Question: I have my own complying SMSF and had fully retired at age 55. With the downturn in share prices, I decided to get a casual job and am earning in excess of $13,000 per year, at which time I was no longer considered retired but in the TRIS category, taking advantage of lump sum withdrawals. Under the new super rules applying from 1/7/2017, you suggest one option is to fully retire again.
Would this require me to completely resign from my casual employment or just reduce my hours to ensure I do not earn in excess of $12,500 in the financial year? Could you confirm what the exact threshold is?
Answer (By Paul Rickard): Under the super regulations, retirement has nothing to do with money, it is to do with intention and hours worked. This is the definition:
For the purposes of Schedule 1, the retirement of a person is taken to occur:
(a) in the case of a person who has reached a preservation age that is less than 60 — if:
(i) an arrangement under which the member was gainfully employed has come to an end; and
(ii) the trustee is reasonably satisfied that the person intends never to again become gainfully employed, either on a full-time or a part-time basis; or
(b) in the case of a person who has attained the age of 60 — an arrangement under which the member was gainfully employed has come to an end, and either of the following circumstances apply:
(i) the person attained that age on or before the ending of the employment; or
(ii) the trustee is reasonably satisfied that the person intends never to again become gainfully employed, either on a full-time or a part-time basis.
The Trustee needs to be satisfied that the person intends to never again become “gainfully employed”. This is defined to mean “means employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment”. Full time means more than 30 hours, part time is at least 10 hours, and less than 30 hours per week. So, to answer your question, you can only be retired if you are gainfully employed for 10 or less hours per week.
Question: We have an SMSF and considering the last changes to super funds which have gone through Parliament, I was contemplating ways to increase value in our super but at the same time increase liabilities to lower the overall maximum of $1.6m each. Can super funds have margin loans or something similar or maybe the advantages or disadvantages of starting another fund?
Answer (by Paul Rickard): While you can increase the assets and liabilities of your fund, this won’t impact your net super balance, which is what is measured to assess capacity against the $1.6m cap.
Yes, your fund can borrow to invest in shares – but not generally through a margin loan (NAB has a loan, which is acceptable). You can borrow through a limited recourse borrowing arrangement.
And yes, you can start another fund but this won’t mitigate the issue. The capacity is assessed by members (not the fund), and each fund reports (by law) to the ATO each member’s balance.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
