How to transfer my super to my sons

H

handyandy

Hi All

More particularly aimed at the accounts/legals but if anybody has ideas view I am happy to hear them.

Currently the wife and I have a very healthy Super balance which we really should never need to draw on for living expenses.

My idea is to somehow transfer these funds to my sons, but ideally within the super fund so that there are not tax consequences.

Reading up on SMSF's my sons can be members of my SMSF.

Obviously we can take out the money tax free in the pension phase but if we are still getting income from our investments how will the two income stream interact tax wise.

I just want to explore some of the options and lay the ground work now prior to hitting 60.

Cheers
 
One alternative would be for you and your wife to live off income from the superfund as much as possible, since that's more tax effective, and leave the assets outside of super to your sons. Can be tax effective especially if you leave it to them via testamentary trust, assuming they're in your personal name or company where you personally own the shares.
 
You cannot transfer funds between members inside the super fund.
If over 60 you can take a pension from the super fund tax free.
Contribute from outside the super fund as non-concessional contributions for your sons. Can do up to $450,000 per son per 3 years.

This will effectively transfer funds to your sons and give you tax free income and part of the fund's income will be tax exempt based on the assets paying your pensions.
 
ok strategy will work but won't be pleasant.

1. name your sons as nominated beneficiaries
2. you and your wife run hose from muffler into car.
3. close doors and go to sleep (permanently)

then super funds are transferred to your sons on death.
 
coastymike said:
ok strategy will work but won't be pleasant.

1. name your sons as nominated beneficiaries
2. you and your wife run hose from muffler into car.
3. close doors and go to sleep (permanently)

then super funds are transferred to your sons on death.
Click to expand...

The trouble is the death benefit will be taxable to the sons, if over 18.
 
Yep but it gets the money out :p

alternatively could start paying the mortgage on the children's home and argue they are dependants and then it is tax free.
 
coastymike said:
ok strategy will work but won't be pleasant.

1. name your sons as nominated beneficiaries
2. you and your wife run hose from muffler into car.
3. close doors and go to sleep (permanently)

then super funds are transferred to your sons on death.
Click to expand...

I was in no hurry to transfer it so forget no 2 and 3 :eek::D

As I understand it the beneficiaries are taxed on the funds so my motivation to transfer in some more tax effective method.

Cheers

PS also is not about getting it out of super but rather that it would then be their super and also hopefully protected from asset attach.
 
Generally best to get the investments into super after age 55 as all income is tax free when in pension phase. So try and ensure income from investments outside super keeps you below the tax free threshold so no tax is paid overall.

There are a few things you can do with reserve accounts etc to effectively pass some of the super funds to the sons but the costs to get advice to do this is probably not worth it unless there is lots of money involved.

Suggest to set your wills up to include testamentary trusts to help protect the assets from creditors/matrimonial issues and let sons transfer the funds back into their super if they wish.

They may prefer to get access to these funds before pension age, even though you may not.
 
Another option is to withdraw super as a lump sum after meeting a condition of release and then gift the money to the children who could then make a non deductible contribution back into super.

Get legal and financial advice on this as there are many issues of course.
 
handyandy said:
...My idea is to somehow transfer these funds to my sons, but ideally within the super fund so that there are not tax consequences...
Click to expand...

One idea might be to make the children members of the fund and then have your deed allow the allocation of income and capital growth on a basis other than by member balance. Such as a per capita allocation of earnings. As far as I know there's nothing in the SIS Act that prevents this. If the trust deed requires it (or allows it and all members agree to it) then there won't be a claim of breach of trust against anyone. The only red flag I can see is to make sure you steer clear of the Part IVA anti-avoidance powers of the ATO but as long as you were not doing this for the predominant purpose of saving tax you should be ok there too. But, I'm not a lawyer and I'd consult a lawyer specialising in superannuation law before doing something like this.
 
brucea said:
One idea might be to make the children members of the fund and then have your deed allow the allocation of income and capital growth on a basis other than by member balance. Such as a per capita allocation of earnings. As far as I know there's nothing in the SIS Act that prevents this. If the trust deed requires it (or allows it and all members agree to it) then there won't be a claim of breach of trust against anyone. The only red flag I can see is to make sure you steer clear of the Part IVA anti-avoidance powers of the ATO but as long as you were not doing this for the predominant purpose of saving tax you should be ok there too. But, I'm not a lawyer and I'd consult a lawyer specialising in superannuation law before doing something like this.
Click to expand...

That is an illegal scheme. Irresponsible to even mention it. This smells like the scheme one well known SMSF specialist was touting a few years back to bend balances using kids. ATO view is that it fails to comply. Using reserves it also fails to comply in most instances (Reg 292-25(3) Of ITAR)

SIS Reg 5.03 is very clear....Fair and reasonable with regards to all the members of the fund. Div 5-1 prevails over every deed.... A deed which authorises it is poorly drafted.
 
handyandy said:
Hi All

More particularly aimed at the accounts/legals but if anybody has ideas view I am happy to hear them.

Currently the wife and I have a very healthy Super balance which we really should never need to draw on for living expenses.

My idea is to somehow transfer these funds to my sons, but ideally within the super fund so that there are not tax consequences.

Reading up on SMSF's my sons can be members of my SMSF.

Obviously we can take out the money tax free in the pension phase but if we are still getting income from our investments how will the two income stream interact tax wise.

I just want to explore some of the options and lay the ground work now prior to hitting 60.

Cheers
Click to expand...

My first question nobody else asked is - How old are you now ? Have you met a condition of release or previously met a COR ?? Personal financial advice on strategies that comply a must. There are many strategies and some take time and others not. You are correct to be considering your wills, estate plans, binding and non-binding nomination s etc to ensure taxes are minimised for them. Early inheritance to a grubby spouse may be a concern also.
 
Paul@PFI said:
That is an illegal scheme. Irresponsible to even mention it. This smells like the scheme one well known SMSF specialist was touting a few years back to bend balances using kids. ATO view is that it fails to comply. Using reserves it also fails to comply in most instances (Reg 292-25(3) Of ITAR)

SIS Reg 5.03 is very clear....Fair and reasonable with regards to all the members of the fund. Div 5-1 prevails over every deed.... A deed which authorises it is poorly drafted.
Click to expand...

Irresponsible? Sometimes it's fun to imagine how the OP might do what they want to do. If the ATO has said something about such a practice do you have a link? I'll grant you SISR 5.03(2) would be a tough hurdle to get past. I had actually misread it. I'd taken it to be subject to the 5.03(1) applicability to funds operating reserves.
 
brucea said:
Irresponsible? Sometimes it's fun to imagine how the OP might do what they want to do. If the ATO has said something about such a practice do you have a link? I'll grant you SISR 5.03(2) would be a tough hurdle to get past. I had actually misread it. I'd taken it to be subject to the 5.03(1) applicability to funds operating reserves.
Click to expand...

Face to face discussion with an Asst Commr Super. I did ask for a ruling after seeing it described by a well known adviser at a TIA seminar. I was told not to bother. (Which I suspected)

That and those deeds (about 1/3rd of modern deeds) contain clauses dealing with forfeiture. Forfeiture was prohibited by the minimum benefit standards...Read APRA circular http://www.apra.gov.au/Super/Documents/I-C-1-Minimum-Benefits-Standards.pdf

The 5.01 reserves issue must also be read with the ITAR 292-25 which also contains fair and reasonable AND 5%...If reserves aren't to ALL members and exceed 5% then the allocation may also still count to caps as a contribution rather than earnings.
 
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