Here are the key steps: 1. SMSF borrows $1,000,000 from bank via LRBA to acquire units in a unit trust 2. Unit trust (Jones Property Trust) is established with the SMSF and others as unit holders. Unit trust acquires the land. 3. Unit trust undertakes the property development using the borrowed funds 4. Upon completion, the developed land is held via separate titles by the unit trust 5. Income/profits from the developed land/titles are distributed to the unit holders (SMSF). The SMSF uses these distributions to repay the bank loan. The unit trust structure allows the SMSF to undertake the development via the trust, avoiding

1. Presented by:
Aaron Dunn
©The SMSF Academy 2012

2. Thank You to our supporting sponsors
http://www.mlc.com.au/accountant-solutions/ www.bglcorp.com.au
www.banklink.com.au
www.justsuper.com.au
www.glenister.com.au
#top10smsf

3. General Advice Disclaimer
This presentation provides general advice only. No direct or implicit
recommendations are given in this document. This means that the general
advice provided has not been prepared taking into account an individual’s
financial circumstances (i.e. investment objectives, financial situation and
particular investment needs). You should assess whether the advice is
appropriate to your individual financial circumstances before making an
investment decision. You can either assess the advice yourself or seek the help
of an authorised representative through an Australian Financial Services License
(AFSL) holder.
The SMSF Academy Pty Ltd believes that the information in this presentation is
correct at the time of compilation but does not warrant the accuracy of that
information. Save for statutory liability which cannot be excluded, The SMSF
Academy disclaims all responsibility for any loss or damage which any person
may suffer from reliance on this information or any opinion, conclusion or
recommendation in this presentation whether the loss or damage is caused by
any fault or negligence on the part of presenter or otherwise.
#top10smsf

4. Strategy 1:
GET OUT OF JAIL FREE
CARDS WITH EXCESS
CONTRIBUTIONS TAX

5. Excess contribution tax – a growing problem?
Will we see
• 296% increase in ECT assessments from the same in
296% increase in ECT
assessments for concessional
contributions in 2009-10 financial year (halving of concessional
2010 2012-13?
contribution cap)
• Will we see a similar story for 2012/13?
• “Get out of jail free” cards:
– Once-off refund of ECT for
concessional contributions
– Returning contributions (NCC)
– De-minimus test
“Get out of jail free” cards:
– Contributions Reserving
• Once-off refund of ECT for
concessional contributions
• Returning contributions (NCC)
• De-minimus test
• Contributions Reserving

6. ‘One-off’ refund of excess concessional contributions
ATO must pay refund within 60 days of receiving Individual Income Tax return
the amount from the fund. ATO allows 15% tax must be lodged within 12
offset. Refund can be reduced by outstanding tax months of income year
debts and debts owed to other government
agencies (e.g. child support agency, Centrelink) Member lodges
tax return
Excess concessional
contributions are $10,000 or
ATO credits
100% of excess less; Individual does not
ATO determines
to member’s
excess have previous excess
income tax concessional contributions
contributions
account and
amends return on or after 1 July 2011
Must accept offer within
SMSF pays 85%
ATO notifies 28 days, but ATO can
of excess
member to
contribution to
accept allowed longer
ATO
Must pay within 30 days unless ATO offers
release authority
defined benefit interest, pension to fund
interest or if excess amount
exceeds the value of the Interest
#top10smsf

7. One-off ECT refund example
• Neil (53) earns $100,000 p.a. and salary
sacrifices up to his CC cap of $50,000
• Reduced to $25,000 for FY2012-13
• SMSF reports $27,083 at end of income year
• SMSF reports to ATO – excess of $2,083
• As the contributions:
– Have been made post 1 July 2011; and
– Are $10,000 or less; and
– Are the first time Toby has breached the cap (since
law introduced); and
– Tax Return lodged within prescribed period
• Commissioner will issue “Notice of Offer”
– 28 days to accept / reject the offer
#top10smsf

8. One-off ECT refund example
• Where Neil accepts the NoO,
– Excess contributions become assessable to him
personally (amendment to 2012 Individual ITR)
– SMSF will be provided with a compulsory ‘release
authority’ of 85% of the contribution ($1,770)
• Must be paid within 30 days of receiving the release
authority along with a release authority statement
– Commissioner will amend Toby’s ITR based on excess
contributions as assessable income
– Income tax, Medicare levy to be deducted from
release amount issued to ATO by SMSF
• Amounts reduced by 15% tax offset representing tax paid by
SMSF
– Tax Refund provided back to Neil with amended
notice of assessment, unless other Commonwealth
debts outstanding
#top10smsf

9. One-off ECT refund example
• $10,000 excess contributions tax refund limit will not be indexed
• If an individual lodges their personal income tax return late (beyond
one year after the ITR was due), they forfeit their right to have an offer
to release excess concessional contributions
– Unless otherwise allowed by the Commissioner;
• Where an individual breaches the concessional contribution cap by
more than $10,000, there is no refund option available, plus they also
lose their ‘once-off’ eligibility as a result of the ECT amount
• If member has breached in more than one year before ECT assessment
raised, will only be eligible for first year
• It is a ‘all or nothing’ approach – there is no ability to request a partial
refund of the excess concessional contributions
• Where there is insufficient capital in the Fund to pay the compulsory
release amount, the amount will be personally assessed to the
individual and a tax liability raised
#top10smsf

10. Returning contributions
• Fund-capped contributions prevent a person
from contributing more than the NCC cap
• Super funds are required to return single fund-
capped contributions that exceed - SISR 7.04(3):
– $150,000 if member is age 65 or over on 1 July in a
financial year; or
– $450,000 if member is less than 65 on 1 July in a
financial year
• Does not apply across multiple contribution
amounts made during a financial year where
aggregated are excessive
– E.g. John (59) makes NCC of $200,000 + $200,000 +
$100,000 in FY
#top10smsf

11. Returning contributions
• Trust deed may outline how certain
contributions could be aggregated
– E.g. off-market share transfers made into SMSF on
same day
• Ineligible contributions – SISR 7.04(4)
– 65 and over: work-test has not been met
• Both require the contribution to be returned
within 30 days of becoming aware of the
breach
– ATO ID 2009/29: must return even after 30 day time limit
– ATO ID 2008/90: only excess amount needs to be returned
#top10smsf

12. De-minimus rule
• ATO to apply a de-minimus threshold for
certain excess non-concessional contributions
– Superannuation Consultative Committee – March
2012
• “de minimis non curat lex” - the law does not
care about very small matters
• ATO likely to no longer raise an ECT liability
where NCC cap breached as a result of
inadvertent trigger of bring forward rule
– i.e. contribution of small value triggered bring
forward rule
• Individuals can apply to the Commissioner for
discretion on case-by-case basis
#top10smsf

13. De-minimus example
• Geoff (55) is self employed and made $50k self
employed super contribution to his SMSF, along
with $150k NCC contribution for 2011/12.
• In 2012/13, Geoff makes a $450k NCC.
• When completing 2012 tax return, Geoff can only
claim $49,900 as self employed deduction,
meaning $100 is NCC
• This triggers the bring forward for 2011/12
($150,100)
• Excess contributions tax payable of $69,797
– ($150,100 + $450,000 - $450,000) x 46.5% = $69,797
• ATO reviewing prior assessments from 1 July 2007
• ATO to allow amounts to be re-contributed into the
fund without incurring ECT
#top10smsf

14. Strategy 2:
CONTRIBUTIONS …
TO HAVE AND TO HOLD

15. Contributions Holding Accounts
• ATOID 2012/16: Allocation of contributions
• Interpretative decision confirms ability to
“park” contributions for up to 28 days after
the end of month in which contribution made
– June contributions can be held-over until following
financial year (allocated before 28 July)
• Deduction for taxpayer when paid
• Tax assessed in year of payment
• However, counts towards contribution cap in
year amount is allocated to the member
– When allocated – gross up by 1.176
• Reserve or suspense account?
– SIS & Tax law requirements
#top10smsf

16. Contributions Holding Account Example
Allocated to
member
$25,000 Unallocated CC Allocated to
member prior
to 28 July
$50,000
1 June 2012 30 June 2012 28 July 2012
• John (54) has anticipated net capital gain of $100,000 for
2011-12
• Self-employed with no concessional contributions made YTD
• Wants to reduce CGT bill as far as possible
• John makes $75,000 member deductible contribution into
fund
• Claims tax deduction for $75,000 | SMSF pays contributions
tax of $11,250
• $50,000 allocated 2011-12 | $25,000 allocated 2012-13
#top10smsf

17. Don’t trip up…
• NCC amounts must not be ‘fund-capped’,
otherwise must be returned
– Under 65, >$450,000; over 65, >$150,000
Example
Member A makes $600,000 in-specie BRP contribution in June 2012. Trustees
resolve to allocate $150,000 before 30 June and balance to be allocated from
holding account/reserve before 28 July. ATO view that real property scenario is
fund-capped, regardless of intention to allocate over 2 years
• No ability to split a single contribution
– SISR 7.08(2) requires trustee to allocate “the”
contribution
Example
Same facts as above, buy BRP is $400,000, with $150,000 before 30 June and
$250,000 to be allocated before 28 July. ATO takes strict interpretation of
wording in SISR 7.08(2) where trustee is required to allocate “the” contribution,
and therefore above circumstances not permitted
#top10smsf

18. Strategy 3:
SMSF “THE BLOCK”
& LRBAs

19. POLL: Is this allowable using an LRBA?
BEFORE
AFTER

20. Allowable using an LRBA?
• Commissioner’s views within SMSFR 2012/1
suggest such a transformation would not have
created a different asset
– Not using borrowings, but fund’s own resources
• Acquired asset was residential property;
remains residential property, regardless of the
significant improvements made
– Not rezoned, subdivided, etc.
#top10smsf

21. LRBA considerations
• Borrow to acquire, repair and maintain but not
to improve
• Can improve, but only to extent that acquired
asset does not become a different asset
• Need to determine if the character of the asset
as a whole has fundamentally changed
– Alterations or additions made to the physical object
or the proprietary rights that comprise an asset
under an LRBA
#top10smsf

22. Different (replacement) asset examples
Single acquirable asset Whether it is a different asset(s)
Vacant block of land on A vacant block of land is subsequently subdivided
single title resulting in multiple titles. One asset has been
replaced by several different assets as a result of the
subdivision.
Vacant block of land on A residential house is built on vacant land which is
single title on a single title. The character of the asset has
fundamentally changed from vacant land to
residential premises. This is a different asset.
Residential house & A house is demolished following a fire and is
land replaced by three (3) strata titled units. The
character of the asset has changed along with the
underlying proprietary rights. This has created three
different assets.
#top10smsf

23. Different (replacement) asset examples
Single acquirable Whether it is a different asset(s)
asset
Residential house A fire destroys a four bedroom house and a new superior residential
and land house is constructed on that land using both insurance proceeds and
additional SMSF funds. Rebuilding another residential house
(regardless of size) does not fundamentally change the character of
the asset held under the LRBA. The addition of a garage, for example
would also not change the character of the asset.
Residential house While each of the following changes would be improvements each
and land (or all) of the changes would not result in a different asset:
• An extension to add two bedrooms
• Addition of a swimming pool
• Extension consisting of an outdoor entertaining area
• Addition of a garage and driveway
• Addition of garden shed
Residential house A ‘granny flat’ is to be constructed in the backyard of a property
and land which already has a four bedroom residence established on it. The
granny flat will have two bedrooms, a family room, a kitchen and
bathroom and will be connected to utilities.
The character of the asset would remain residential premises and
thus the construction of the granny flat would not result in there
being a different asset
#top10smsf

24. Funding improvements
How you can fund any improvements using a LRBA
Insurance Proceeds Yes
The fund’s cash reserves* Yes
Non-related tenant Yes
Related party tenant Yes
Funds from any other external source Yes
• Related party improvements may be classified
as a contribution (TR 2010/1)
• Beware related party acquisitions of goods and
materials not insignificant in value & function
• Trustees can not be remunerated unless
suitably qualified, licensed and operating a
business of building/renovating
#top10smsf

25. Strategy 4:
BORROWING FOR
SMSF PROPERTY
DEVELOPMENT

26. Funding improvements
• Section 67A & 67B changes from 7 July 2010
have imposed restrictions using LRBAs
• ATO SMSFR 2012/1 has provided clarity on:
– single acquirable asset,
– Repairs, maintaining and improving an asset; and
– Where an asset becomes a different asset
• ATO ruling confirms that the SMSF can not
undertake (breach of s67B):
– Capital improvements where it becomes a different
asset, including subdivision, rezoning,
– Property held over 2 or more titles (e.g. farmland)
• What strategies (if any) can be used to
address the above?
#top10smsf

27. How it works – LRBA with SISR 13.22C trust
#top10smsf

28. SISR 13.22C LRBA example
• Craig & Alana Jones intend to buy a property
with sizeable land to build 3 townhouses
• Existing Property & Land purchase is $450,000
• Development cost estimated at $550,000
• Total project = $1,000,000
• They would like undertake the development
using their SMSF
• How can this be achieved?
#top10smsf

29. SISR 13.22C LRBA example
5. SMSF has obligation to make
loan repayments (use
Issue?
contributions?)
Jones Property Trust
Jones Family Bare (unit trust)
Super Fund (Holding) Trust
Dist’ns
(SMSF) Trust
3. Apply for
#1,000,000 @ $1 units Units in Unit Trust
Units in
in Unit Trust
2. Limited 4. Unit Trust acquires property for
Loan $450k; undertakes development
Recourse
Repayments with additional capital of $550k
Loan to SMSF
6. Bank
Repayments
1. Redraw $550k
Craig & Alana
#top10smsf

30. SISR 13.22C LRBA example
• Not impossible but unlikely to find a bank that
will lend
– Only security allowed by lender are the units in the
unit trust
• ATOID 2010/162 – more favourable terms for
the SMSF loan?
– What level of interest rate can be charged?
• Money should go in ‘upfront’ otherwise may
require further bare trust for additional
borrowings
• Must not breach requirements of SISR 13.22D
• What about going over budget?
#top10smsf

31. Strategy 5:
WHY YOU SHOULD
ALWAYS RUN MULTIPLE
SMSF PENSIONS

32. Maximising benefit payments
• Maximise benefit of locking in the tax-free and
taxable components
• Why is this important?
1. Greater tax efficiency for pensions under 60 years of
age
2. Estate planning benefits
• POLL: Do you run multiple pensions?
• Create multi-pensions where undertaking
recontributions
– Ability to elect which interest to draw benefits from
• Various strategies including:
– Unrestricted Non-preserved monies with TRIS
– Market volatility
– Asset segregation
#top10smsf

33. Impact on UNP with Transition to Retirement
• Proportioning rule states that tax-free &
taxable components must be taken in
proportion to each other
– Accumulation: Based on component before lump
sum benefit paid
– Pension: Proportion determined at commencement
of income stream
• SIS or Tax Law does not impose any
proportioning to preservation components
– Can separate unrestricted non-preserved benefits
from preserved and restricted benefits
• Why?
– Priority of cashing benefits
– Allocation of fund earnings
#top10smsf

34. Impact on UNP with Transition to Retirement
• Case Study
– Greg (55) has $700,000 account balance within
SMSF
– Components include preserved $500,000,
unrestricted $200,000
– Target pension income of $60,000 p.a. (CPI, 3%)
– Access to capital is important to Greg
• How do we best structure the pension(s)
for Greg?
– Do we commence one or more pensions?
– Two pensions will allow for Account Based
Pension to be commenced with unrestricted
non-preserved benefits
#top10smsf

35. Impact on UNP with Transition to Retirement
$300,000 $800,000
$700,000
$250,000
$600,000
$200,000
$500,000
$150,000
$400,000
$100,000
$300,000
$50,000
$200,000
$- $100,000
55 56 57 58 59 60
Single TRIS TRIS & ABP Balance
• Within 4 years, single pension has totally eroded unrestricted
benefits
• Additional $243,331 of unrestricted benefits available after five
(5) years by running separate income stream (ABP)

36. Benefit of multi-pension strategy
• Case Study
– Ted (60) has recently retired
– $1,000,000 balance in SMSF ($200,000
TFC)
– Requires $60,000 pension p.a. (CPI – 3%)
– Fund earnings at 6% p.a.
– Undertakes recontribution strategy of
$450,000
• TC = $360,000 + TFC = $90,000
• Should Ted commence one or more
pensions?
#top10smsf

37. Benefit of multi-pension strategy
One pension Multi-pensions
Original components include 20% TFC Original components include 20% TFC
Post recontribution includes 56% TFC Recontribution creates a new super
(44% TC) interest (ABP#2) with 100% TFC
ABP#1 commences with
recontribution (20% TFC)
All earnings and benefits taken must All earnings and benefits to be
be applied in proportion to when the applied proportionately
income stream commenced (i.e. 56% Choice of above minimum pension
TFC / 44% TC) amounts
Taxable component balance: Taxable component balance:
• After 10 years - $460,223 • After 10 years - $414,930
• After 20 years - $383,733 • After 20 years - $254,318

38. Benefit of multi-pension strategy
$700,000
$600,000
$500,000
Tax-free component
$400,000
Multi-pension strategy benefit:
$300,000
• $45,293 after 10 years
$200,000
• $83,751 after 15 years
• $129,403 after 20 years
$100,000 • $195,411 after 25 years
$0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Years
Single Pension Multiple Pension
#top10smsf

39. How net earning & pension levels influence the strategy
Multi-pension strategy benefit after 10 years
10%
9%
Estate Planning
benefit of
8% $205,804
Net Earnings
7%
6%
5%
4%
$50,000 $60,000 $70,000 $80,000 $90,000 $100,000
Pension level
$0 -$100,000 $100,000 -$200,000 $200,000 -$300,000 $300,000 -$400,000

40. How net earning & pension levels influence the strategy
Multi-pension strategy benefit after 20 years
10%
9%
Estate Planning
8%
benefit $0
7%
6%
5%
4%
$50,000 $60,000 $70,000 $80,000 $90,000 $100,000
$0 -$100,000 $100,000 -$200,000 $200,000 -$300,000 $300,000 -$400,000 $400,000 -$500,000

41. Strategy 6:
SIX REASONS FOR
RUNNING REVERSIONARY
PENSIONS

42. Six reasons for reversionary pensions
1. Continuation of the Fund’s tax exemption
2. Potential for pension benefits to become
‘contaminated’ with taxable component
3. No minimum pro-rata pension required prior
to death
4. Can still take a lump sum death benefit
payment
5. No change to minimum pension for current
financial year
6. Less paperwork
#top10smsf

43. Why reversionary?
• Commissioner states within TR 2011/D3 that a
pension will cease unless:
– Reversionary beneficiary included within the
original pension terms & conditions; or
– A valid binding death benefit nomination existed
• ATO view that reversionary must be
established at commencement of pension
• Any change to add a reversionary is likely to
require a full commutation and repurchase
• Reliance on a valid BDBN would require very
strict requirements in substance and form of
nomination
#top10smsf

44. Strategy 7:
HOW $1 ACCUMULATION
ACCOUNT ALLOWS YOU TO
CARRY FORWARD A $100K
CAPITAL LOSS

45. Exempt current pension income
• As part of fund investment strategy, trustees may
wish to:
– Segregate assets; or
– Pool assets (unsegregated)
• Segregation can take various forms:
Segregated by ‘pool’ of members
Asset Asset Member Member
A B A B
(Pension) (Pension) Member Member
Asset Asset Member Member
A B
C D C D
(Accum.) (Accum.)
Segregated by Asset All members are in pension
phase

46. Asset segregation example
• Fred & Wilma are both retired and drawing
Account Based Pensions from their SMSF
• During 2011-12 financial year have realised
several investments which have resulted in
capital losses totalling $100,000
• As fund is ‘segregated’ – capital losses are to
be disregarded
– Section 118-320, ITAA 1997
• If a member decided to roll back part of their
income stream to accumulation phase, an
actuary certificate would be required using
unsegregated method
– Section 102-5, ITAA 1997
• Change in method would allow for the capital
losses to be carried forward

47. Why is this important?
• Carried forward capital losses can be very
important in light of the Commissioner’s
views expressed within TR 2011/D3:
– Failure to complying with pension standards
• Loss of fund tax exemption
– Death of a member
• Pension ceases at death unless automatic reversionary
beneficiary
#top10smsf

48. Strategy 8:
MEETING MINIMUM
PENSION AS LUMP SUM

49. Partial Commutationexample
Partial commutation example
• Amanda (59) has recently retired and has
$1,000,000 in accumulation within SMSF
• Wishes to commence an Account Based
Pension and withdraw $70,000 for the income
year
Tax Rate Tax Payable
Pension payment of $70,000 32.5% $3,797
37.0% $15,400*
45.0% $21,000*
The tax amounts shown above do not include any Medicare levy or Medicare levy surcharge, but do include the
15% tax offset available for the pension.
* Assumes pension amount is entirely assessable within the respective tax bracket (i.e. pension added to other
income taking individual into the marginal tax bracket)
#top10smsf

50. Partial Commutationexample
Partial commutation example
• Ability to use low-rate threshold – $175,000
(2012-13)
• Accumulation phase (15%)
Fund Tax Tax Payable on $50,000 of
Rate fund income
$70,000 taken as lump sum 15% $7,500
$70,000 as an income stream 0% $0
• Better to take income stream up to $83,000 of
taxable income (incl. Medicare levy)
• But, could Amanda have the best of both
worlds?
#top10smsf

51. Meeting the minimumpension
Meeting the minimum pension
• Yes she can
• TR 2011/D3 confirms that where Amanda
elects to take a lump sum via a partial
commutation, the:
– Income stream benefit still exists (no cessation)
– The payment is a super lump sum for income tax
purposes and lump sum for SIS purposes
– All payments from Account Based Pension count
towards minimum pension requirements as a result
of commutation (unless to rollover)
• Amount can be in cash or in-specie
Strategy can also apply for 60 and over members
E.g. Moving into higher pension % brackets not
requiring income; can make in-specie benefit
payments to meet minimum pension

52. Strategy 9:
OPTIMISING PENSIONS
WITHIN A VOLATILE
INVESTMENT MARKET

53. Benefiting from a poor investment market
Downward investment market example
• Arthur drawing an Account Based Pension with
an account balance of $1,000,000 at 30 June
2011
– Includes 50% Tax-Free proportion
• Poor share market performance shows
portfolio decreased to $800,000
– dropped 20% in 2 months
• Do nothing = benefits reduce proportionately
from commencement of income stream
– $400k TFC / $400k TC
• Is there an alternative solution for Arthur?
#top10smsf

54. Benefiting from a poor investment market
Benefiting from a poor investment market
• Full commutation at 30 June 2011 = $500,000 TFC /
$300k TC
– NB. Not 1 July otherwise, pro-rata minimum (1/365th)
pension required to be withdrawn
• Commence new income stream from 1 September
2011
– 62.5% tax-free proportion
Accumulation Pension Phase
Tax-free component $500,000 $400,000
Taxable component $300,000 $400,000
Account Balance $800,000 $800,000
• Result = 12.5% improvement in tax-free component
– Under age 60: reduced Arthur’s taxable income
– 60 years & over: improved tax on lump sum death
benefit when paid to non-dependant
#top10smsf

55. Benefiting from a poor investment market
Benefiting from a poor investment market
• Opportunity Cost = 2/12ths tax exemption for
financial year
– @ 4% Fund income = $6,667 share of income x 15%
= $1,000 tax
INCOME TAX (less than 60 years) No change Commutation &
Pension Reset
Taxable proportion Pension $25,000 $18,750
Tax Payable (ex. Medicare levy) $0 $0
After tax pension $50,000 $50,000
Super Fund Tax (15%) $0 $1,000
Total Tax $0 $1,000
ESTATE PLANNING No change Commutation &
Pension Reset
Account Balance $628,380 $628,380
Taxable Component $314,190 (50%) $235,643 (37.5%)
Non-dependant death benefit (16.5%) $51,841 $38,881

56. Strategy 10:
ANTI-DETRIMENT,
RECONTRIBUTION OR
BOTH?

57. Anti-detriment or recontribution?
Anti-detriment recontribution?
• TR 2011/D3 has highlighted taxation issues
with super death benefits from:
– Lump Sum death benefit to non-tax dependants;
and
– Capital Gains Tax (CGT) within the SMSF
• Recontribution ‘window’ typically 60 - 64
years of age
– Can extend beyond 65 if ‘work test’ is met
#top10smsf

58. Example
Example
• John (62) is retired and sole remaining
member of SMSF
• $450,000 balance made up entirely of taxable
component
• 2 x Adult children (independent)
• Death benefit nomination indicates to be paid
equally
• Should John consider undertaking a
recontribution strategy or look to fund an
anti-detriment payment?
– $74,250 lump sum tax saving with recontribution
(i.e. $450,000 x 16.5%)
– What about CGT within the fund? $200,000 of
unrealised capital gains?
#top10smsf

59. Example (cont.)
Anti-detriment Recontribution
Account Balance on death $450,000 $450,000
Tax-free component $0 $450,000
Taxable component $450,000 $0
Anti-detriment payment* $63,643 $0
Total death benefit $513,643 $450,000
Tax-Free Component $0 $450,000
Taxable Component $513,643 $0
Tax on death benefit ($84,751) $0
Capital Gains Tax $0** ($20,000)
Excess Contributions Tax*** $0 $0
Net benefit $428,892 $430,000
John’s ESP is 1 July 1971, with date of death benefit payment 31 March 2012
* Calculated in accordance with ATOID 2007/219
** Provides a carried forward tax loss, subject to other fund income ($224,287)
*** ECT ignored but could apply due to reserve transfer and concessional contribution cap
limitation

60. Example (cont.)
• Anti-detriment payment
creates a $424,287 tax
deduction for SMSF
– Unrealised capital gain of
$200,000
• Becomes a future tax
benefit for adult children,
but will they use it?
• Is there an optimal
outcome?
#top10smsf

61. Example (cont.)
Anti-detriment Recontribution Both
Account Balance on death $450,000 $450,000 $450,000
Tax-free component $0 $450,000 $237,880
Taxable component $450,000 $0 $212,120
Anti-detriment payment* $63,643 $0 $30,000
Total death benefit $513,643 $450,000 $480,000
Tax-Free Component $0 $450,000 $237,880
Taxable Component $513,643 $0 $242,120
Tax on death benefit ($84,751) $0 ($39,950)
Capital Gains Tax $0 $20,000 $0
Excess Contributions Tax** $0 $0 $0
Net benefit $428,892 $430,000 $440,050
• 2.21% effective tax rate on fund income and death benefit

62. My Top10 SMSF strategies for 2012-13
1. Use the ‘get out of jail free’ cards for ECT
2. Contribution holding accounts to manage ECT
and ‘double dip’
3. Property improvements using LRBAs
4. Property development with LRBAs & SISR
13.22C trusts
5. Almost always run multi-pensions
6. Six reasons to have reversionary pensions
7. How a $1 account balance can allow carry
forward capital losses of $100,000
8. Taking minimum pension as lump sum
9. How to take advantage of strategies in a
volatile investment market
10. Anti-detriment or recontribution or both?
#top10smsf

63. eBook and Webinar recording
A copy of the webinar recording and
eBook are available at
www.thesmsfacademy.com.au

64. Thank You
www.thesmsfacademy.com.au
twitter.com/thesmsfacademy
facebook.com/thesmsfacademy
youtube.com/thesmsfacademy