Assets

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The average balance of self-managed super funds has topped $1 million for the first time, the latest tax office statistics show. It was at around $800,000 four years ago.
SMSFs returned 9.8 percent on assets in fiscal 2014, the fifth consecutive year of positive returns.
"For the first time the average assets of SMSFs grew to over $1 million in 2014, a growth of 23 percent over five years," ATO assistant commissioner Kasey Macfarlane said.
"Likewise, average assets per member increased to $564,000, the highest over the period," Fairfax Media reported.
The data shows there are one million members of DIY super funds which combined are worth $590 billion in assets.
The average assets per small fund are $1,066,080 and median assets $602,629.
Nearly 31percent of SMSFs now have assets of $1 million or over, including 10.8 percent with assets between $2 million to $5 million; 2.1percent in the $5 million to $10 million range and 0.5percent with a balance over $10 million.
 
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jchancellor-FAypfDUnLy

SMSF average balance hits $1 million

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Household finance data released by the Reserve Bank (RBA) each quarter looks at the ratios of household debts and assets to disposable income. The latest RBA update shows that while households debt is growing, asset wealth is simultaneously increasing. 
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According to the RBA, the ratio of household debt to disposable income was recorded at 193.7% at the end of June 2017 and now sits at a record-high having increased by 2.0% over the quarter and by 3.9% over the year.
According to CoreLogic research analyst Cameron Kusher it was not surprising to see that most of this debt is housing related; the ratio of housing debt to disposable income is recorded at 136.4% having increased by 1.4% over the quarter and 3.9% over the year.
Kusher said, “Clearly, household and housing debt has increased over time relative to disposable incomes. Of note is that since the financial crisis, the rate of escalation has slowed.”
Further data from the RBA reveals that of the 136.4% ratio of housing debt to disposable income, 103.2% is held by owner occupiers with the remaining 33.2% held by investors.
At the end of June 2017 the ratio of household assets to disposable income was recorded at 935.6% and the ratio of housing assets to disposable income was 516.5%, both of which were record highs. Over the past year household assets and housing assets have increased by 6.6% and 7.8% respectively, well in excess of the increase in household and housing debt.
<a href="https://www.propertyobserver.com.au/images/2017/10/05/Kusher1.png" target="_blank">Click to enlarge</a>
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By comparing the ratios of assets and debt the RBA also produces ratios of household and housing debt to assets. Mr Kusher said, “The data reiterates that although debt levels are high, at this stage debt is well supported by assets which are valued substantially higher.”
Over recent years the ratios of household and housing debt to assets has actually been falling. In June 2017, the ratio of household debt to assets was recorded at 20.7% and the ratio of housing debt to assets sat at 26.4%.
According to Kusher, a big contributor to the declining ratio of debt to assets over recent years has been the ongoing fall in interest rates to their current lows. At the end of June 2017 the ratio of household interest repayments to disposable income was 8.7% and for housing it was 7.1%. Lower interest rates also mean that where there is a debt, debtors have the ability (if they choose) to maintain previous repayments which in turn means additional debt is repaid as interest rates fall.
He said, “The latest household finance data from the RBA highlights that Australian households are heavily indebted, largely due to housing. While debt levels are high, the value of household and housing assets are, at this stage, considerably greater than the level of debt.”
“Of course, if household and housing asset values begin to fall in the future, the accompanying debt may not fall at the same rate and that remains the main concern with the ongoing increase in household and housing debt.
“Although Australia survived the financial crisis with much less damage than many other countries, of note was the fairly sharp rise in the ratio of household and housing debts to assets over that period. A more sustained downturn could potentially see a much greater increase in these ratios as asset values fall but the debt against these assets remain,” Mr Kusher said. 
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ckusher-ujnxiKuFQs

Household debt growing slower than asset wealth as both hit record highs

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Melbourne's likely last significant CBD offering of 2018 is a one of Queen Street’s trophy buildings.
Colliers International’s Oliver Hay, Daniel Wolman and David Sia have been appointed to manage the on-site auction campaign for 438 Queen Street.
Set on 1,440 sqm the property is expected to sell for more than $7 million.
The property is being sold by David Tweed, a controversial stocks predator who gained notoriety more than a decade ago through his practice of making unsolicited off-market offers to unsophisticated investors to acquire their securities at prices well below market value.
“With so few freestanding assets hitting the Melbourne CBD market, we’re expecting developers, investors and owner-occupiers to all be after a piece of the city’s history,” Mr Hay said. 
The corner property located in the heart of Melbourne’s Queen Victoria Market Precinct and Elizabeth Street 24-hour Precinct has triple street frontage spanning 69 m and is zoned for Capital City 1.
“These characteristics present scope for the building to be used as a powerhouse office headquarters, hospitality or student accommodation/hotel,” Mr Hay said. 
The property is for sale by auction on 13 December.
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j.ballantyne1990-6AQqhLzZaK

Melbourne's last 2018 CBD offering of 2018 is a historic Queen Street building

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<h2>An SMSF can lease an asset of the fund – such as business equipment or machinery – to a related party of the fund. This is known as an in-house asset.</h2>
An in-house asset is a loan to – or an investment in – a related party of your fund or an asset subject to a lease to a related party.
A related party of your fund can include fund members, trustees, their relatives and any companies and trusts these related parties control or influence. Employers who contribute member benefits for you or another member of your super fund are also related parties.
It’s important to remember that in-house assets can’t be more than 5 percent of the total market value of fund assets.
If your SMSF holds an in-house asset, the value of all of your funds’ assets needs to be determined at the end of the income year. The valuation enables you to test whether the market value of the in-house assets exceed 5% of the funds’ total assets at the end of a year of income.
<h2>Certain events will affect the percentage of in-house assets and there are also some exceptions to the in-house asset rules.</h2>
Your SMSF must also ensure that the lease of business equipment or machinery complies with the sole purpose test and is made on a commercial ‘arm’s length’ basis.
Can an SMSF sell a collectable or personal-use asset to a related party?
Yes – collectables and personal-use assets held in an SMSF can be sold to a related party. For items acquired:
<ul>
<li>after 1 July 2011, the sale must be made at market price as determined by a qualified, independent valuer</li>
<li>before 1 July 2011 and sold before 1 July 2016, an independent valuation is not required, however, the sale must be made on an arm's length basis.</li>
</ul>
All sales to related parties that occur on or after 1 July 2016 must be supported by an independent valuation.
What is the time limit for providing requested documents to my SMSF auditor?
You must provide requested relevant documents to your SMSF auditor within 14 days of the request being made.
If you fail to do so, you will be in breach of a statutory time period in section 35C (2) of the Superannuation Industry (Supervision) Act 1993.
Where a statutory time period is exceeded by more than 14 days, your SMSF auditor is required to report the contravention to the ATO via an Auditor Contravention Report.
What is my preservation age for accessing super benefits?
Your preservation age is the minimum age at which you can access your preserved super benefits without meeting another condition of release. It is based on your year of birth.
Your preservation age will be 55 if you were born before 1 July 1960.
If you were born after 30 June 1960, you will have a higher preservation age of:
<ul>
<li>56 – if you were born between 1 July 1960 and 30 June 1961</li>
<li>57 – if you were born between 1 July 1961 and 30 June 1962</li>
<li>58 – if you were born between 1 July 1962 and 30 June 1963</li>
<li>59 – if you were born between 1 July 1963 and 30 June 1964</li>
<li>60 – if you were born after 30 June 1964 
</li>
</ul>
To access your preserved super in the 2015-16 income year, you must have turned 55 before 1 July 2015.
Your preservation age is relevant to the following conditions of release:
<ul>
<li>reaching preservation age and retired with no intention to work again in the future</li>
<li>reaching preservation age and starting a transition-to-retirement income stream.</li>
</ul>
What happens if TRIS payments exceed the maximum annual payment limit?
A transition-to-retirement income stream (TRIS) can be paid to a member who has reached their preservation age even if they have not retired. However, strict annual payment conditions apply. The minimum annual payment amount depends on the member’s age and the maximum annual payment amount is 10 percent of the member’s account balance. 
If payments are outside the allowable limits, the TRIS is automatically taken to have ceased for income tax purposes from the start of the financial year in question. This means your fund cannot claim a tax exemption on the income from the account supporting all the payments. It also means all payments made during the financial year will be treated as a lump sum and taxed at the individual’s marginal tax rate, unless the payments are unrestricted non-preserved benefits.
Can an SMSF purchase shares in a private company?
An SMSF is prohibited from acquiring assets from a related party. There are limited exceptions, including market listed shares, business real property or in-house assets (where the value of all in-house assets does not exceed 5% of total fund assets).
In recent communications, we have described situations where an SMSF purchases the shares of a private company for the purpose of channelling franked dividends to the SMSF instead of the company’s original shareholders.
If the private company is a related party of the SMSF, the purchase would be a prohibited acquisition and a breach of section 66 of the Superannuation Industry (Supervision) Act 1993 (SISA) would occur.
How are unrestricted non-preserved benefits related to a condition of release?
The most common conditions of release for paying benefits to a member are when the member has:
<ul>
<li>reached their preservation age and retires</li>
<li>reached their preservation age and begins a transition-to-retirement income stream</li>
<li>turned 65 (even if they haven't retired)</li>
<li>died</li>
</ul>
When you meet a condition of release with no cashing restrictions, your preserved benefits become unrestricted non-preserved benefits (UNPB).
Under the rules for voluntarily cashing benefits, UNPBs may be cashed at any time. 
Can you set up an SMSF with a corporate trustee? 
Under paragraph 19(3)(a) of the SISA, the trustee of the fund must be a constitutional corporation pursuant to a requirement contained in the governing rules.
This means you need to set up a company incorporated under law and obtain a certificate of registration in order to have the company act as trustee of a fund. Registering a company incurs immediate costs and there is also an annual fee depending on the purpose of the fund.
The company must be registered before the SMSF is established.
How do I amend my SMSF annual return?
To amend your SMSF annual return you need to resubmit the whole return and answer ‘yes’ in Section A question 5.
You cannot request amendments by:
<ul>
<li>writing to us with the correct details</li>
<li>submitting a partially completed SMSF annual return</li>
<li>submitting a Request for an amendment of an income tax return form.</li>
</ul>
Can I make salary-sacrificed contributions to my SMSF and at the same time access retirement money to make mortgage payments?
There are very limited circumstances when you can access your retirement savings early. Strict criteria must be met to do so.
A release on compassionate grounds must be applied for through the Department of Human Services. In these circumstances, superannuation savings will only be released to make mortgage payments if you do not have the financial capacity to pay and your mortgagee is threatening to repossess or sell your home.
If you are voluntarily salary sacrificing into your super fund, instead of paying your mortgage, you will not qualify for compassionate grounds because you have the financial capacity to make your mortgage repayments by accessing your employment income.
You are only able to withdraw super under severe financial hardship if you have received Australian Government income support payments continuously for 26 weeks and are unable to meet reasonable and immediate living expenses. Payments from your super fund are limited to a maximum of $10,000 every 12 months.
Improper early access to your super is illegal – there are severe consequences for you and your fund if you access your super before you are legally entitled to do so. These include disqualification of trustees, the fund being made non-complying, imposition of administrative penalties, and prosecution.
Any money accessed illegally will also be assessed as income for the individual and taxed at the applicable marginal tax rate.
Can an SMSF take out insurance on a cross-insurance basis?
Regulations that came into operation on 1 July 2014 do not allow SMSFs to provide insurance for a member unless the insured event is consistent with one of the following conditions of release:
<ul>
<li>death</li>
<li>terminal medical condition</li>
<li>permanent incapacity</li>
<li>temporary incapacity.</li>
</ul>
<h2>The Explanatory Memorandum associated with the amended regulations makes it clear that the proceeds of an insurance policy must be released to the member who is the insured under the policy. This means that cross-insurance arrangements where the proceeds of an insurance policy are paid to someone other than the insured under the policy are not permitted.</h2>
Does the temporary budget repair levy apply to SMSFs?
The Temporary Budget Repair Levy started on 1 July 2014. It is a 2 percent levy that applies if your income is taxed at the highest marginal tax rate. Super fund tax rates that match the top marginal tax rate for individuals have been increased by 2 percent. These tax rates are:
<h2><a href="/images/2016/10/12/Screen%20Shot%202016-10-12%20at%209.25.33%20AM.png" target="_blank">Click to enlarge</a></h2>
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For more information from the ATO, <a href="https://www.ato.gov.au" target="_blank">click here</a>.
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Property 101: Can equipment owned by the SMSF be leased to other members of the same SMSF?

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GUEST OBSERVER
New online resources – the Divorce and Separation Financial Checklist and the Asset Stocktake Calculator – developed by ASIC will help people navigate the financial aspects of divorce and separation.
The resources are designed to help Australians manage their finances and make informed financial choices to avoid financial pitfalls during periods of significant change in their life.
The <a href="https://www.moneysmart.gov.au/life-events-and-you/life-events/divorce-and-separation/divorce-and-separation-financial-checklist" target="_blank">divorce and separation financial checklist</a> and <a href="https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/asset-stocktake-calculator" target="_blank">asset stocktake calculator</a> will provide guidance on:
<ul>
<li>making informed financial decisions at the time of a relationship breakdown;</li>
<li>separating finances and getting money on track post separation and divorce and;</li>
<li>commencing the property settlement process by providing a summary of assets and debts.</li>
</ul>
'A relationship breakdown changes many aspects of a person's life, including their finances. This can leave people feeling stressed and overwhelmed and make it difficult to focus on financial decisions', said Mr Peter Kell, ASIC Deputy Chairman.
'The new resources can help sort out money issues and guide people through the financial uncertainty they may be facing when a relationship ends, by providing practical steps to separate finances,' added Mr Kell.
Research undertaken by the Australian Institute of Family Studies has measured the impact of a relationship breakdown on people's finances, which especially affects women. Divorce had a substantial negative effect on the equivalised household incomes of women, with Australian women experiencing a fall in income of 21 per cent compared to their pre-divorce income.<a name="_ftnref1" href="https://www.asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-285mr-asic-launches-new-divorce-and-separation-resources-to-support-your-financial-decisions/#_ftn1" title=""> </a>
Anne Hollonds, Psychologist and Director of the Institute of Family Studies said, 'When a relationship breaks down, we often don't know how to start sorting out our finances. The new checklist from ASIC's MoneySmart can help you work out what you need to do. You can also use it to support someone you know who's going through a divorce or separation.'
ASIC's promotion of the resources is supported by a video featuring Anne Hollonds who explains how the divorce and separation financial checklist can help navigate finances when a relationship ends.
To view the video, <a href="https://www.youtube.com/watch?v=RyM327PY744" target="_blank">click here</a>.
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