Whatever the super changes, someone loses

2 Dec 2011 | ,

The unfortunate truth about Australian politics is that both major parties tend to look after their supporters with the most influence, sometimes to the detriment of others. For the Liberals big business gets preferential treatment, as was evidenced by its Work Choices legislation, while the Labor party supports the unions.

The recent super changes introduced by the Labor party are examples of small business owners and the self-employed being disadvantaged and ignored to the benefit of union members. Increasing the superannuation guarantee charge from 9 per cent to 12 per cent, without requiring this increase to be taken into account in future wage case decisions, will increase the operating costs for small businesses already struggling financially.

The self-employed, who for many years were disadvantaged in relation to superannuation, are again being treated like second-class citizens with regard to the age limit placed on superannuation contributions. Initially the limit will be increased from 70 to 75 for compulsory contributions and then be removed altogether.

Q. Does the removal of the 75 years age limit for making contributions only apply to employer super guarantee contributions, or will the age limit also be increased/removed for those who are self employed and meet the work test requirements of 40 hours in 30 consecutive days?

I am planning to sell a property and make a concessional contribution into my super before I turn 75 in June 2012. I would prefer to leave the property sale for September 2012, when I believe the seller’s market may be more favourable than March 2012. I expect to be able to meet the work test in September 2012, and could put proceeds into superannuation if the age limit is increased or removed.

A. Unfortunately changes to age limits for superannuation contributions will only apply to compulsory contributions. This means as you turn 75 in the 2012 year you will not be able to make super contributions after 1 July 2012. If you sell closer to your birthday, and settlement will take place after 30 June 2012, you could consider borrowing the funds necessary to make your contributions in this financial year.

Q. My husband and I are both in our 70s and the sole trustees of our SMSF. Neither of us has nominated reversionary beneficiaries, but would like to nominate each other. However, we have been advised that our Trust Deed does not allow for reversionary pensions and it must be “upgraded’, with a hefty fee applicable for the “upgrade”. Is this right?

A. The trust deed of an SMSF, in addition to the applicable superannuation and taxation legislation, dictates what the trustees and members of an SMSF can do. The problem could be that your deed was drawn up without a reversionary pension being considered and needs to be amended to at least include this.

If your fund was set up many years ago the trust deed should be updated anyway due to the number of changes that have been made to superannuation regulations over the past 10 years. You should be able to update your deed for approximately $350.  

You should also consider getting professional advice on what will happen with your fund when one of you dies. Your options are to appoint a company now to take over as trustee, find another person to join the fund as a member/trustee now or when one of you dies, or wind up the fund with the surviving member’s benefits being rolled over to another fund or paid out. Changing trustees will result in having to change the owner shown on the SMSF’s investments.

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