Temporary Reduction in Minimum Pensions extended for 2021/22
The Government has announced an extension of the temporary reduction in superannuation minimum drawdown rates for a further year to 30 June 2022.
As part of the response to the coronavirus pandemic, the Government responded immediately and reduced the superannuation minimum drawdown rates by 50% for the 2019-20 and 2020-21 income years, ending on 30 June 2021.
A recent announcement extends that reduction to the 2021-22 income year and continues to make life easier for retirees by giving them more flexibility as to how much pension they take.
Buying a property off-the-plan
Buying a property off-the-plan starts as an exciting dream created by the visions of architects and designers, but it’s often a world away from the harsh reality of living there a few years later. Water leaks, building cracks, noisy neighbours and old sofas dumped out the back become the ‘strange and weird’ ghosts facing owners after they settle on their dream property.
This article is an excellent summary of some of the issues you should be aware of before signing up to buy a property off the plan.10 Unspoken Risks Buying Off-The-Plan, an article from Firstlinks.
Downsizer contributions to Super don’t have to be in Cash
Downsizer contributions are not restricted to funds secured from a property sale, with the ATO confirming that not only cash but also other equal value assets will be allowed to be contributed.
Mary Simmons, Technical Manager at the Self Managed Super Fund Association wrote in her April newsletter:
“The ATO recently confirmed to the SMSF Association that provided the downsizer eligibility criteria is met, there is no need to analyse how the contribution is funded, provided it does not exceed $300,000 or the total capital proceeds from the sale of the qualifying dwelling.
“This means that an individual can make a downsizer contribution as an in-specie contribution, provided the value of the asset is equal to all or part of the proceeds from the disposal of the qualifying dwelling.”
Mary gave the example of a couple in their 70s selling a home for $1.35 million and, having met the eligibility requirements to each make downsizer superannuation contributions of $300,000, they do so by transferring a portfolio of listed shares, which they already own individually, into their SMSF.
For the contribution to take place, the market value of the in-specie contribution of listed shares would be equal to $600,000 and an off-market share transfer form would be executed and given to the SMSF trustee within 90 days of receiving the proceeds from the sale of their home, she added:
“With the existing strict eligibility criteria that an individual must satisfy to be eligible to make a downsizer contribution, we are pleased that the ATO’s interpretation supports the intent of the law and does not see any mischief if the contribution is funded via an in-specie transfer of any asset(s) provided it is at arm’s length and permitted by section 66 of the Superannuation Industry (Supervision) Act.”
Superannuation Death Benefits
A super death benefit can only be paid to certain dependants of the deceased as defined in the legislation or to the member’s Legal Personal Representative (executor of the Will).
Unlike many other assets, super does not automatically form part of a deceased estate. However, a member can direct their benefit to their estate by nominating their LPR. There are two definitions of dependants that are relevant for super death benefit purposes. The super definition determines who can be paid a death benefit and the tax definition determines the taxation of the benefit. In simple terms, a super death benefit can only be paid to a ‘SIS dependant’. SIS dependants include a spouse, a child of any age, a financial dependant, an interdependent person, and the LPR of the deceased.
When a death benefit is directed to an estate (i.e. LPR), as opposed to individual SIS dependents, the benefit can be distributed according the member’s Will. Superannuation proceeds may form part of an estate where a valid binding nomination is made in favour of the estate, the trust deed requires payment to an estate in some circumstances (e.g. no valid binding nomination is in place), or the trustee exercises discretion to pay the death benefit to the estate (such as in the absence of a valid binding nomination, when a nomination is non-binding or if the deceased has no SIS dependants).
Some SIS dependants also have the option to receive the death benefit as a pension. These people include a spouse, a child under 18 years of age, a child aged 18 to 25 who is financially dependent a disabled child, a financial dependant (other than a child), and an interdependent person. There are some differences in the definition of a dependent for super and tax purposes.
Cryptocurrencies are very volatile
There is still great debate as to whether investors should be holding cryptocurrencies, such as Bitcoin, to improve diversification and hopefully returns. What can be said with great confidence is that cryptocurrencies are very volatile as evidenced by comparing Bitcoin with the Nasdaq index.
When you hear about artificial intelligence, stop imagining computers that can do everything we can do but better. Of course, that may be true at some future time.
Cade Metz, who has a new book about A.I., wants us to understand that the technology is promising but has its downsides: It’s currently less capable than people, and it is being coded with human bias. In an article published by the PressNewsAgency, they ask the Cade what is artificial intelligence:
Shira: Let’s start with the basics: What is artificial intelligence?
Cade: It’s a term for a collection of concepts that allow computer systems to vaguely work like the brain. Some of my reporting and my book focus on one of those concepts: a neural network, which is a mathematical system that can analyze data and pinpoint patterns.
If you take thousands of cat photos and feed them into a neural network, for instance, it can learn to recognize the patterns that define what a cat looks like. The first neural networks were built in the 1950s, but for decades they never really fulfilled their promise. That started to change around 2010.
For decades, neural networks had two significant limitations: not enough data and not enough computer processing power. The internet gave us reams of data, and eventually scientists had enough computing power to crunch through it all.
This one idea changed many technologies over the past 10 years. Digital assistants like Alexa, driverless cars, chat bots, computer systems that can write poetry, surveillance systems and robots that can pick up products in warehouses all rely on neural networks.
Sometimes it feels that people talk about artificial intelligence as if it’s a magic potion.
Yes. The original sin of the A.I. pioneers was that they called it artificial intelligence. When we hear the term, we imagine a computer that can do anything people can do. That wasn’t the case in the 1950s, and it’s not true now.
This newsletter contains general advice. It does not take into account your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.