The ATO has just released a finalised version of LCG 2017/D3, titled LCG 2017/3 Superannuation reform: Superannuation death benefits and the transfer balance cap This guidance provides direction and explanation on the tax and regulatory treatment of superannuation death benefits and the treatment of death benefit income streams, especially the treatment of reversionary income streams. It provides clarity and further examples on how investment earnings and insurance proceeds are dealt with in relation to the Transfer Balance Cap for both a reversionary and non-reversionary recipient.

Two powerhouse disruptors – cloud-based document and entity management platform NowInfinity, headed up  by fintech entrepreneur Amreeta Abbott, and groundbreaking law firm View Legal, headed up by innovator and recognised expert in estate planning and tax law, Matthew Burgess, have joined forces, merging the digital business units of each firm and forming a strategies partnership on legal services… read more.

10th March, 2017 by SMSF Technical Specialist Julie Dolan

The ATO yesterday released a consolidated version of LCG 2016/8 (Law Companion Guideline). It addresses the transfer balance cap, transition to retirement income stream (TRIS) reforms as well as the transitional CGT relief for superannuation funds.

What this consolidated version provides is clarity around the treatment of TRIS’s. In relation to an unsegregated fund, it has been confirmed that a TRIS is not required to be commuted back to the accumulation phase prior to 30 June 2017 so as to be eligible for the CGT relief. In relation to segregated funds, the government is still currently considering legislative options to clarify this position.

NowInfinity: Australia’s Number One “SMSF Deed Provider” for 2015

NowInfinity, a leading provider of digital documentation and lodgment services for SMSF advisers, has been recognised as the best “SMSF Deed Provider” in Australia for 2015 in a recent awards ceremony held by SMSF Adviser magazine.

It was NowInfinity’s technological superiority, leadership in online integration, and unrivalled connectivity with some of the largest names in financial services, such as the ATO, ASIC, Class Super and Xero, which led them to take out the prestigious award.
“By integrating with such vital players to the SMSF industry, we are creating deeds that are consistently ‘best-of-breed’ and fully compliant with all ATO obligations and superannuation legislation,” said NowInfinity director, Amreeta Abbott.

“Our ‘NowInfinity Connect Platform’ also puts the control back into the hands of its users, by allowing them to download any document at their own convenience.”

“In this way, advisers can effortlessly establish and maintain their SMSF deeds with complete peace of mind regarding legal compliance. Not only that they can combine and create up a wide range of leading SMSF strategies from NowInfinity, Xero or Class Super. On this theme the biggest innovation is our cloud base Corporate Messenger with ASIC which seamlessly ties in with the NowInfinity platform bringing ease of use, efficiency and compliance to SMSFs and company management.” said Abbott.

NowInfinity Corporate Messenger takes the work out of ASIC lodgements by supporting a wide range of interactions. These include company set-ups, common ASIC forms including 484s and tax agent appointments.

The core benefits of Corporate Messenger are its direct linkage to ASIC and the automation of many company related processes. Automated processes include annual reviews, implementing address changes across multiple companies, multiple log-ins and digital signing.

For many NowInfinity members the service will be a free add-on to their existing membership arrangements. Occasional users will be able to take advantage of a simple low-cost pricing plan.

Corporate Messenger with ASIC Integration

For more information on Corporate Messenger call us on 07 5554 5398
or request a personal demonstration at:
https://nowinfinity.clickfunnels.com/companysupervisor

 

 

 

Question

What are the primary conditions of relief for certain ATE lifetime, life expentancy, or market-linked income streams purchased from 20 September 2007, from the commutation of an ATE income stream purchased prior to 20 September 2007 ?

Response

ATE income streams purchased prior to 20 September 2004 are eligible for a 100% asset test exemption. However, from 20 September 2004 to 19 September 2007, purchased ATE income streams are only eligible for a 50% asset test exemption. Income streams purchased from 20 September 2007 will not receive an asset test exemption.

There are a linited number of situations, where a recipient who commutes an income stream and uses the commuted amount to purchase a new income stream may retain the 100% or 50% exemptions held by the original income stream. To qualify for the 100% or 50% asset test exemption, the original income stream must satisfy the ‘primary conditions for relief’ as well as one of the ‘additional set of conditions’, set out below.

Note:
Pre-20 September 2004 ATE income streams must satisfy the conditions outlined in 4.9.2.10*, ATE income streams purchased from 20 September 2004 and before 20 September 2007 must satisfy the conditions outlined in 4.9.2.15**.
Along with other ATE income streams purchased from 20 September 2004 and before 20 September 2007, market-linked income streams may qualify for retention of the 50% exemption.
Treatment of joint ATE income streams will be consistent with that for ‘single’ ATE income streams. A joint ATE income stream will be eligible for relief where it satisfies the requirements specified below for ONE of the joint beneficiaries.
Where a new income stream does not meet the requirements for retention of the exemption, the income stream will become fully asset tested.
The original income stream must be commuted in full and the entire commuted amount rolled over to the new income stream. A partial commutation can only be made to effect an income stream payment split, to pay a superannuation contributions surcharge debt or to pay a hardship amount. Where an existing income stream is commuted in full to meet these payments, that part of the commuted amount not used to meet the liability must be rolled over to the new income stream.

Primary conditions for relief – 100% exemption

To be eligible for relief, (i.e. for the new income stream to continue to receive a 100% asset test exemption), the original income stream must be:

– a lifetime or life expectancy ATE income stream (satisfies SSAct section 9A or 9B), AND
– purchased prior to 20 September 2004, AND
– commuted in full to purchase a new income stream that satisfies SSAct section 9A or 9B (4.9.2.15), as they applied before 20 September 2007.

Note: A partial commutation is only allowed for payment due to income stream payment split (additional condition no. 6), payment of a superannuation contribution surcharge debt (additional condition no. 7), or payment for a hardship amount (additional condition no. 8). Where an existing income stream is commuted in full to meet these payments, that part of the commuted amount not used to meet the liability must be rolled over to the new income stream.

Primary conditions for relief – 50% exemption

There are 2 sets of primary conditions depending on the type of income stream:

1) To be eligible for relief, (i.e. for the new income stream to continue to receive a 50% asset test exemption), the original income stream must be:

– a lifetime or life expectancy ATE income stream (satisfies SSAct section 9A or 9B), AND
– purchased from 20 September 2004 and before 20 September 2007, AND
– commuted in full to purchase a new income stream that satisfies SSAct section 9A , 9B, or 9BA (4.9.2.15), as they applied before 20 September 2007.

2) To be eligible for relief, the income stream must be:

– a market-linked partially ATE income stream (satisfies SSAct section 9BA), AND
– commuted in full to purchase a new income stream that satisfies SSAct section 9BA, as it applies before 20 September 2007.

Note: A partial commutation is only allowed for payment due to income stream payment split (additional condition no. 6), payment of a superannuation contribution surcharge debt (additional condition no. 7), or payment for a hardship amount (additional condition no. 8). Where an existing income stream is commuted in full to meet these payments, that part of the commuted amount not used to meet the liability must be rolled over to the new income stream.

To see additional conditions relative to:
– death of the reversionary beneficiary
– divorce or separation
– Income stream paid from SMSF and SAFs, from life companies, or transferred to a successor fund,
– and much more,
Please click on the following link https://nowinfinity.desk.com/customer/portal/articles/1566982

In addition to the primary condition of relief for certain ATE lifetime, life expectancy, or market-linked income streams purchased from 20 September 2007, from the commutation of an ATE income stream purchased prior to 20 September 2007, that can be found in the following link: https://nowinfinity.desk.com/customer/portal/articles/1566974

one of the following sets of conditions must also be met:

1) For lifetime, life expectancy or market-linked income streams where the reversionary beneficiary dies before the primary beneficiary, the original income stream must:

– have been purchased by the primary beneficiary for the benefit of the primary and reversionary beneficiary, and
– have had its payments calculated on the basis of the life expectancy of the reversionary beneficiary.

Note 1: The original income stream must be fully commuted and rolled over to the new income stream.

Note 2: This exemption is only allowed once, except in circumstances where an original ATE income stream purchased before 20 September 2004 has been commuted between 20 September 2004 and 19 September 2007 (inclusive) on the death of the reversionary partner. If the primary beneficiary subsequently re-partners, and then commutes the second income stream on or after 20 September 2007 to purchase a new income stream based on the new reversionary partner’s life expectancy, the assets test exemption held by the third income stream can be retained.

2) For lifetime, life expectancy or market-linked income streams where the primary and reversionary beneficiary divorce or separate, the original income stream must:

– have been purchased by the primary beneficiary for the benefit of the primary beneficiary and a reversionary
– beneficiary who, at the time of purchase, are members of a couple together (as defined in the SSAct), and
– the primary beneficiary and reversionary beneficiary are no longer members of a couple together.

Note 1: The original income stream must be fully commuted and rolled over to the new income stream.

Note 2: This exemption is ONLY allowed ONCE, except in circumstances where an original ATE income stream purchased before 20 September 2004 has been commuted between 20 September 2004 and 19 September 2007 (inclusive) where the partners are no longer together. If the primary beneficiary subsequently re-partners, and then commutes the second income stream on or after 20 September 2007 to purchase a new income stream based on the new reversionary partner’s life expectancy, the assets test exemption held by the third income stream can be retained.

Note 3: Unless the original income stream is subject to a payment split arising from a Family Court order or a superannuation agreement under Family Law Act 1975 Part VIIIAA or Part VIIIB, the original income stream must be commuted in full and all of the commuted amount must be used to purchase the new income stream.

Note 4: For income streams affected by payment splitting following partnership breakdown by the Family Court or a superannuation agreement under Family Law Act 1975 Part VIIIAA or Part VIIIB, please refer to NUMBER 6 below.

3) For lifetime and life expectancy income streams paid from SMSFs and SAFs where the original income stream is:

– a defined benefit pension as defined in the Superannuation Industry (Supervision) Act 1993, but
– does not satisfy SSAct section 9A(1)(b) or 9B(1A)(b) (i.e. the income stream does not satisfy the high probability requirements specified in 4.9.4.40).

Note 1: The original income stream must be fully commuted and rolled over to the new income stream.

Note 2: This exemption is ONLY allowed ONCE.

Note 3: SSAct section 9A(1)(b) and 9B(1A)(b) require, in relation to an income stream, that there be in force a current actuarial certificate stating that in the actuary’s opinion there is a high probability that the provider of the income stream will be able to pay the income stream as required under the income stream’s contract or the funds governing rules.

Note 4: Lifetime and life expectancy ATE income streams sourced from an SMSF or SAF, that are purchased prior to 20 September 2004 and subsequently are fully commuted including the reserves and rolled over from 1 January 2006 as a result of failure to meet the high probability requirement will retain the 100% exemption only if the commuted assets including the reserves are used to purchase:

– a lifetime or life expectancy ATE annuity (from the statutory fund of a life office or the benefit fund of a friendly society) that is used to source the income stream payments from the SMSF or SAF, or
– a lifetime or life expectancy ATE income stream from a retail superannuation fund that meets the requirements specified for offering these products.

Note 5: Lifetime and life expectancy ATE income streams, sourced from an SMSF or SAF, that are purchased from 20 September 2004 and before 20 September 2007, and are subsequently fully commuted including the reserves and rolled over from 1 January 2006 as a result of failure to meet the high probability requirement will retain the 50% exemption only if the commuted assets including the reserves are used to purchase:

– a market-linked income stream, or a lifetime or life expectancy ATE annuity (from the statutory fund of a life office or the benefit fund of a friendly society) that is used to source the income stream payments from the SMSF or SAF, or
– a market-linked income stream, or a lifetime or life expectancy ATE income stream from a retail superannuation fund that meets the requirements specified for offering these products.
– a market-linked income stream from the SMSF or SAF.

4) For lifetime and life expectancy income streams paid from life companies where the income stream:

– is an immediate annuity under a statutory fund established by a life company, or under a benefit fund established by a friendly society, but
– does not satisfy SSAct sections 9A(1)(b) or 9B(1A)(b), OR fails to satisfy the standards set out in Actuarial Standard 4.02 published by the Life Insurance Actuarial Standards Board.

Note 1: The original income stream must be fully commuted and rolled over to the new income stream.

Note 2: The exemption is only allowed once.

Note 3: SSAct section 9A(1)(b) and 9B(1A)(b) require, in relation to an income stream, that there be in force a current actuarial certificate stating that in the actuary’s opinion there is a high probability that the provider of the income stream will be able to pay the income stream as required under the income stream’s contract or governing rules. This is mirrored by the requirements of the Life Insurance Actuarial Standard Board.

5) For lifetime, life expectancy or market-linked income streams transferred to a successor fund (4.9.1.30), the original income stream must:

– not be paid from an SMSF or SAF, AND
– be transferred, on or after 20 September 2004 to a successor fund, and a new income stream results from the transfer.

Note: If the original income stream meets this condition, there is no limitation to the number of times that it can be commuted for this purpose and still receive:
– a 100% exemption, provided the original ATE income stream is purchased or acquired before 20 September 2004,
– a 50% exemption, provided the original ATE income stream is purchased or acquired from 20 September 2004 and before 20 September 2007.

6) For lifetime, life expectancy or market-linked income streams where the primary beneficiary and their spouse or partner divorce or separate, the ORIGINAL income stream was commuted to give effect to:

– an entitlement of the partner (or former partner) of the primary beneficiary in respect of the original income stream under a payment split under Family Law Act 1975 Part VIIIB, or

Explanation: Family Law Act 1975 Part VIIIB of the refers to income streams that have been purchased or acquired from a superannuation fund, or from a life office or friendly society, using superannuation money.

– to a court order made under Family Law Act 1975 section 79 or 114, or an injunction granted under Family Law Act 1975 section 114, that is binding on a third party under Family Law Act 1975 Part VIIIAA.

Explanation: This refers to income streams that are purchased with non-superannuation money or income streams that are paid directly from a life office or friendly society statutory fund.

Note 1: The original income stream can be commuted partially to make the payment split.

Note 2: If the original income stream meets this condition, there is no limitation to the number of times that it can be commuted to meet this payment and still receive:
– a 100% exemption, provided the original ATE income stream is purchased or acquired before 20 September 2004,
– a 50% exemption, provided the original ATE income stream is purchased or acquired from 20 September 2004 and before 20 September 2007.

7) The original income stream was commuted to pay a superannuation contributions surcharge debt.

Note 1: The original income stream can be commuted partially to make this payment.

Note 2: If the original income stream meets this condition, there is no limitation to the number of times that it can be commuted to meet this payment and still receive:
– a 100% exemption, provided the original ATE income stream is purchased or acquired before 20 September 2004,
– a 50% exemption, provided the original ATE income stream is purchased or acquired from 20 September 2004 and before 20 September 2007.

8) The original income stream was commuted to pay a hardship amount.

Note 1: The original income stream can be commuted partially to make this payment.

Note 2: If the original income stream meets this condition, there is no limitation to the number of times that it can be commuted to meet this payment and still receive:
– a 100% exemption, provided the original ATE income stream is purchased before 20 September 2004,
– a 50% exemption, provided the original ATE income stream is purchased from 20 September 2004 and before 20 September 2007.

9) The original income stream was commuted, or the contract or governing rules covering the income stream, are altered to meet the requirements specified in 6.21(2A) of the Superannuation Industry (Supervision) Regulations 1994 that from 1 July 2007 an income stream may revert only to a dependant of the income stream recipient and, in the case of a child, the child must:

– be less than 18 years old, or
– if 18 years or older,
– be financially dependent on the member and less than 25 years of age, or
– have a disability as described in the Disability Services Act 1986. subsection 8(1) of the

The following conditions must also apply:
– the original ATE income stream was purchased before 1 July 2007, and
– the income stream is being fully commuted to purchase a new income stream that satisfies SSAct section 9A, 9B or 9BA (4.9.2.15), as they applied before 20 September 2007.

Note: This exemption is ONLY allowed ONCE. The new income stream receives:
– a 100% exemption, provided it was purchased from the commutation of an original ATE income stream purchased before 20 September 2004,
– a 50% exemption, provided it was purchased from the commutation of an original ATE income stream purchased from 20 September 2004 and before 20 September 2007.

10) For an asset-test exempt market-linked income stream resulting from the commutation and rollover of ALL the assets supporting another asset-test exempt market-linked income stream, where the new income stream is covered by SSAct section 9BA or would have been covered by that section if SSAct subparagraph 9BA(1)(a)(i) did not apply.

The original income stream must also have been covered by SSAct section 9BA.

Note: Market-linked income streams are limited to a 50% exemption only.

11) Where a primary beneficiary purchases a new asset-test exempt income stream following the closure of a SMSF because:

– a member of the fund supporting the original income stream has died, or
– the administrative responsibilities of the fund supporting the original income stream have become too onerous due to the age or incapacity of a trustee, and
-the new income stream:

– is purchased using all the assets, including reserves, from the commutation of the original asset-test exempt income stream sourced from the self-managed superannuation fund that has been closed, and
– is covered by:
SSAct section 9A or 9B (if the original ATE income stream was purchased prior to 20 September 2004), or would have been covered by those sections if paragraph 9A(1)(aa) or subparagraph 9B(1)(a)(i) of the SSAct did not apply;
SSAct section 9A or 9B or 9BA (if the original ATE income stream was purchased from 20 September 2004 and before 20 September 2007), or would have been covered by those sections if SSAct paragraph 9A(1)(aa), or subparagraph 9B(1)(a)(i), or 9BA(1)(a)(i) did not apply.

Note: This exemption is only allowed once. The new income stream receives:
– a 100% exemption, provided it was purchased from the commutation of an original ATE income stream purchased before 20 September 2004,
– a 50% exemption, provided it was purchased from the commutation of an original ATE income stream purchased from 20 September 2004 and before 20 September 2007.

Example: Greg and Alice are trustees of their self-managed superannuation fund. They both have market-linked asset-test exempt income streams that were purchased on 1 July 2005 when Greg was 65 and Alice was 64. Greg dies on 26 January 2015. Alice subsequently decides that she does not have the expertise or inclination to continue as a fund trustee. Alice commutes her market-linked asset-test exempt income stream and uses the proceeds to purchase from a retail income stream provider, an income stream that meets the provisions of SSAct section 9BA. The new income stream is covered by these principles and retains the 50% exemption from the social security assets test.

In addition to the primary condition of relief for certain ATE lifetime, life expectancy, or market-linked income streams purchased from 20 September 2007, from the commutation of an ATE income stream purchased prior to 20 September 2007, that can be found in the following link: https://nowinfinity.desk.com/customer/portal/articles/1566974

one of the following sets of conditions must also be met:

1) For lifetime, life expectancy or market-linked income streams where the reversionary beneficiary dies before the primary beneficiary, the original income stream must:

– have been purchased by the primary beneficiary for the benefit of the primary and reversionary beneficiary, and
– have had its payments calculated on the basis of the life expectancy of the reversionary beneficiary.

Note 1: The original income stream must be fully commuted and rolled over to the new income stream.

Note 2: This exemption is only allowed once, except in circumstances where an original ATE income stream purchased before 20 September 2004 has been commuted between 20 September 2004 and 19 September 2007 (inclusive) on the death of the reversionary partner. If the primary beneficiary subsequently re-partners, and then commutes the second income stream on or after 20 September 2007 to purchase a new income stream based on the new reversionary partner’s life expectancy, the assets test exemption held by the third income stream can be retained.

2) For lifetime, life expectancy or market-linked income streams where the primary and reversionary beneficiary divorce or separate, the original income stream must:

– have been purchased by the primary beneficiary for the benefit of the primary beneficiary and a reversionary
– beneficiary who, at the time of purchase, are members of a couple together (as defined in the SSAct), and
– the primary beneficiary and reversionary beneficiary are no longer members of a couple together.

Note 1: The original income stream must be fully commuted and rolled over to the new income stream.

Note 2: This exemption is ONLY allowed ONCE, except in circumstances where an original ATE income stream purchased before 20 September 2004 has been commuted between 20 September 2004 and 19 September 2007 (inclusive) where the partners are no longer together. If the primary beneficiary subsequently re-partners, and then commutes the second income stream on or after 20 September 2007 to purchase a new income stream based on the new reversionary partner’s life expectancy, the assets test exemption held by the third income stream can be retained.

Note 3: Unless the original income stream is subject to a payment split arising from a Family Court order or a superannuation agreement under Family Law Act 1975 Part VIIIAA or Part VIIIB, the original income stream must be commuted in full and all of the commuted amount must be used to purchase the new income stream.

Note 4: For income streams affected by payment splitting following partnership breakdown by the Family Court or a superannuation agreement under Family Law Act 1975 Part VIIIAA or Part VIIIB, please refer to NUMBER 6 below.

3) For lifetime and life expectancy income streams paid from SMSFs and SAFs where the original income stream is:

– a defined benefit pension as defined in the Superannuation Industry (Supervision) Act 1993, but
– does not satisfy SSAct section 9A(1)(b) or 9B(1A)(b) (i.e. the income stream does not satisfy the high probability requirements specified in 4.9.4.40).

Note 1: The original income stream must be fully commuted and rolled over to the new income stream.

Note 2: This exemption is ONLY allowed ONCE.

Note 3: SSAct section 9A(1)(b) and 9B(1A)(b) require, in relation to an income stream, that there be in force a current actuarial certificate stating that in the actuary’s opinion there is a high probability that the provider of the income stream will be able to pay the income stream as required under the income stream’s contract or the funds governing rules.

Note 4: Lifetime and life expectancy ATE income streams sourced from an SMSF or SAF, that are purchased prior to 20 September 2004 and subsequently are fully commuted including the reserves and rolled over from 1 January 2006 as a result of failure to meet the high probability requirement will retain the 100% exemption only if the commuted assets including the reserves are used to purchase:

– a lifetime or life expectancy ATE annuity (from the statutory fund of a life office or the benefit fund of a friendly society) that is used to source the income stream payments from the SMSF or SAF, or
– a lifetime or life expectancy ATE income stream from a retail superannuation fund that meets the requirements specified for offering these products.

Note 5: Lifetime and life expectancy ATE income streams, sourced from an SMSF or SAF, that are purchased from 20 September 2004 and before 20 September 2007, and are subsequently fully commuted including the reserves and rolled over from 1 January 2006 as a result of failure to meet the high probability requirement will retain the 50% exemption only if the commuted assets including the reserves are used to purchase:

– a market-linked income stream, or a lifetime or life expectancy ATE annuity (from the statutory fund of a life office or the benefit fund of a friendly society) that is used to source the income stream payments from the SMSF or SAF, or
– a market-linked income stream, or a lifetime or life expectancy ATE income stream from a retail superannuation fund that meets the requirements specified for offering these products.
– a market-linked income stream from the SMSF or SAF.

4) For lifetime and life expectancy income streams paid from life companies where the income stream:

– is an immediate annuity under a statutory fund established by a life company, or under a benefit fund established by a friendly society, but
– does not satisfy SSAct sections 9A(1)(b) or 9B(1A)(b), OR fails to satisfy the standards set out in Actuarial Standard 4.02 published by the Life Insurance Actuarial Standards Board.

Note 1: The original income stream must be fully commuted and rolled over to the new income stream.

Note 2: The exemption is only allowed once.

Note 3: SSAct section 9A(1)(b) and 9B(1A)(b) require, in relation to an income stream, that there be in force a current actuarial certificate stating that in the actuary’s opinion there is a high probability that the provider of the income stream will be able to pay the income stream as required under the income stream’s contract or governing rules. This is mirrored by the requirements of the Life Insurance Actuarial Standard Board.

5) For lifetime, life expectancy or market-linked income streams transferred to a successor fund (4.9.1.30), the original income stream must:

– not be paid from an SMSF or SAF, AND
– be transferred, on or after 20 September 2004 to a successor fund, and a new income stream results from the transfer.

Note: If the original income stream meets this condition, there is no limitation to the number of times that it can be commuted for this purpose and still receive:
– a 100% exemption, provided the original ATE income stream is purchased or acquired before 20 September 2004,
– a 50% exemption, provided the original ATE income stream is purchased or acquired from 20 September 2004 and before 20 September 2007.

6) For lifetime, life expectancy or market-linked income streams where the primary beneficiary and their spouse or partner divorce or separate, the ORIGINAL income stream was commuted to give effect to:

– an entitlement of the partner (or former partner) of the primary beneficiary in respect of the original income stream under a payment split under Family Law Act 1975 Part VIIIB, or

Explanation: Family Law Act 1975 Part VIIIB of the refers to income streams that have been purchased or acquired from a superannuation fund, or from a life office or friendly society, using superannuation money.

– to a court order made under Family Law Act 1975 section 79 or 114, or an injunction granted under Family Law Act 1975 section 114, that is binding on a third party under Family Law Act 1975 Part VIIIAA.

Explanation: This refers to income streams that are purchased with non-superannuation money or income streams that are paid directly from a life office or friendly society statutory fund.

Note 1: The original income stream can be commuted partially to make the payment split.

Note 2: If the original income stream meets this condition, there is no limitation to the number of times that it can be commuted to meet this payment and still receive:
– a 100% exemption, provided the original ATE income stream is purchased or acquired before 20 September 2004,
– a 50% exemption, provided the original ATE income stream is purchased or acquired from 20 September 2004 and before 20 September 2007.

7) The original income stream was commuted to pay a superannuation contributions surcharge debt.

Note 1: The original income stream can be commuted partially to make this payment.

Note 2: If the original income stream meets this condition, there is no limitation to the number of times that it can be commuted to meet this payment and still receive:
– a 100% exemption, provided the original ATE income stream is purchased or acquired before 20 September 2004,
– a 50% exemption, provided the original ATE income stream is purchased or acquired from 20 September 2004 and before 20 September 2007.

8) The original income stream was commuted to pay a hardship amount.

Note 1: The original income stream can be commuted partially to make this payment.

Note 2: If the original income stream meets this condition, there is no limitation to the number of times that it can be commuted to meet this payment and still receive:
– a 100% exemption, provided the original ATE income stream is purchased before 20 September 2004,
– a 50% exemption, provided the original ATE income stream is purchased from 20 September 2004 and before 20 September 2007.

9) The original income stream was commuted, or the contract or governing rules covering the income stream, are altered to meet the requirements specified in 6.21(2A) of the Superannuation Industry (Supervision) Regulations 1994 that from 1 July 2007 an income stream may revert only to a dependant of the income stream recipient and, in the case of a child, the child must:

– be less than 18 years old, or
– if 18 years or older,
– be financially dependent on the member and less than 25 years of age, or
– have a disability as described in the Disability Services Act 1986. subsection 8(1) of the

The following conditions must also apply:
– the original ATE income stream was purchased before 1 July 2007, and
– the income stream is being fully commuted to purchase a new income stream that satisfies SSAct section 9A, 9B or 9BA (4.9.2.15), as they applied before 20 September 2007.

Note: This exemption is ONLY allowed ONCE. The new income stream receives:
– a 100% exemption, provided it was purchased from the commutation of an original ATE income stream purchased before 20 September 2004,
– a 50% exemption, provided it was purchased from the commutation of an original ATE income stream purchased from 20 September 2004 and before 20 September 2007.

10) For an asset-test exempt market-linked income stream resulting from the commutation and rollover of ALL the assets supporting another asset-test exempt market-linked income stream, where the new income stream is covered by SSAct section 9BA or would have been covered by that section if SSAct subparagraph 9BA(1)(a)(i) did not apply.

The original income stream must also have been covered by SSAct section 9BA.

Note: Market-linked income streams are limited to a 50% exemption only.

11) Where a primary beneficiary purchases a new asset-test exempt income stream following the closure of a SMSF because:

– a member of the fund supporting the original income stream has died, or
– the administrative responsibilities of the fund supporting the original income stream have become too onerous due to the age or incapacity of a trustee, and
-the new income stream:

– is purchased using all the assets, including reserves, from the commutation of the original asset-test exempt income stream sourced from the self-managed superannuation fund that has been closed, and
– is covered by:
SSAct section 9A or 9B (if the original ATE income stream was purchased prior to 20 September 2004), or would have been covered by those sections if paragraph 9A(1)(aa) or subparagraph 9B(1)(a)(i) of the SSAct did not apply;
SSAct section 9A or 9B or 9BA (if the original ATE income stream was purchased from 20 September 2004 and before 20 September 2007), or would have been covered by those sections if SSAct paragraph 9A(1)(aa), or subparagraph 9B(1)(a)(i), or 9BA(1)(a)(i) did not apply.

Note: This exemption is only allowed once. The new income stream receives:
– a 100% exemption, provided it was purchased from the commutation of an original ATE income stream purchased before 20 September 2004,
– a 50% exemption, provided it was purchased from the commutation of an original ATE income stream purchased from 20 September 2004 and before 20 September 2007.

Example: Greg and Alice are trustees of their self-managed superannuation fund. They both have market-linked asset-test exempt income streams that were purchased on 1 July 2005 when Greg was 65 and Alice was 64. Greg dies on 26 January 2015. Alice subsequently decides that she does not have the expertise or inclination to continue as a fund trustee. Alice commutes her market-linked asset-test exempt income stream and uses the proceeds to purchase from a retail income stream provider, an income stream that meets the provisions of SSAct section 9BA. The new income stream is covered by these principles and retains the 50% exemption from the social security assets test.

Question

A sole trader owns a commercial property. It is two shops on one title. One shop he operates his business from, the other shop is rented to an unrelated business. If we were to transfer the BRP to an SMSF (again, to take advantage of concessional stamp duty rates in NSW):

a. I assume the small business concessions would only be available on the part of the BRP used in the business of the sole trader, and the part of the BRP used by the unrelated business would face capital gains at normal rates (less the general 50% discount) – is this correct

b. Would the whole BRP transfer be subject to NSW stamp duty concessions, or only the part related to the sole trader’s business

c. What do you think would be an appropriate method for apportioning the cost base of the property and the current market value of the property, would a simple real estate opinion be sufficient?

Response

a) Small business concessions would be only available on the part of BRP used in the business of the sole trader and not on the part used by the unrelated business, as this part does not satisfy the active test conditions. Therefore they will take the benefit of the individual CGT discount of 50%.

b) Both part of the Business Real Property will be subject to NSW stamp duty concessions.

c) In terms of valuations a qualified valuer should value the interests in the property particularly as the property is to be transferred to a SMSF.

Question

Recently a client wanted to know whether they could transfer ownership of property used by defense force housing (accommodation) could be sold to the SMSF?

Response

The Defense Force housing property is owned by members of the SMSF, thus the property is an asset from a related party. According to section 66(1) of the SISA, the acquisition of asset from a related party is prohibited.

However there is two exceptions are which are the Business Real Property and the in-house asset.

The Defense Force Housing Property does not satisfy the business use test – which requires the real property to be “used wholly and exclusively in one or more businesses carried on by any entity” – because the Property is used for a residential purpose. Therefore the Property is not a Business Real Property.

Moreover , the Property is not an in house as it is not an asset covered by section 71(1), which states that ” an in house asset of a superannuation fund is an asset of the fund that is a loan to, or an investment in, a related party of the fund, an investment in a related trust of the fund, or an asset of the fund subject to a lease or lease arrangement between a trustee of the fund and a related party of the fund”.

To conclude, the acquisition of the Defense Force Housing Property would result in a breach of the SISA by contravening section 61(1).