AYB250 - PERSONAL FINANCIAL PLANNING Tutorial Solutions Topic 7 - Superannuation and SMSFs 1. The trustees of Akita Superannuation Fund have made the following investment decisions. As auditor of the Akita Fund, advise the trustees as to whether you believe the decisions comply with the investment restrictions. a. The trustees of the fund have bought a beach house for the exclusive use of the members. Fails the sole purpose test. All investments need to be undertaken for the purpose of providing retirement benefits - superannuation funds are not for the purpose of providing free/cheap holidays to members. b. The trustees have acquired shares in Akita Pty Ltd which amount to 40% of the total assets of Akita Superannuation Fund. Akita Pty Ltd is owned by two of the members of the Akita Superannuation Fund. Fails the in-house asset rule. In-house assets are limited to 5% of all assets. c. In order to fund a payout to a recently retired member, the fund has borrowed $100,000 for a period of two years. Likely to fail the 'borrowings' rule. Funds are not allowed to borrow except for short-term transactional purposes. They can borrow to pay benefits, but only up to 10% of the fund's assets and only for up to 90 days. d. The fund has loaned Kita, who is a member of the fund, $200,000 to help fund a new business venture. The loan has been offered on commercial terms. Likely to fail the 'loans and financial assistance to members rule'. Funds cannot lend money to members under any circumstances. e. Akiro, who is a member of the fund, has sold a parcel of vacant land to the fund at a price which is considerably below its market value. Likely to fail 'all transactions on an arm's length basis' rule. All transactions need to be conducted on commercial terms. AYB250 Personal Financial Planning -1- Topic 7 Tutorial Solutions
2. Differentiate between taxed, untaxed, and non-concessional superannuation money. . Taxed superannuation money has had the 15% contributions and earnings taxes removed. . Untaxed superannuation money has not had the 15% contributions and earnings taxes removed. . Non-concessional superannuation money is after tax money that has been contributed by the individual. 3. Brendan and Annie recently divorced. As part of the Family Court determination it has been decided that Brendan's superannuation of $400,000 should be split 60% to Brendan and 40% to Annie. Brendan's superannuation includes a $300,000 taxed component and a $100,000 tax free component. What will be the component parts of Brendan's and Annie's superannuation after the split? Must apply the proportioning rule: After the split Brendan will have $2ft0,000 in superannuation which includes a taxed component of $180,000 and a tax free component of $60,000 after applying the proportioning rule. Annie will have $160,000 in superannuation which includes a taxed component of $120,000 and a tax free component of $ft0,000. 4. Chitra is self-employed and earns $200,000 p.a. She is considering making a concessional contribution to superannuation. Advise Chitra how