Newsletter

There are consequences when a trustee of a self-managed super fund (SMSF) becomes a 'disqualified person'. If you are a trustee and become a disqualified person, you are not allowed to remain a trustee.

A person can become a disqualified person for a number of reasons, most commonly when they are considered to be insolvent, under administration or an undischarged bankrupt.

A disqualified person commits an offence if they know they are disqualified and continue to be, or act as, a trustee of an SMSF. Penalties, including fines and imprisonment, can apply. There is also a risk the SMSF can be made non-complying if you do not take appropriate action.

If you become a disqualified person you need to:

• remove yourself as trustee and inform us immediately; and
• transfer your superannuation interest out of the SMSF.

If by doing so the fund no longer meets the definition of an SMSF, it may need to be restructured to meet the requirements of a regulated super fund or be wound up. For more information refer to the ATO website.

SMSF trustees (who are also normally the members) must from the 2012-2013 financial year and onwards, consider whether the SMSF should hold insurance cover for the members, following an amendment to the superannuation regulations in order to discharge their obligations under the SIS Act.

Insurance should be considered when preparing the initial investment strategy for newly established trustees. For existing SMSF’s, this should form part of the regular investment strategy review. There is no rule on how often trustees need to consider the insurance needs of members, but you need to document this at least annually.

Trustees should consider whether fund members need total and permanent disability (TPD), life and income protection insurance. From 1 July 2014, you will not be able to take out new policies in super that don't align with the conditions of release in superannuation law. This includes TPD policies that pay a benefit if the member is unable to work again in their own occupation and insurance that pays a benefit if the member suffers a critical illness specified in the policy.

The following are some reasons why a member may not require insurance cover:

• the member has cover in another super fund;
• the member has cover outside of the super fund;
• the member has no need for cover as their debts are low and expenses are fully funded;
• the member does not believe in cover or is unwilling to pay the cost of the premium; and
• the member has been declined cover due to occupation or pre-existing conditions.

If no changes to insurances in the SMSF are required, the trustees should document the reason(s) why the decisions were made annually in the fund’s investment strategy or in the minutes of trustee meetings if no changes are made to the investment strategy. This will provide evidence the new requirement has been addressed.

Clients intending to lodge a lump sum Family Tax Benefit, Child Care Benefit or Single Income Family Supplement (SIFS) claim for the 2012-2013 financial year, must do so by 30 June 2014 due to changes to the claim lodgement period administered by the Department of Human Services.

Also, clients who received or expect to receive Family Tax Benefit, Child Care Benefit and/or SIFS for the 2012-2013 financial year must lodge their individual income tax returns by 30 June 2014 to receive their benefits.

If you do not need to lodge an income tax return you must notify Centrelink by 30 June 2014 and you may also advise the ATO by lodging a Return not necessary.

CHANGES TO THE PRIVATE HEALTH INSURANCE REBATE

The private health insurance rebate is an amount that the government contributes towards the cost of your private health insurance premiums. The majority of people with private health insurance claim the rebate as a reduction in the amount of premiums they pay to their private health insurers (known as premium reduction).

From 1 July 2012, your entitlement to the rebate will depend on your single or family income for surcharge purposes. This means that if you have a higher income, your rebate entitlement may be reduced, or you may not be entitled to receive any rebate at all. You will receive a statement from your private health insurer, which is required to complete your tax return.

You may now be eligible for a private health insurance rebate if you were covered by private health insurance regardless of who paid for the policy. If you are covered as a dependent child on a policy, you are not eligible for the rebate, but will not have to pay the Medicare levy surcharge.

You will be income tested on your share of the private health insurance policy. This may mean that your household will get more than one annual statement from your insurer for the one policy if there was more than one adult on the policy when the premiums were paid.

MEDICARE LEVY SURCHARGE THRESHOLDS

If you and all your dependants do not have an appropriate level of private patient hospital cover for the full year and your income is more than the relevant income test threshold, the Medicare levy surcharge may apply.

The Medicare levy surcharge is now determined by new income thresholds. There is no change to how the Medicare levy surcharge applies, or to any exemptions that may apply to your circumstances.

* The family threshold will increase by $1,500 for each dependent child after the first.

When you lodge your tax return, the ATO will test your income against the three new income thresholds to determine the level of rebate you are entitled to receive. Depending on how you claimed your rebate and the level of rebate you claimed, this may result in a tax debt or a tax offset.

* The family threshold will increase by $1,500 for each dependent child after the first.