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ATO advice for SMSFs with related-party loans

The ATO has recently provided recommendations for self-managed super funds (SMSF) trustees with related party LRBAs that are lodging before the 31 January 2017 compliance deadline.

The Tax Office stated that the relevant income of an SMSF is considered NALI (non-arm’s length income), and should be reported as such in the SMSF’s 2016 annual return, when trustees have:

Prior to 31 January 2017, the Tax Office will not be allocating compliance resources to review the borrowing terms of a fund’s LRBA. Therefore, provided the LRBA in an SMSF is consistent with an arm’s length dealing and the required catch-up payments are made by 31 January 2017, the fund is not at risk of ATO enforcement action.

Strict consequences, such as ATO compliance and enforcement action, await SMSF trustees who do not ensure that any LRBA in their fund is on terms consistent with an arm’s length dealing and if catch-up payments are not made by 31 January 2017.

Where the necessary action has not been undertaken by 31 January 2017, SMSF trustees must take immediate action to amend any previously lodged 2016 SMSF annual return if it did not correctly report relevant income as NALI.

Posted on 1 September '16 by , under Tax.

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Transition to retirement

The transition to retirement (TTR) strategy allows you to access some of your super while you continue to work.

You are able to use the TTR strategy if you are aged 55 to 60. You can use it to supplement your income if you reduce your work hours or boost your super and save on tax while you keep working full time.

  • Starting a TTR pension: To start your TTR pension, transfer some of your super to an account-based pension. You have to keep some money in your super account so that you can continue to receive your employer's compulsory contributions as well as any voluntary contributions you may be making.
  • Government benefits and TTR: The benefits you or your partner receive might be impacted if you choose to opt for this strategy. How and what exactly will change might become clearer upon discussing this with a Financial Information Service (FIS) officer.
  • Life insurance and TTR: In some cases, the life insurance cover you have with your super may stop or reduce if you start a TTR pension – check this before making any decisions or changes.

TTR can help ease your mind as you transition into retirement but it can be a bit complex. Before you choose whether you want to use TTR to reduce work hours or save on tax, or even if you want to use TTR altogether, you should figure out how this will impact all aspects of your finances.

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