YourGuardian: April / May 2003 edition

Contents

1. Welcome
2. Splitting Super on Divorce
3. Latest Superannuation Statistics
4. Tax Office Compliance Reviews

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Welcome

Welcome! to our April / May edition of our monthly newsletter—Your Guardian. 

Our newsletter is intended to provide you with a brief update of the latest changes and issues as they relate to Self Managed Superannuation Funds (SMSFs).

We invite you to forward a copy of our newsletter to anyone you know who may be interested.

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Splitting Super on Divorce

Effective from 28 December 2002, legislation has been introduced to enable superannuation to be divided between a married couple when they divorce or separate. It is important to note that this legislation only applies to people who have been married and does not apply to de-facto couples.

Previously, super was excluded from property or assets under the Family Law, therefore could not be split upon marriage breakdown. While the value of a spouse’s super account balance could be taken into account in dividing other assets, this presented problems where super was not readily accessible by that spouse. For example, the value of other assets allocated to the spouse with super generally would have been reduced, even though the super may not have been accessible for a number of years.

The new legislation allows super to be split either by way of a legal agreement between the couple at the time of their marriage breakdown or by obtaining a Court order if an agreement cannot be reached. There are various ways in which the super can be split. The method used will depend on the form of the super benefits at the time of the marriage breakdown and whether the spouse has satisfied a condition allowing them to receive a cash payment or not.

While this legislation is welcome, it is lengthy and complex. There are also significant taxation issues that need to be considered in relation to splitting super upon divorce or separation. It is therefore extremely important to seek professional advice in relation to this area to ensure that the best tax outcome is achieved for both spouses.

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Latest Superannuation Statistics

According to the latest superannuation figures collected by APRA for the December 2002 quarter, total superannuation assets in Australia now stand at around $518 billion, which is an increase of 2.4% on the September 2002 quarter. Of this total, approximately 20% of the assets are invested in self managed super funds, which is quite significant considering the level of assets that would be invested in large industry and retail super funds.

The actual number of self managed super funds is continuing to grow at a fast rate. The Tax Office currently has around 240,000 self managed super funds on their records compared to approximately only 148,000 five years ago. With the ageing population and more people looking to take control of their super investments, it is anticipated that this growth will be magnified in the coming years. As a result the government will need to focus on policies to assist people in maximising their retirement savings and to encourage them to save for their own retirement.

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Tax Office Compliance Reviews

The Tax Office is currently undertaking a compliance review of self managed super funds. The areas they are concentrating on are:

• investment rules – ensuring that any investments made by a self managed super fund comply with the legislation;
• lodgement of returns – checking that there are no outstanding tax or regulatory returns for the fund;
• payment of benefits – confirming that benefits are only paid where members have satisfied the relevant conditions;
• separation of assets – ensuring that fund assets are clearly separate to assets owned by members or relatives.

With the continued growth in the number of self managed super funds, it is expected that the Tax Office will increase the resources they allocate to monitoring this area. As trustees are responsible for the operation of a self managed super fund, it is important that they are aware of their obligations and that they seek assistance with the operation of their fund if they are uncertain. Significant penalties can be applied if any of the rules are breached.

SuperGuardian can ease the burden on trustees with our administration and compliance service for self managed super funds. We take control of this area for you leaving you free to focus on your investments. If you would like further information about our service, please contact either Michelle Kewell or Tania Tonkin on (08) 8221 6540 or visit our website at www.superguardian.com.au.

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DISCLAIMER:  The information in this newsletter has been provided by SuperGuardian in a summarised form.  No responsibility can be accepted for any loss or damage suffered as a result of reliance on the information included herein.  Readers are encouraged to seek professional advice in relation to their particular circumstances.