SMSFs cannot be used for Christmas presents!
There are very limited circumstances where taxpayers can legally access their super early, and the ATO is reminding taxpayers that “paying bills and buying Christmas presents doesn’t make the list.”
Generally, taxpayers can only access their super when they:
- reach preservation age and ‘retire’; or
- turn 65 (even if they are still working).
To access their super legally before then, taxpayers must satisfy a ‘condition of release’.
SMSF members who illegally access their benefits may be liable for additional income tax and administrative penalties, and they could be disqualified as a trustee.
For taxpayers who have illegally accessed their super, returning it to the fund may be considered a new contribution. Depending on their contribution caps, this may result in additional tax on excess contributions.
Taxpayers should beware of people promoting ‘early access schemes’ to withdraw their super early (other than by legal means). They can protect themselves from promoters of such schemes by:
- stopping any involvement with the scheme, organisation or person who approached them;
- not signing any documents, and not providing any of their personal details such as their tax file number; and
- making a ‘tip-off’ to the ATO online or by phoning the ATO on 13 10 20.
ATO reminder about family trust elections
Taxpayers may be considering whether they should make a family trust election (‘FTE’) for a trust, or an interposed entity election (‘IEE’) for a trust or other entity.
Making an FTE provides access to certain tax concessions (assuming the relevant tests and conditions are satisfied), although there are important things to consider.
In particular, once the election is in effect, family trust distribution tax (‘FTDT’) is imposed when distributions are made outside the family group of the ‘specified individual’. FTDT is a 47% tax, payable by a trustee, director, or partner, as the case may be (depending on the entity).
Taxpayers should review FTEs and IEEs annually to ensure they remain appropriate. Taxpayers can only revoke or vary FTEs and IEEs in limited circumstances and subject to certain conditions.
Before making a distribution or annual trust resolutions, trustees should identify the members of the specified individual’s family group. This will help avoid FTDT liabilities.
Interested to find out more about how to make the most of your money? Then call my office on (07) 3399 8844, or just visit our website at www.straighttalkat.com.au and complete your details on our Home page to request a FREE Financial Health Check.
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
