Sent: 25-10-2011 13:28:02
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Two Tax Office Interpretative Decisions
From time to time the Tax Office releases some interesting material via its Interpretative Decision publications.
In my experience it's often essential to ensure that there has been no amendment to the law after an ID has been published.
Last week the ATO published two very interesting IDs which involve superannuation and SMSFs in particular. One involves death benefits and the other involves super fund's acquiring assets that have a charge over them at the time of purchase.
The first ID 2011/77 and involves the payment of a death benefit to a step child. In the ATO's view a step child ceases to be your dependant for super purposes if your legal marriage has ended.
The ID looks specifically at the case where a step child was not formally adopted under State or Territory law. The ID points out that "a child ceases to be stepchild of a step-parent when the relationship between the child's natural parent and the step-parent ends, that is, on the death of the natural parent or the divorce of the natural parent from the step-parent".
The ID points out that the Superannuation Complaints Tribunal has been applying these rules in a number of cases.
In practical terms this decision means that a step child is not ordinarily a dependant under the super laws and therefore is not eligible to receive super fund death benefits as a dependant.
But the ID also points out that a step child may be in what the super law refers to as an inter-dependency relationship with their former step parent.
This issue of non-dependency for super fund death benefits will have implications for step children nominated on super fund death benefit nominations.
Note however that this doesn't deal with the taxation treatment of death benefits. It only deals with the ability to receive the benefit.
The second Interpretative Decision 2011/81 relates to a super fund acquiring an asset that already has a charge over the asset. What is meant by 'charge'? In simple terms it often means the pledge of an asset to a particular creditor to support a debt.
Under the super laws a super fund trustee must make sure that a charge is not placed over any super fund asset.
The ID however looks at a property that a super fund intends to purchase from an unrelated party and at the time of purchase the super fund's trustee was aware that the property had a charge over it in favour of another unrelated party. The obvious question is, can a super fund acquire such an asset?
According to the ID the short answer is yes, this is possible. The Tax Officer however warn and say that before a super fund acquires such an asset then the trustees would need to consider if the asset would suit its documented investment strategy. The sole purpose test must also be considered as must ensuring that the purchase of the asset wouldn't see the super fund provide any direct or indirect financial assistance to the super fund's members or their relatives. The purchase of the asset must be based on reasonable arm's length terms.
Finally please consider purchasing a copy of my book "A How To Book Of Self Managed Super Funds". You can look at the contents page at the following link: http://www.atcbiz.com.au/r.php?r=0mjd6ne
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As you'll see from the list there have been many changes.
Two purchase options are available - once only subscription - $55 inc GST - or an annual subscription will gives you access to all the updates made throughout the year ($120 inc GST). The book can be purchased at the following link: http://www.atcbiz.com.au/r.php?r=5a4agqb
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