1. November 2014 Contributions & In-Specie Transfers

2. Disclaimer Please note this presentation is to be considered as general advice only. The opinions of the presenter should not be relied upon as providing specific advice for you or your clients. The information contained within this presentation is based upon our understanding of the relevant legislation, regulations and other materials as at November 2014.

3. Contributions & In-Specie Transfers Topics Covered 1.Contributions update 2.ATO requirements relating to contributions 3.Key legislation and regulations relating to SMSF contributions

4. 1. Contributions Update

5. Contributions & In-Specie Transfers 1. Contributions update Budget 2014-15 Budget Measures Concessional contributions  SG rate to increase to 9.5 per cent from 1 July 2014  Will remain at 9.5 percent until 30 June 2018 and increase by 0.5% each year until it reaches 12 percent in 2022/23

6. Contributions & In-Specie Transfers 1. Contributions update Budget 2014-15 Budget Measures Excess non-concessional contributions  Individuals can withdraw non-concessional superannuation contributions in excess of the non-concessional contributions cap made from 1 July 2013 and any associated earnings, with these earnings to be taxed at the individual’s marginal tax rate  Excess non-concessional contributions that are left in the fund to be taxed at top marginal rate* * Note: Excess CC left in fund to be added to NCC cap.

7. Contributions & In-Specie Transfers 1. Contributions update Increase in excess NCC tax rate  Superannuation (Excess Non ‑ concessional Contributions Tax) Act 2007 – Excess Non-Concessional Contributions to be taxed at 47%  Superannuation (Excess Non-concessional Contributions Tax) Amendment (Temporary Budget Repair Levy) Act 2014 – Increases Excess Non- Concessional Contributions to 49%  However sum of concessional and non-concessional tax capped at 95% tax on excess concessional contributions.

8. Contributions & In-Specie Transfers 1. Contributions update Increase in excess NCC tax rate  Superannuation (Excess Non ‑ concessional Contributions Tax) Act 2007 – Excess Non-Concessional Contributions to be taxed at 47%  Superannuation (Excess Non-concessional Contributions Tax) Amendment (Temporary Budget Repair Levy) Act 2014 – Increases Excess Non- Concessional Contributions to 49%  However sum of concessional and non-concessional tax capped at 95% tax on excess concessional contributions.

9. 2. ATO requirements relating to contributions

10. Contributions & In-Specie Transfers 2. ATO requirements regarding contributions TR 2010/1 Income Tax Superannuation Contributions Definition of a contribution (Page 9 notes): “anything of value that increases the capital of a superannuation fund provided by a person whose purpose is to benefit one or more particular members of the fund or all of the members in general.”

11. Contributions & In-Specie Transfers 2. ATO requirements regarding contributions TR 2010/1 Income Tax Superannuation Contributions How and when a contribution is made to a superannuation fund?  Transferring funds to the super fund  Rolling over a superannuation benefit from another fund  An in-specie contribution  Increasing the value of an existing asset held by the fund (Page 9 notes)

12. Contributions & In-Specie Transfers 2. ATO requirements regarding contributions TR 2010/1 Income Tax Superannuation Contributions How and when a contribution is made to a superannuation fund (Cont)?  Paying an amount to a third party for the benefit of a member  Forgiving a debt owed by the super fund  Shifting value to an asset owned by the super fund (Page 9 notes)

13. Contributions & In-Specie Transfers 2. ATO requirements regarding contributions TR 2010/1 Income Tax Superannuation Contributions When is a contribution recognised (via transfer of funds)?  Cash payment - When cash received by the fund  EFT - When funds are credited to the fund  Personal cheque - When the cheque is received by the fund (Page 9 notes)

14. Contributions & In-Specie Transfers 2. ATO requirements regarding contributions TR 2010/1 Income Tax Superannuation Contributions When is a contribution recognised (via in-specie transfer)? When the super fund obtains ownership of the asset from the contributor  Shares - properly executed off market share transfer  Property - legal or beneficial ownership  Others – when fund becomes registered owner or when physical possess occurs in absence of formal registration process (Page 9 notes)

15. Contributions & In-Specie Transfers 2. ATO requirements regarding contributions TR 2010/1 Income Tax Superannuation Contributions When is a contribution recognised (via increasing value of an asset)? For example, when member makes an improvement to fund’s asset  When ownership of the improvement passes to the fund  When the improvement becomes a fixture of the fund’s asset  A contribution by way of value shifting to an asset owned by a superannuation provider is made when the capital of the fund is increased because of the increase in value of the asset. (Page 10 notes)

16. Contributions & In-Specie Transfers 2. ATO requirements regarding contributions TR 2010/1 Income Tax Superannuation Contributions When is a contribution recognised (via payment of fund liability by member)?  When the fund’s liability is extinguished; or  When the fund’s liability is forgiven; or  If and when a guarantor pays the debt of the super fund Note: If not treated as a contribution, e.g. member at contributions caps or aged over 65, may be considered borrowing (Page 11 notes)

17. Contributions & In-Specie Transfers 2. ATO requirements regarding contributions Case Study 1 (Page 4 notes)  ZZZ Superannuation Fund [15 Minutes]

18. 3. Legislation and regulatory requirements

19. Contributions & In-Specie Transfers 3. Legislative and regulatory requirements Case Study 2 (Page 5 notes)  M & M Superannuation Fund [20 Minutes]

20. Contributions & In-Specie Transfers 3. Legislative and regulatory requirements Concessional contributions caps Excess concessional contributions (section 291.20 ITAA 1997): Year ended 30 June 2014  $25,000 (General Cap); or  $35,000 (Temporary Cap) for those aged 59 or over on 30 June 2013.

21. Contributions & In-Specie Transfers 3. Legislative and regulatory requirements Concessional contributions caps Excess concessional contributions (section 291.20 ITAA 1997): Year ended 30 June 2015  $30,000 (General Cap); or  $35,000 (Temporary Cap) for those aged 49 or over on 30 June 2013.

22. Contributions & In-Specie Transfers 3. Legislative and regulatory requirements Taxation excess concessional contributions Section 291.15, excess concessional contributions are included in the member's assessable income for the corresponding year, with the member entitled to a 15% tax offset of the excess contribution. This excess can be released from the superannuation fund if elected. If not released, excess concessional contributions may be added to the member’s non-concessional contributions.

23. Contributions & In-Specie Transfers 3. Legislative and regulatory requirements Non-concessional contributions caps A member's non-concessional contributions cap (NCC) per section 292.85 of the ITAA 1997:  6 times the member's general concessional contributions cap  6 x $25,000 for the 2014 financial year  6 x $30,000 for the 2015 financial year  Not 6 x $35,000 as this is a 'temporary cap' and does not apply

24. Contributions & In-Specie Transfers 3. Legislative and regulatory requirements Non-concessional contributions caps Bring forward rule:  Applies to those aged less than 65 at any time during the financial year  In any year (year 1), member able to contribute up to their NCC, and contribute in year 1 also, the non-concessional contributions cap amounts for years 2 and 3  Therefore, NCC using bring forward rule is $450,000 for 2014 financial year and $540,000 for the 2015 financial year

25. Contributions & In-Specie Transfers 3. Legislative and regulatory requirements Non-concessional contributions caps Bring forward rule (continued):  Bring forward rule is automatically triggered once the member's NCC has been exceeded  For example, in year 1 member contributes $151,000. Any NCC for years 2 or 3 are then added to this amount If $150,000 exceeded in ’13, all contributions made in ‘14 & ‘15 are automatically included in ‘13. ← $150,000 in ’15 & ‘16 to ‘14 ??$150,000$450,000$0 30 Jun ‘1130 Jun ’12(Yr 1) 30 Jun ’13(Yr 2) 30 Jun ’14(Yr 3) 30 Jun ’15(Yr 4) 30 Jun ’16

26. Contributions & In-Specie Transfers 3. Legislative and regulatory requirements Member contributions - Other  Section 290.160 maximum earnings as employee condition states that no more than 10% of your income can come from employment services  Section 290.170 notice of intent to claim deduction must be provided to trustee and acknowledged by trustee

27. Contributions & In-Specie Transfers 3. Legislative and regulatory requirements Member contributions Regulation 7.04  Refer page 12 notes for acceptance of contributions

28. Contributions & In-Specie Transfers 3. Legislative and regulatory requirements Timing of contributions Taxation Ruling TR 2010/1  Refer page 9 of notes for timing of contributions

29. Contributions & In-Specie Transfers 3. Legislative and regulatory requirements In-specie transfer of assets Section 66 of SISA – Assets can be transferred from related party  Listed securities  Business real property  Units in related unit trust (conditions apply) Refer pages 13 to 20 of notes for more information.

30. Contributions & In-Specie Transfers 3. Legislative and regulatory requirements Case Study 3  A & B Superannuation Fund (Page 7 notes) [15 Minutes]

31. Thank you