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Red tape increasing for DIY super trustees

13/02/2019 / by admin

???In regard to “limited financial advice provided by accountants”, I went to my accountant the other week to discuss a re-contribution using the bring-forward rule. She informed me the only way this can be completed since the rules changed on July 1, 2016, is if she does a “statement of advice” that will cost me $1500 plus. She did a recontribution for me last year costing significantly less. I suggested I do it myself using last year’s re-contribution as a template and she thought it was not a good idea. I just want the paperwork associated with the recontribution, not superfluous paperwork costing an arm and a leg. This sly bit of legislation will affect every self-managed super fund (SMSF) trustee, if my accountant is right. Is she? Should I find another accountant? Finally, is completing a re-contribution strategy oneself fraught with problems? P.F.
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You accountant is correct in that the law changed last July. Since then, an accountant must be licensed to give advice on establishing or winding up an SMSF, and other advice such as when to start a pension or make additional contributions.

Once a person is licensed, they then have to follow ASIC’s onerous requirements, which include writing a report or “statement of advice” each time. So, to that extent, your accountant is following the law.

That said, the information you want is fairly simple and can be found on the n Tax Office’s website by Googling “ATO non-concessional contributions cap”. The major trap for novices is the danger of making an “excess contribution”. As explained by the ATO, if you haven’t made a non-concessional contribution exceeding $180,000 in each of the past two financial years, and are under age 65, you can “bring forward” three years’ contributions or $540,000, before June 30 this year, after which the caps are to be reduced. Then make no further non-concessional contributions until July 2019.

Note also that, if you make a deductible (“concessional”) contribution and, by mistake, no tax is deducted, it is then treated as a non-concessional contribution and this together with a $540,000 non-concessional contribution can push you over the cap. You then have to withdraw the excess and pay tax on it amid much paperwork.

If you’re unhappy, try using one of the many SMSF administrator companies, they’re very competitively priced. On the other hand, if you don’t understand simple rules regarding super, why do you want to run an SMSF? Why not just use a low-fee, public super fund with a myriad of investment options? You’re quite likely to earn more on your savings, even after fees.

I have had difficulty trying to ascertain my tax liability, if any. I have not filed a return for some years, having given up full-time work in 2012. My income for the last 2?? years has been my age pension, plus wages, currently $179 a week – no tax paid; interest on an investment of $20,000 plus an income stream of $5360 annually. I spoke to an ATO rep in a shopping centre last year and he said my income was not taxable but I am not sure I told him about the allocated pension. What is the work bonus and how does that affect my tax situation, if relevant? P.B.

Your allocated pension would be tax-free and you can earn up to $32,279 without paying tax, assuming you claim both the $445 low-income tax offset and the $2230 single senior ns and pensioners tax offset. The ATO offers a calculator on its website, Google “ATO Do I need to submit a tax return”.

Under Centrelink’s work bonus scheme, the first $250 a fortnight of employment income is ignored by the income test. Sign up ASAP!

I am 85 and my wife is 86 and we have received a part pension since December 2008. In October 2016, we submitted our periodic details to Centrelink showing assets of $771,463. In December, Centrelink advised our fortnightly pension would be $7.50 each plus supplements of $59.70 each. This $15 combined fortnightly pension means we are only $5000 (viz. $5000 x $3) under the cut off which therefore, must be $776,000, not $816,000. It seems to me that Centrelink have used the pension rate plus supplement for one calculation, yet pension only for another. I spent 1?? hours on the phone to Centrelink, finally got a lady, then her supervisor, both of whom agreed with me, but could not give an explanation. I have often stated, much to the amazement of others, that we do not need what we were getting from Centrelink but, as we were entitled, we accepted. All I want is an explanation that passes the factual and arithmetic test. Do hope you can help. N.T.

Note that your assets of $771,463 would be rounded down to $771,000. This is $396,000 more than the $375,000 lower threshold. As you note, the full pension of $1339.20 (since March 20) reduces by $3 for every $1000 above this, resulting in a combined fortnightly pension of [$1339.20 -($396 x 3)=] $75.60 combined.

The pension supplement of $49.70 a fortnight per couple is comprised of a “minimum amount” of $26.70 (which you can elect to receive quarterly), a “basic amount” of $18.90 and a “remaining amount” of $4.10.

The “basic amount” and “remaining amount” can be reduced to nil by the means tests. For example, where a pensioner is eligible for the pension supplement, the means tests will first reduce, in the following order, your basic pension, then the pension supplement’s “basic amount”, then its “remaining amount”, rent assistance if payable, energy supplement ($10.60) and finally the pension supplement minimum amount, the latter being payable in full or not at all.

It could be the existence of this final amount that confuses you.

Since you don’t need the pension, you can end the confusion and the anxiety by telling Centrelink to go away and keep their pension, to the cheers of taxpayers like me!

Concerning health care cards available to eligible persons, you said that the low-income health care card (LIHCC) provides benefits to eligible persons that are not otherwise available under the Commonwealth seniors health card (CSHC) “such as energy bills, public transport costs, council rates, healthcare costs, including ambulance, dental and eye care”. I recently sought advice from the Combined Pensioners and Superannuants Society about applying for a LIHCC and was advised that I would be wasting my time as it was only applicable to people who have dependants. Your comments would be appreciated. T.R.

The CSHC doesn’t cover dependants, nor utilities. The LIHCC nominally covers both while some services, such as ambulance, are covered by both cards.

The Victorian Department of Human Services prepares a chart showing the LIHCC brings with its concessions for water, gas, power and utility relief grants. NSW has similar schemes (Google “NSW utility relief grants”) as do other states. However, I get sporadic reports, that such concessions are not always offered by differing utilities.

As we discussed on March 12, what we need is an under-worked civil servant with the time to put together a table, or a series of tables, to answer such questions.

If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Help lines: Financial Ombudsman, 1300 780 808; pensions, 13 23 00.

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