2014 Budget Report: How will Australia's largest annual economic event affect you and your clients?

By Denice Fraser, Senior Marketing Executive


Thomson Reuters' experienced tax writing team will again be at Parliament House on #Budget2014 night (13 May) preparing their detailed Weekly Tax Bulletin Federal Budget Report.

The Report will comprise coverage and analysis across a wide range of issues including personal, corporate, business and international tax, compliance, superannuation, GST, and social security. 

Like last year, we’ll make this report available to Cleardocs users free of charge on the day following the Budget announcement.  

Visit the Thomson Reuters website at http://www.thomsonreuters.com.au/browse/budget/ to learn more.


+Cleardocs Thomson Reuters

New SMSF Borrowing rules

Danni Kirwan, Marketing Executive

On 7 June 2010, changes were made to the law on borrowing through Self Managed Superannuation funds (SMSFs). If you are considering borrowing through your SMSF, or are already in the process of preparing to borrow, these changes may affect you.

All Cleardocs documents are up to date. As always the changes were developed and signed-off by our lawyers at Maddocks.

So what are the changes?

Most noticeably, the name for SMSF Borrowing arrangements has changed from “Instalment Warrant Borrowing arrangements” to “Limited Recourse Borrowing arrangements”. Other key changes are:

· The borrowed money can also be used by the SMSF to pay borrowing related expenses including stamp duty, conveyancing fees and loan establishment costs. Under the old arrangement, it wasn’t clear if funds could be used for these sorts of expenses.

· The SMSF can refinance its borrowing.

· The SMSF can use the borrowed money to purchase a ‘single acquirable asset’, which can include a collection of shares in a company or a collection of units in a unit trust – so long as the shares or units acquired are of the same class with the same market value.

These changes are expected to be welcomed by SMSF Trustees, as they provide greater clarity than the previous rules as well as, generally, more flexibility.

How do the changes affect the Cleardocs documents?

The Cleardocs SMSF borrowing packages and SMSF deed were updated, on the advice of Maddocks, on Friday 9 July in accordance with the law changes.

If you haven’t yet started the borrowing process, then:

· Any new SMSFs set up are capable of Limited Recourse Borrowing

· To purchase an SMSF Borrowing package from Cleardocs, the SMSF needs to have a deed that was created or updated on or after 9 July 2010.

If you’ve paid Cleardocs for your SMSF Borrowing documents but the loan has not yet started, then you need an updated version of the Cleardocs documents, please call us on 1300 307 343 and we will arrange the new documents for you for free.

If your SMSF borrowing is already in place, then you don’t need to do anything about the documents. They are fine as they are.

What do you think about the changes?

We’d love to hear your thoughts on the SMSF Borrowing changes. Do you think the new rules help to clarify the SMSF Borrowing process? You can leave your comments below.

Need more information?

For a more comprehensive review of the changes, Maddocks have prepared the following ClearLaw articles on the topic:

Super fund borrowing rules: proposed new laws making things clearer

SMSF Borrowing: Cleardocs documents updated to reflect changes in the law

Related Cleardocs Documents

Self Managed Superannuation Fund (SMSF) set up $137.50

Update to SMSF $99.00

SMSF Borrowing (bank) $198.00

SMSF Borrowing (related party) $599.50

SMSF Borrowing with Cleardocs – the process

Danni Kirwan, Marketing Executive

A number of our blog posts and ClearLaw articles over the past year or so discuss SMSF borrowing, — it continues to be a popular topic. Many people are unsure about the process, and what documents are required. Below, I set out the process, and the documents required, to get your SMSF borrowing ready through Cleardocs.

Overview

In overview, here’s what you need:

• An SMSF
  
• The SMSF needs an up to date Cleardocs deed
  
• Usually, the SMSF needs a corporate trustee — check with the lender
  
• You need an SMSF borrowing document package which includes a Declaration of Custody Trust
  
• Usually, the Declaration of Custody Trust needs a corporate trustee — check with the lender. Importantly, if you do need a corporate trustee for the Declaration of Custody Trust, then that company must be a different company from the one that is the SMF trustee (so you are likely to need two companies)

So you may need to:

• Set up an SMSF
  
• Update an existing SMSF’s deed
  
• Register a company, or two
  
• Change the SMF’s trustee to a corporate trustee

You’ll definitely need to order an SMSF borrowing package.

Before you start, find out the lender’s requirements.

Here’s the process step-by-step

Step-by-step

Step one: Have you got company trustees? You may need two

Most banks lending to SMSF’s require that both the SMSF and the Declaration of Custody Trust (contained in the SMSF Borrowing packages) have corporate trustees. This means you need two companies.

If you need to register one or both of them, then you can do so through Cleardocs.

For the company that is going to act as the trustee of the SMSF, make sure you tick the “Yes” box in the question interface that asks if the company will act solely as the trustee of an SMSF — as this will entitle you to a cheaper ASIC annual review fee.

You need to wait for ASIC to register your company before you continue with the next documents — as you will need the name and ACN number of the corporate trustee to complete the forms for the SMSF and for the borrowing package.

Step two: Set up SMSF, or update existing SMSF to Cleardocs deed

If you already have an SMSF with an up to date Cleardocs deed and with a corporate trustee, then you can skip to step 4 four.

To use the Cleardocs SMSF Borrowing packages, the SMSF will need to have a Cleardocs deed. This ensures:

• that your SMSF has the power to borrow in the first place; and
  
• that we know your SMSF deed works with any of the other related documents you purchase – such as the SMSF borrowing packages, or the Change of Trustee.

If you don’t already have an SMSF, then you can set up a new SMSF through Cleardocs for $137.50.

If you have an existing SMSF that does not have a Cleardocs deed, or that has an out of date Cleardocs deed, then you can update to the latest version of the Cleardocs deed for $99.

Step three: If required, change the trustee of the SMSF from individuals to corporate trustee

Most banks lending to SMSF’s are requiring the fund to have a corporate trustee. As I mentioned in my last blog post, many SMSF’s are also making the decision to change to a corporate trustee to enable easier administration in the circumstances of admitting or removing trustees, or the death of a trustee. Corporate Trustees can also allow for greater asset protection, and of course can enable a fund to operate with a sole individual as both the member and director of the corporate trustee.

If you have an SMSF that does not have a Cleardocs deed then you will need to update to a Cleardocs deed before you change the trustees. You need to update the deed with the funds current situation, and then use the Change of Trustee product to record the change of trustee/s.

If you are changing from individual trustees to a corporate trustee, then the document package Cleardocs provides will include a new trust deed as part of this package. This is because the deed differs depending on whether the trustee/s are individuals or a company.

Step four: Complete the SMSF Borrowing package

Cleardocs has two separate SMSF borrowing packages – one for borrowing from a bank, another for borrowing from a related party. Both packages require detailed information about the lender, the borrower and the asset to be purchased. To ensure you have all of the information required, it’s a good idea to download and complete the document checklist before you start filling out the online interface.

Have the lender review documents before you sign. It is much easier to change a document before it is signed than after it is signed.

More information

There’s more information about SMSF borrowing through Cleardocs:

• Self Managed Superannuation Fund Product Page
• Update to SMSF Product Page
• Change of Trustee Product Page
• SMSF Borrowing Product Page

Earlier blogs about SMSF borrowing:

• Instalment Warrants , SMSF borrowing, what's happening
• The banks and SMSF borrowing: remember the bank is acting for itself — not for the SMSF trustee(s)
• Part 1: Trading SMSF assets (and replacement assets) bought under an instalment warrant arrangement
• Part 2: Case studies of trading SMSF assets (and replacement assets) bought under an instalment warrant arrangement

As always, if you need more information you can call us on 1300 307 343.

Changing SMSF Trustee’s with Cleardocs

Danni Kirwan Marketing Executive

Last year, Cleardocs launched our Change of SMSF Trustee product, enabling our customers to change the trustee(s) of their Self Managed Superannuation Funds (SMSF’s). The Change of Trustee can be used to:

• replace individual trustees with a corporate trustee
• replace a corporate trustee with individual trustees
• remove trustees
• retire trustees
• add trustees

By the way, if you are interested in changing trustees of another type of trust — discretionary (family), unit, or hybrid — then see our earlier blog Careful about changing a Discretionary Trust, Hybrid Trust — even just changing trustee

Why change SMSF Trustee’s?

Many SMSF’s are making the decision to change to a corporate trustee to enable easier administration — particularly, in the circumstances of admitting or removing trustees, or the death of a trustee. Also a corporate trustee can enable a fund to operate with an individual as both the sole member and sole director of the corporate trustee.

In addition to these reasons, the recent popularity of SMSF borrowing has seen an increase in SMSF trustees changing from individuals to corporations – at the request of some of the banks.

If you’re changing from individuals to a corporate trustee, then you’ll need to have registered a company first as the ACN number is required to complete the Change of Trustee documents. You can register a special purpose company with Cleardocs for $537.50.

Although changing from individual to corporate trustees is popular, many SMSF’s also have reason to add or remove individual trustees. SMSF’s can operate for decades, so it’s reasonable to expect some changes to occur within that time that may affect the trustee(s) of the fund. Some basic examples include removing a trustee in the case of a marriage breakdown, or adding a trustee when parents add their children to their fund.

Get advice first

Regardless of the reason for the change, it is important:

· to get professional advice about your situation before deciding what to do; and

· to record any change of trustee(s) appropriately so that the SMSF’s documents accurately reflects the current situation of the SMSF.

Removing a trustee? Not without their signature...

Although the Change of SMSF Trustee documents can be used to remove or retire trustees, it is important to note that the documents require the signature of the outgoing trustee – so the documents cannot be used:

· to remove a trustee without their participation; or

· to remove a trustee who has died — in the case of a deceased trustee, we can refer you to our legal helpline at Maddocks for the appropriate documents.

Using the Cleardocs Change of SMSF Trustee

In order to remove a trustee, the SMSF must first have a Cleardocs deed. If the SMSF doesn’t currently have a Cleardocs deed, then you can update to a Cleardocs SMSF deed for $99. This ensures that our Change of Trustee documents are suitable to use with the SMSF deed.

To find out more about our Change of SMSF Trustee package, click here to go to the product page.

Beware – early access to super is a SCAM!

Danni Kirwan, Marketing Executive

The ongoing global financial crisis has left many people looking for extra cash, and in some cases as ASIC warns, attempting to gain early access to their superannuation.

Late last week, ASIC released a statement addressing the increase in the number of people trying to gain illegal early access to their super – primarily through scams involving the establishment of SMSF’s. You can read the full statement from ASIC here

While establishing an SMSF will give you greater control over how your funds are invested, there are restrictions in place that govern what you can invest your super in, and when you can draw on your super.

Despite what promoters of illegal schemes may tell you, early access to Superannuation is only granted in very limited circumstances – such as financial hardship or on compassionate grounds. If applying for early access to super fund on the basis of financial hardship for example, you must prove:

• That you have been receiving welfare benefits continuously for 26 weeks, and;
• That you are unable to meet your day to day living expenses.

If that is the case:

• You can only receive up to $10,000.00 in a 12 month period, and;
• The money withdrawn can only be used to cover your day to day living expenses.

ASIC makes it quite clear that in most cases, you won’t be able to access your superannuation until you retire.

Beware!
If you are approached by someone claiming that you can set up an SMSF and use some of the funds to pay off debts or ease you cash flow problems, beware! Withdrawing money from your super before you retire could open you up to significant penalties and back taxes.

As a trustee of an SMSF, you could be fined up to $220,000.00 and face a jail term of up to five years if it can be proven that you knowingly allowed illegal early access to your superannuation funds. Even if you return the money to your SMSF, it will still be taxed at a higher non-complying tax rate.

If you are thinking about establishing an SMSF to give you greater control over how your funds are invested, the chances are you will also being seeing an advisor to help you invest your funds. If an advisor suggests early access to your super, you should call ASIC or the ATO to make sure you won’t make yourself liable to penalties.

Call ASIC
If you believe that you may have started the process to illegally access funds – for example by setting up an SMSF to roll funds into and access some of those funds early – the ATO urges you to call them on 13 10 20 to discuss your situation.

The ASIC website also has examples of early release schemes – including an extensive list of schemes that they have taken action against. You can see it here