years Income Stream Age 60 and above 0% NANE Marginal tax rate Less 10% tax offset Below the age of 60 years Income Stream Below the age of 60 Marginal tax rate 15% tax offset MTR (no tax offset) Cash flow is regarded as critical due to the fact that the pension payment can only be made in cash. Lump sum payment can be made either in the form of cash or in specie. Irrespective of the type of benefit withdrawals reduces the asset base (Bui, Delpachitra and Kristabela 2016). The laws necessitate the trustee to take into the considerations the liquidity of funds having regard to the anticipated requirement of cash flow. The minimum standards of pension offer the reference point for the necessary amount of cash flow in the SMSF. It is worth mentioning that where the cash flows are secured trustees might be exposed to the short term volatility of the market at the time of cashing benefits so that the trustee can make the necessary yearly pension payments. The couple Lillian and Boris will have sufficient income to service their income as the SMSF cash flows strategy will enable Lillian and Boris to address the key goals which will help them in; Ensuring that the necessary cash flow requirements are met They can invest in the growth assets to increase their balance available at the time of retirement Both Lillian and Boris will be able to exploit the opportunities for growth by controlling the downside risk. Reference List: Barkoczy, S., 2016. Foundations of Taxation Law 2016.OUP Catalogue. Bird, R., Foster, D., Gray, J., Raftery, A.M., Thorp, S. and Yeung, D., 2016. Experiences of Current and Former Members of Self-Managed Superannuation Funds. Bird, R., Foster, D., Gray, J., Raftery, A.M., Thorp, S. and Yeung, D., 2016. Who Starts a Self-Managed Superannuation Fund and Why?. Bui, Y., Delpachitra, S. and Kristabela, S., 2016. Expectations and experiences of self-managed superannuation fund trustees.The Journal of Developing Areas,50(4), pp.459-467. ROBIN, H., 2017.AUSTRALIAN TAXATION LAW 2017. OXFORD University Press. Woellner, R.H., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016.Australian Taxation Law Select: Legislation and Commentary 2016. Oxford University Press.