NetActuary

Looming 15th May

15^th May, 2019 is the last date for lodging a superannuation fund return via an accountant or tax agent without a penalty. As you can imagine, many of the ECPI and adequacy actuarial certificates at this stage are not straight forward. This blog provides background information on how the ECPI percentage will vary if one partner has passed away in the financial year.

The Federal Government’s $1.6 million transfer balance cap (TBC) limiting the amount of exempt current pension income (ECPI) applied from 01/07/2017.  It did not increase in 2018/19 financial year and so remains at $1.6m. 

The Transfer Balance Account (TBA) has credits when a retirement phase pension is started and a debit upon commutations.  The credits are created at the transaction date and not subsequently adjusted.  This means that subsequent net earnings and growth are ignored.  A reversionary pension paid to a surviving spouse or a retirement phase pension commenced with a death benefit paid to the surviving spouse will impact on their TBC amount.  This may create an excess problem because the deceased member’s TBC does not carry over to a surviving spouse.

Amounts over the TBC will be held in an accumulation account and have tax at 15% paid on assessable income.  Benefits paid out of the accumulation accounts will be tax free for persons over age 60 – this is different aspect to tax on investment earnings.  The future year exempt current pension income (ECPI) will be maximized by drawing amounts over the pension minimum from accumulation accounts.

There is special timing on death benefit transactions.  When a person automatically receives a reversionary pension, the TBA credit will not occurs until 12 months after the deceased’s death.  This provides a period of time for the surviving spouse to adjust their superannuation matters.  There is no 12-month period where a new or fresh pension is created with non-reversionary monies.  The credit occurs immediately when the new pension is started. 

The time span for reporting the TBA is determined by the total superannuation balances of an SMSF’s members.  If any member has a total superannuation balance of more than $1m, the event must be reported within 28 days after the end of the quarter in which the event occurs.  There are other rules for reporting commutation sooner or for some reporting with the date of lodging the SMSF annual return.  However, it is best to report early – basically straight away – as penalties could apply to late reporting.

From an ECPI point of view, the actuarial calculated percentage will be higher and less tax paid by getting the daily weighted average optimal.  It is not just commencing a pension from accumulation accounts soon, or utilizing the reversionary period of grace, but making pension payments late in the year.  Accumulation account payments can be taken early in the year.

The NetActuary special deal of $55 for tax exempt percentage actuarial certificates and $165 for legacy pension actuarial reports applies irrespective of how complex the case. This includes GST and applies until 30/06/2019. Please contact Brian on (03) 9028 5002 or email brian@netactuary.com.au if we can help.

Brian Bendzulla

 

 

QROPS Tax Calcs Reinstated

Over recent months, we have received so many requests for UK QROPS tax calculations that the data forms have been added back to the website. Commercially, this is probably a service area that would have been better to drop – the work is time consuming and each task can be very different. However, providing a good support service to our adviser clients is more 
important to us.

There are three types of tax calculations. The first is when the pension monies have already been transferred across to Australia.  The second is before the pension money transfers, where the report is needed to formulate a strategy. The third type is the “previously exempt fund earnings”. PEFE calculations are needed when monies for an Australian tax resident are moved from one overseas fund to another.

We can also help obtain ROPS registration with HMRC – including the necessary SMSF deed modifications.

We will work over the coming months to assemble information in an eBook to assist advisers in this area.

 

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

Enhanced Retirement Income

The legislation that was passed by Parliament on 14^th February, 2019 presents opportunities to enhance retirement income and (hence) improve the living standards of many post retirement clients.  This blog summarizes the way NetActuary supports advisers with the computational aspects.

If a retiree quickly spent all their private assets, they would get maximum Age Pension.  That would be a totally inappropriate plan.  So, with the constraint that private monies must last the distance with a specified certainty, the optimal use of capital – including a step down in planned income on first death – can increase the value of Age Pension entitlements by many tens of thousands of dollars.  NetActuary has been doing many such projections for advisers.

From 1^st July, 2019 we again have a partially asset test exempt income stream.  Asset-tested income streams (lifetime) have 60% of the purchase price (later dropping to 30%) counting towards the Centrelink asset test.  This could be very useful since in the early years of retirement it is often the asset test that dominates.

The grandfathering of the current income test means that advisers should check whether this is something which is to an older client’s advantage.  This is urgent as this option is only available for the next few months.

The change that I see as having enormous potential is using a specified percentage of an equity in a house or investment real estate is the Pension Loan Scheme.  The level of income and eligibility have been made more generous.  Besides supplementation, it can be used to help manage sequence and mortality risks, allowing an enhanced standard of retirement living.

The post retirement sustainable income calculator is being enhanced to include a Pension Loan Scheme as a source of retirement income.  If you want to be included in updates on this aspect, please send an email to brian@netactuary.com.au.

Brian Bendzulla

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

TTR Strategies Can Be Valuable

I have heard people express the view that transition to retirement strategies are finished. For certain situations, that is not the case.

Consider the person on $90,000 salary in the example below. The gain is $3,334. That is good as a percentage of the $150,000 account balance.

The NetActuary TTR calculator can be found under the new “Technical” tab on our website. It incorporates all the LMITO and LITO aspects of the new tax system.

 

 

Whilst it is true that there is no gain from investment income (no longer tax exempt), a tax free TTR pension income is better than paying marginal tax rates for many people. Another big difference to older TTR strategies is that it works better for people with lower account balances. This is because the minimum 4% drawings uses less of the currently low non-concessional contribution cap available.

If you would like to be proactive with creating a better outcome for your clients, we offer a computation bureau service. The member statement is all that is needed. A multi-year projection is also available. A fee schedule of $0 for those with less than a $2,000 p.a. gain and $33 inclusive of GST for gains above $2,000 would be acceptable.

Please contact brian@netactuary.com.au for more details.

The NetActuary Team

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.

Updated Age Pension and Calculator

The Age Pension rate p.f. that applies from 20^th September, 2018 is as follows: 

Type of Pension	Previously	From 20/06/2018
Single	$907.60	$916.30
Couple (Both Eligible)	$1,368.20	$1,381.40
Couple (One Eligible)	$684.10	$690.70
Couple (Illness Separated)	$907.60 each	$916.30 each

The above includes a clean energy supplement of $14.10 p.f. (single) and $21.20 p.f. (couple combined) which needs to be excluded for New Age Pensioners since 20^th September, 2016.

I will update all the calculators shortly for those new pension rates.  The free sustainable retirement income calculator is already updated.


This calculator can be used to either calculate how long assets will last – including anticipated Age Pension entitlements – or (alternatively) what level of income is sustainable.  The level of confidence can be set from “best estimate” to higher level of adequacy.

The free calculator can be downloaded here.

 

Brian Bendzulla