1. Date 26/11/2015 November 2015 Technical Day Para planning and Technical Update

2. Agenda  Insurance Duty of Disclosure  Tax Deductions for Super contributions  SMSF SoAs and Disclosure requirements  Pensions strategy The Advice Exchange Pty Ltd

3. Insurance Duty of Disclosure  What is the client’s Duty of Disclosure? Answer all application questions honestly and to tell the insurer about any matters that could be considered relevant to the insurance application.  Section 29 of the Insurance Contracts Act sets out the remedies available to the insurer in the event of non-disclosure.  Amendments came into force on 28 June 2014, giving insurers the ability to vary a contract.  If the policy has been in force for longer than three years, then the insurer needs to also show that the non-disclosure was fraudulent (section 29(2)). The Advice Exchange Pty Ltd

4. What you need to do  Explain the duty of disclosure and implications of section 29.  You need to warn client that section 29 will apply to the new cover  Emphasise the importance of understanding the Duty of Disclosure  Highlight the “important information” section in the application and Significant Risks section in the PDS  If you have a client who is unsure of their medical history –don’t risk it  Think about financial, pastimes and other information  Insurers have the ability to check and verify information The Advice Exchange Pty Ltd

5. SOA Template text  Has been updated to include a Duty of Disclosure section  You need to find out how long a client’s existing insurance policy has been inforce and tailor the text accordingly in the SOA to suit. The Advice Exchange Pty Ltd

6. Tax deductions for Super contributions  Is your client planning on claiming a tax deduction for their personal superannuation contribution this year? ATO requires:  A notice of intent to claim a deduction for personal superannuation contributions form is completed and sent to the superannuation fund  The client must receive an acknowledgement of the claim from the trustee. Partial rollovers, including to pension accounts, to fund insurance premiums, or consolidate multiple accounts will result in a proportional reduction of the available claim amount. The Advice Exchange Pty Ltd

7. What you need to do  Lodge the form with the contribution, or as early as possible.  We recommend that you lodge any claim for the relevant tax year prior to moving client funds for a rollover or pensions commencement. Once funds are moved the process cannot be undone.  We encourage you to work with the client’s accountant/administrator to ensure that this form is not overlooked when dealing with SMSFs. The Advice Exchange Pty Ltd

8. SMSF SOAs Addressing the correct entity  Individual Trustees – Mr Sam and Mrs Samantha Sample ATF the Sample Superannuation Fund  Corporate Trustee – Mr Sam and Mrs Samantha Sample, Directors of Sample Company Pty Ltd ATF the Sample Superannuation Fund The Advice Exchange Pty Ltd

9. Out of Scope?  If you are not qualified to provide SMSF set up advice, ensure this is made clear in the SOA. E.g.: Accountant has assisted in the SMSF set up  You can note this in the scope of advice section of the SOA.  Ensure you are not providing rollover advice to rollover to SMSF in this case.  If you haven’t provided advice on the appropriateness of a SMSF and setting up one, you generally do not need to provide replacement product advice on rolling over external super accounts to the SMSF. The Advice Exchange Pty Ltd

10. Individual & Trustee recommendations  Investment of funds within the SMSF needs to be addressed to the trustees of the SMSF  If you are recommending insurance within the SMSF for members you need to put in a recommendation that the Trustees obtain insurance for the member  Super rollovers need to be addressed to the individuals  Recommendations about the Needs Analysis needs to be addressed to the individuals The Advice Exchange Pty Ltd

11. TTR Strategy – Preservation Age  Accessing a TTR pension from preservation age Individuals who have reached preservation age, but have not yet retired or reached age 65, may be able to access their preserved superannuation benefits in the form of a TTR pension. The preservation age for Clients born before 1 July 1960 is 55 years. Clients born between 1 July 1960 and 30 June 1961 will need to be at least age 56 to commence a TTR pension, not age 55. The preservation age for Clients born after 30 June 1964 will be 60 years More broadly, the increase in preservation age will eventually remove the ability for those under age 60 to commence a TTR pension. The Advice Exchange Pty Ltd

12. What you need to do  When you speak to clients, draw their attention to the fact they can only commence a TTR after they reach preservation age.  You are not able to provide investment recommendations now in an SOA for clients who will be commencing TTRs next year.  You can include a recommendation to commence a TTR now, and do a Record of Advice at the time the client is eligible to commence a TTR.  You can provide appropriate investment recommendations and fee disclosures, replacement product information etc. within the ROA at that time in the future. The Advice Exchange Pty Ltd

13. Taxation of Super benefits Tax treatment of income payments For income stream benefits paid to clients aged between preservation age and age 59 Taxable component – taxed at MTR A 15 % tax offset applies to the taxable component of their pension payments. Over 60 – Tax Free The Advice Exchange Pty Ltd

14. Taxation of Super benefits Tax treatment of lump sum payments For lump sum benefits paid to those aged between preservation age and age 59, a low rate cap ($195,000 in 2015/16) applies to ensure no tax is payable on the taxable component benefits that are within the cap. The Advice Exchange Pty Ltd

15. Structuring pensions  A pension cannot be added to by way of contribution  A pension is commenced with the tax components of the accumulation account  Component percentages calculated on commencement  There may be tax reasons for having multiple pensions The Advice Exchange Pty Ltd

16. Pensions and preservation The Advice Exchange Pty Ltd Or unrestricted non-preserved benefits from a previous a condition of release Must have met a condition of release commence a pension Can select preservation components to commence a pension Cannot select tax components to commence a pension Unrestricted non-preserved Restricted non-preserved Preserved Priority in cashing pension benefits

17. TTRs and preservation The Advice Exchange Pty Ltd If TTR contains UNPB then commutation can be made Total withdrawals may exceed 10% of account balance May consider commencing TTR with preserved monies Leave UNP available for lump sum withdrawal Start a separate pension with Preserved benefits

18. Commutation counting as minimum pension payment  Requires unrestricted non-preserved benefits  Condition of release met  Ability to make tax free commutation to low rate cap  Currently $195,000  Make use of low rate cap  Commutation may count towards minimum pension payment  Election required – Tax Reg 995-1.03 The Advice Exchange Pty Ltd

19. Case study – pension commutation Amount  1 July 2015 account balance $1,000,000  Tax free percentage 55%  Taxable percentage 45%  Minimum annual pension $40,000 The Advice Exchange Pty Ltd Retirement $195k tax-free withdrawal Anne (56) If she makes an election to treat the payment as a lump sum before receiving the payment it can count towards the minimum and she can receive the payment tax free

20. Commutation counting as minimum pension payment The Advice Exchange Pty Ltd Tips and traps Check with the product provider Review SMSF trust deed and pension provisions Need to consider Impact to tax offsets, rebates and Government incentives Excess pension payment re-contributed back into super Unused indexed low rate threshold