NetActuary

Time To Roar Again!

I have greatly enjoyed undertaking exempt percentage and adequacy actuarial calculations over the past year. Consequently, NetActuary has decided to focus in 2019-20 on becoming the pre-eminent supplier of legacy pension actuarial reports. This blog outlines how that is going to be achieved.

Firstly, noting that the top three suppliers charge $396, $439 and $440 inclusive of GST - the NetActuary fee will be $220 inclusive of GST.

We don’t mind if you send us only the legacy pension work. I have the advantage of remembering very clearly the heighday of these pensions. NetActuary is also going to increase the number of support tools for this area. Already, there is an actuarial calculator so that you can monitor how liabilities have moved. Another calculator is about to be loaded that helps the administrator set the next year market-linked pension payment amount. This is because we notice where the remaining term is not a whole year, occasionally the wrong round up and down rule is used.

We are very happy to work with advisers to wind up these legacy arrangements – or deal with under/over appropriate reserve issues.

NetActuary needs very little information from you to undertake this work – just the most recent actuarial report and a draft set of accounts – that’s all! However, there are Excel data forms on our website if you prefer.

Please drop us a one-line email if you would like your email added to the proactive material we send out on this area. Capped defined benefit income streams have their own administrative and advice challenges.

 

Brian Bendzulla

New Offices and Telephone Number

We have enjoyed the many years that NetActuary have operated from Salamanca Place, however it is becoming increasingly difficult for clients to find parking and to access the offices  –  especially during times when events such as Salamanca Market, Dark MoFo and The Taste of Tasmania are taking place.  

Consequently, we have purchased delightful offices at 4/19a Hunter Street in Hobart (on the other side of Sullivan’s Cove) in the award-winning Henry Jones IXL complex.  This area has the new cruise terminal, MACq 01, The Henry Jones Art Hotel, Hotel Grand Chancellor etc. (and the coffee is just as good “on the other side”!)

Our new telephone number is (03) 9028 5002.  These details are on the NetActuary website.

The NetActuary Team

Autumn Tidy Up SALE

As we head towards the end of the financial year, the number of tax-exempt income percentage and Legacy Pension adequacy certificates also runs down. As our encouragement to complete the remaining outstanding SMSF tasks, we offer an excellent value offer on actuarial certificates until 30^th June, 2019 – $55 (including GST) for section 283 exempt income percentage actuarial certificates and $165 (including GST) for legacy pension actuarial reports.

In the post Royal Commission world, more than just price and speed are important with these services. We have supplied additional comments in covering emails where something should be considered that would be in the client’s best interest. This may be a life expectancy term pension that needs to consider possible actions before the term runs out or where more than adequate reserves can be put to work to generate retirement income. With the normal s283 certificate, there have been numerous discussions to assist with issues such as
whether a TRIS is in retirement phase or not – besides the part year segregation aspects. NetActuary will always have the actuary signing the certificate being the person undertaking the calculations.

It has been very gratifying to see how many past clients have again used the NetActuary actuarial certificate service since we recommenced this work. As part of the certificate service, we provide a complete support role.

The links to the data forms are:

• Click here for ECPI Excel form
• Click here for ECPI pdf form
• Click here for Defined Pension adequacy reports.

Many of our clients simply provide draft accounts, the general ledger and past certificates rather than filling in forms.

Please feel very welcome to phone Brian on (03) 9028 5002 to chat about how we can make this task simple and convenient for you.

Brian Bendzulla

Secure Web Calculators

An encrypted internet connection was once only used for payment systems. One knows the connection is secure when a padlock and https:// appears in the address bar. Google Chrome has started to mark all HTTP sites as “not secure”. Google is also down-ranking unencrypted sites in the search engine. Apple Safari browser is going to follow. Consequently, NetActuary has migrated all web calculators and reference pages to a secure host.

Secure sites have an SSL certificate. This has a public and private key that work together to establish an encrypted connection. The increased processing power needed to run encryption has no noticeable response time difference for the web calculators. With the commercialization of the internet, I think we need to accept that the days of http/unsecured connections are numbered. Hopefully, some of the internet scams are driven out at the same time.

 

If you are a user of our branded calculators, what do you need to do? Nothing immediately. They have put redirects on all existing links. However, when you do a website update/maintenance you may like to point directly to the https://netactuary.support/ links. An installation note is available.

 

Brian Bendzulla

Family Law Super Info

With matrimonial property settlements, superannuation entitlements can be a significant proportion of total assets. It would be very useful if Family Law practitioners had a single place to check items such as information on fees payable; addresses to send requests; whether special methods and factors apply; types of splitting available; whether the trustee/administrator provides defined benefit entitlements; etc.

NetActuary has created a web database infrastructure to solve this need. A link on the Lawyer tab reference panel will take you to a page shown here.

Much work still exists to build all the content. At the moment, the fund details loaded are mainly defined benefit special methods and factors funds. We will work on expanding this. However, it can also be a collaborative effort. On the web page is a quick “submit comments” for information which you have come across.

We are also developing a useful resource for legal practitioners working in the tort law area. More about that in a separate blog item.

Brian Bendzulla

Pre-Christmas Sale!

We have really enjoyed helping administrators and trustees with defined pension actuarial reports this year.  We have our systems and procedures fine tuned and have decided to pass that efficiency on in the form of a permanent reduction of the fee to $275 (inclusive of GST) per report.  However, there is one final period up to the Centrelink end of year cut off to finish any remaining outstanding adequacy and tax-exempt percentage reports for these legacy pensions.  Until the end of December 2018 we offer what we believe is the lowest fee for this service in Australia - $220 inclusive of GST!

There are a number of additional advantages in our service.  In the actuarial report return email we have been commenting upon issues that the client could consider which could enhance the structure and appropriateness of their retirement arrangements.  We need no data forms filled in – simply email us the previous actuarial report and the accounts trial balance.  If you would like to take up this offer, email them through and we will get the reports back to you quickly.

If you would like to discuss any aspect of this, please ‘phone Brian on (03) 6224 1145.

Legacy Pension Spring Clean Sale!!

One of the most worthwhile aspects of issuing the actuarial tax certificates again is not the primary task – but rather being able to highlight areas that are in the client’s best interest to consider.  This is particularly true of legacy pensions.  A significant proportion of these pensions could: achieve a better tax outcome; redirect resources towards producing retirement income not adequacy reserves; plan ahead for neglected reserves; consider updating reserves for new life expectancies etc.  The covering notes to our actuarial reports comment on these broader issue items.

NetActuary would like to be the SMSF legacy pension specialist.  To that aim, we would like to facilitate a “Spring Clean” of legacy pensions with a Springtime sale.  All legacy pension
report requests received before 9^th September, 2018 will enjoy a 50% fee reduction!  Instead of our usual $396 (inclusive of GST), the fee will only be $198 (inclusive of GST).

Instead of filling in the request form, simply forward the most recent actuarial report together with this year’s draft accounts to brian@netactuary.com.au.  If there are any major non-uniform transactions, that would also be useful information.

If you would like to discuss any aspect, please feel most welcome to ‘phone Brian on (03) 6224 1145 for a chat.

The NetActuary Team

ECPI and Death of a Member

You will notice that the NetActuary ECPI data-form identifies situations that need careful consideration.  One of these is when a member has died.  This blog provides some background information about how ECPI will be calculated in that eventuality.

If the account-based pension is reversionary, the ECPI entitlement continues on the assessable income from the assets backing that pension in the same way that the pension continues.  In other cases where the amount for the death benefit (lump sum or new pension commenced) is only the account balance, the ECPI continues until it is “as soon as practical to pay the benefit”.  This provision was introduced in an amended definition introduced by the Income Tax Amendment (Superannuation Measures) No 1 Regulation 2013 to apply to the 2012/13 (and subsequent) income years.

We don’t need to consider anti-detriment amounts, but insurance proceeds don’t have this concession.  Income from these proceeds are not tax free in the period to payment.  No minimum pension payment is required for the period up to death.  If the pension is auto-reversionary, then the minimum payment is required by the end of financial year. 

The phrase “as soon as was practical” is not defined by law, however the ATO appears to accept a period not exceeding 6 months from the date of death as acceptable.

With legacy pensions, careful consideration is needed.  One of the instances envisaged in TR2013/5 was a superannuation income stream will cease if a provision in the governing rules provides for it to cease.  Consequently, with a section 1.06(2) lifetime pension it is likely that the pension and the ECPI will cease when the pensioner passes away if there is no reversion.  The assets backing the lifetime pension are released to reserves.  Use of those reserves would be under contribution/reserve allocation provisions, not death benefits.  On the other hand, a section 1.06(7) Life Expectancy pension has the residual benefit of remaining payments outstanding and has an arguable case for continuing ECPI.

The above shows why it would not be prudent to process actuarial certificates merely from a filled in date of death.

I am impressed with the number of trustees/advisers who took up the NetActuary $11 special.  Yes, it did cover earlier financial years.  Please give me a day or two to catch up and also launch the NetActuary property analysis toolkit and we will run another special on actuarial certificates.

Brian Bendzulla

Ensuring Correct SMSF Tax Outcomes

While NetActuary will diligently work to ensure administrators achieve appropriate ECPI outcomes taking recent changes into account, this note will provide useful background information – especially with “deemed segregation” and “disregarded small fund assets”.  No comments will be included below on funds that include legacy defined pensions (a separate note will be prepared for those).

 

Elected or Deemed Segregation

Until the 2017/18 year it was common practice to issue an unsegregated actuarial certificate as long as there was an accumulation account at some stage in the financial year.  The ATO’s view – which they will now enforce from the 2017/18 and subsequent years – is that one can have segregation under sec 295.385 of the ITAA 1997, even if the period fully in retirement phase is for only part of a year.  Consequently, one can have both segregated and unsegregated components in the same financial year.  In fact, one can have a number of segregated periods, each having to be separately accounted for – including asset revaluations – but only one residual unsegregated actuarial certificate.  The extra administrative effort can be avoided (which may or may not be in the client’s best interest).

Elected segregation is the old fashioned, conscious decision to segregate and separately account for some of the assets.

We need to be careful about what is exempt and what is not.  A new term – “retirement phase liabilities” has been introduced.  So, we have:

Retirement phase liabilities being:

• Account based pensions
• Market-linked income streams
• Transitional retirement income streams (TRIS) in retirement phase; and

Non-Retirement phase liabilities being:

• Accumulation account
• A Reserve Account
• A TRIS not in retirement phase.

A TRIS is in retirement phase and counts towards tax free earnings after age 65 or once the trustee has been notified that a nil cashing restriction condition of release has been satisfied.  A Transfer Balance Account credit notification must be made.  The TRIS in retirement phase is still not an ABP, although some practitioners feel this should be fixed up.  The same applies to issues around death benefit income streams.

 

Disregarded Small Fund Assets

If at 30/06/2017 (and each subsequent period) a member was in retirement phase and had a Total Superannuation Balance (TSB) above $1.6m in any fund and there was a retirement phase benefit in the fund at any time in 2017/18, the SMSF is classified as having “Disregarded Small Fund Assets”.  In this situation the fund is not allowed to use the segregated method for ECPI.  One will note that is necessary to ask clients what their superannuation assets are in all their funds.  Unsegregated assets are covered in section s295.390 of ITAA 1997.  If the trustees want to claim ECPI they need to get an actuarial certificate.  The calculated ECPI proportion applies to assessable income and net capital gains earned on assets which were not segregated.  Where the value of pension assets has grown above $1.6m it is possible that an actuarial certificate is needed – even if solely in pensions i.e. 100% exempt.

 

Avoiding Deemed Assets

Having to account for and revalue assets for a number of periods within a year is more administration work.  This can be avoided if (say) $100 was kept in an accumulation account at all times during the year.

The issue is that – just like the elected segregation – one or other option may give a better tax outcome.  If there are non-uniform gains or losses e.g. a property sale, the extra administration may be worth it.  Even items such as dividends may not be uniform over the year.  This area is interesting but more of a strategic plan ahead issue rather than an actuarial certificate production issue.    There are many actions that optimize tax and TBC outcomes.  These can be as simple as making pension commencements and Lump Sum Accumulation withdrawals early in the year and contributions late in the year.  From a TBC perspective, it’s better to have amounts above minimum payment requirements as a commutation, not as a pension.

The unsegregated ECPI percentage is used also to claim an expense deduction.  It is important to observe we are talking about tax calculations and the trustees may adopt a different approach for member allocations.

 

Keeping It Simple

Most funds will not have the above issues.  An innovation on the NetActuary data-forms (and in evaluating the SMSF admin general ledgers submitted) is only to ask the usually required questions and have a “less usual” checklist advice.  These are also the areas we watch out for in that they may affect outcomes and require more information.

• Are there legacy defined pensions?                    
• Is there “deemed or elected segregation” in the year?     
• Are there “disregarded small fund assets”?      
• Did the fund commence or wind up in the year?               
• Does the fund have a reserve account?           
• Is there any non-arms length income?
• Did a member pass away during the year or have insurance proceeds been received?       

 

NetActuary is the renamed company in the previous Bendzulla group of companies that provided actuarial certificates.  In recommencing these services, we have the ambition to be the pre-eminent source of quality support for the area.  That includes funds with legacy defined pensions.

Please ‘phone Brian Bendzulla on (03) 6224 1145 if we can help.

COME CELEBRATE WITH NETACTUARY

NetActuary is back in the SMSF Actuarial certificate business! Yes, this has been a long wait!! That is even more reason for a celebration you too can share.

A number of initiatives are planned for the coming months. As an opening special all account-based pension actuarial certificates submitted in the first week of July will be processed for a fee of only $11 inclusive of gst.

The 2017-18 actuarial certificates need a different approach to previous years. It is no longer adequate to mechanically process them. Many fund circumstances have alternative possible approaches and strategies that need to be evaluated to determine which is in the client’s best interest. While NetActuary will use extensive production system support, this will be combined with a careful actuarial judgement. All calculations will be undertaken personally by the qualified actuary who signs the certificate. The turnaround will be prompt, but always subject to what needs to be done.

Will this cost more. No!! Our account-based pension actuarial certificate maximum price will be $132 inclusive of gst. There will be a guarantee of no fee increases in the next two years. Lodgement is simple – on NetActuary.com.au is a data form or simply send us the general ledger download from any of the SMSF accounting systems.

We also have a profound interest in helping with all types of legacy pension aspects including actuarial adequacy and tax exemption reports. For more information see the website or phone Brian Bendzulla on 03-6224 1145.