Insurance within superannuation is an optional benefit that many super funds provide. This does not necessarily mean it is better than having your cover outside of super.

The following is a list of advantages and disadvantages of insurance within superannuation.

From this analysis, it is suitable to have your death cover within Superannuation if you intend your superannuation benefits to go to a dependent.

It is suitable to have your income protection inside your super if you only intend to use it if you become totally and permanently disabled.

It is suitable to have TPD cover within Superannuation if you are over age 60 where any taxable element will not apply.

There is a distinct difference between a reimbursement of expenses possibly subject to FBT and an allowance...subject to personal income tax. Generally, if the payment provided by the employer is to be kept track of, so that any excess is paid back to the employer, it will be recognised as a expense payment fringe benefit. If it is provided without any expectation of return, it is an allowance.

You can receive a fringe benefit or an allowance in exchange for a cash bonus if arrangements with employer are made before the cash bonus is approved by the company.

Certain items are exempt from fringe benefits tax.

• Deductible items
• Portable electronic devices where the primary use is work related
• in house child care
• taxi travel to and from the workplace (even if going home)
• other in-house benefits

Certain items are exempt from iincome tax under the allowance rules:

• Meals allowance up to a certain limit
• Travel allowance up to a certain limit
• Living away from home allowance (where it is directed to a rental property)
• Car Expenses

Car expenses like registration, insurance, repairs, maintenance, fuel, oil that are reimbursed by the employer on a cents per kilo basis (under 5,000 kms) where the employee owns the vehicle is not treated as an expense payment fringe benefit, but as an allowance that is included as assessable income of the employee under paragraph 26(eaa) of the Act. It can be offset by the deductibility of business travel as per the usual rules. i.e. from 1 workplace to another.

If the expenses are reimbursed under any other method, it will form part of the taxable value of an expense payment fringe benefit.

If your employer owns the car outright and offers it to you for private purposes with no lease financing....you will be subject to fringe benefits tax under the statutory method where the cost base is the purchase cost including GST plus non business fitted accesories. This will reduce by 1/3 after 4 full FBT years.

If a novated lease is involved, the cost base is the purchase price plus GST plus non business fitted accesories.

1. Banking reforms introduce standardised loan fact sheets.
2. Parents with children between 16 - 19 who are in full time secondary study who are eligible for FTB - A maximum rate will receive an additional $150 per fortnight. Consequently, children in this situation will not be eligible Youth Allowance.
3. Certain health funds will reset the limits on the services offered.

The Family Tax Benefit A is a fortnightly payment to the parent of children under 16 or between 16 - 20 and completed or undertaking a Year 12 education or a full time student under 25 (and not receiving youth allowance or AUStudy).

This payment is based on an income test using the adjusted taxable family income which is:

Taxable income + salary sacrifice contributions + personal deductible contributions + Total net investment losses (added back) + tax free pensions. It does not include any child support payments made.

This includes income generated by the child as well.

If the dependent child between 16 - 24 and earns an income above: $13,000 p.a, the FTB will cease.

Low income families (1 dependent child) with an ATFI less than: $45,000 will receivet $4,905 per annum on average per child.

Middle income families (1 dependent child) with an ATFI less than: $94,000 will receive between: $2,062 - $4,905 per annum per child.

Child support received by a parent that is already receiving the FTB - A above the base rate (i.e. $2,062) will result in a reduction if it is above the maintenance income free amount of approximately: $1,368 per annum.

The CGT provisions specify that a CGT event can occur upon the sale, gifting, destruction / loss or transfer of a CGT asset.

CGT assets specifically exclude personal use items under the $10k cost base threshold, motor vehicles, main residence, bonds and notes sold at a discount, winnings from gambling. Refer to s118-10 of ITAA97 for further information.

The purchase or sale occurs at the making of the contract of sale, or if there is no specific contract, at delivery of the asset or transfer of title.

Important dates:

The main residence exemption is important as it effectively allows the profitering of your home every 5-7 years without any capital gains tax.

Furthermore, the main residence exemption can remain if you choose to rent out your premise by living in the property initially as your main residence for atleast 12 months before renting it out for up to 6 consecutive years. To renew the main residence exemption, you will than have to live in the premise for another 12 months.

During this time, you must not purchase another property to live in as that property may be deemed to be your main residence.

If you treat the property as an investment (and not a main residence), you should rent it for atleast 12 months to get the 50% CGT discount, even though you may have lived in it previously for more than 12 months. This is the due to the August 1996 rule relating to the market value substitution.

If you were to split your main residence into more than 1 title or blocks, only the block that you continue to use as your main residence will keep the main residence exemption. The other blocks of land will lose the exemption entirely as if it never applied, but the land will be eligible for the CGT discount given the purchase date is back dated to the original purchase or transfer event.

A common strategy is to split the land, sell the block that contains your main residence and move into the other block you have created. In this instance, you may be subject to some sort of capital gains tax as the main residence exemption on the new block starts when you first moved into it and not beforehand.

Alternatively, if you and your partner decided to have different properties as your main residence, you will be restricted in the level of exemption allowed for both people. Usually 50% will be exemptand 50% will be subject to CGT for each property as a starting point.

Losses from Capital Assets must be offset in a particular order from earliest to latest. Losses from collectibles can be applied to offset the capital gain that you choose.

The sale of a property that includes chattels like furtniture, appliances, whitegoods, that are not annexed to the house, may be separate Capital Assets if the cost base is over $10,000 for personal use assets or used for a personal use at any time if its related to an investment property. Separate depreciating assets used wholly for investment property purposes will be assessed as income or a deduction based on Division 40.

The main residence exemption also extends to a dwelling owned by a trust where the beneficiary is absolutely entitled or where the trustee of a deceased estate holds the home for certain beneficiaries.

Income protection can provide a long term solution to a disability that keeps you out of the work force.

It can be held inside Super or outside super. If it is held inside super, there may be a limited range of options available.

The main points to look for in Income Protection:

1. Guaranteed renewability (only offered by a life insurance company).
2. Up to 75% of gross income plus 9 or 10% Superannuation Continuation.
3. Choose Indemnity cover based on the higher of agreed monthly benefit or 75% of current income.
4. Indexation whilst on claim.
5. Includes a partial disability benefit.
6. Worldwide coverage.
7. Covered whilst unemployed or on leave.
8. Based on an 'own occupation' definition of disability.
9. Covers accidents, illnesses and any pre existing conditions.
10. Indexation whilst on cover or future insurability.
11. Premium waiver during the claim period.

Amoung the leading products on the market are:

• CommInsure Income Care
• TAL Accelerated Protection IP Standard
• Zurich Income Replacement Premier

* The above policies include superannuation continuance, increasing claims, indexation, premium waiver on claim and recurrent disability.

There are 3 tax breaks your super fund is eligible for.

The first is the anti-detriment benefit.

It is only available if upon death of a member, a lump sum death benefit is paid to a spouse (including de facto), former spouse or a child.

This would usually come from a specially designed reserve whereby the fund receives a tax deduction equivalent to the anti-detriment amount divided by 15% that is can use on future income of the fund.

The anti-detriment amount is approximately 15% of the Taxable component (excluding any insured amount)

Please refer to s295-485 ITAA97.

The second is the death and disability benefit.

When a death benefit, terminal illness benefit or disability benefit is paid in consequence of a members termination of employment, the fund will receive a tax deduction equivalent to the benefit x (future service days / total service days).

This election can be made in the same financial year as the event, even though the member choose to deduct insurance premiums paid in previous financial years.

The tax deduction will apply to the assessable income of the fund and its members in future years, but the fund and all its members will no longer be eligible to claim tax deductions for future onoing insurance premiums.

Please refer to s295-470 ITAA97.

The third is a self insurance benefit.

A SMSF can claim the reasonable cost of self insuring itself through a special reserve account.

Please refer to s295-465 ITAA97.

Income from assets in pension phase can be held on an unsegregated basis where the income / capital gains generated is proportioned between the accumulation and pension interests using the average value for the financial year.

It can also be used in combination with a segregated approach where Asset A,B,C are segregated and Asset D is unsegregated.

If your fund has an investment property or other large asset that is greater than the pension phase amount you have set, than you will have to use the unsegregated method if you wanted to allow a portion of the asset to be in 'pension phase'.

The best outcome is to make sure your positive income assets and assets that have a large capital gain that you want to capitalise on are in pension phase whilst your negative income assets are in accumulation phase.

If you have a large diversity of assets with different incomes, capital gains, it is best to use the segregated method.

If your assets are all similiar, than the unsegregated method can be alot simpler to deploy.

Cross Collateralisation results in the extended mortgage of the primary asset . i.e. the family home to other assets i.e. investment property, car etc.

If the loan allocated to the investment property or car is paid off, the asset can not be freely sold without the lenders authority as this asset is still being used as security for the primary asset.

It generally ties all assets (free or not free of debt) to any outstanding loans.

To avoid this scenario, it is best to refinance your existing mortgage on your primary asset. Any excess funds that are not needed to repay the existing loan can be put into an offset account....where it can be withdrawn to meet the deposit for a new property or other asset on a stand alone basis. This will maintain the separation between the loan on your primary asset and other loans or assets that you purchase from a direct collateralisation point of view.

Centrelink provides a deductible amount to help determine if a recipient may be eligible for a support payment like the age pension.

RCV: residual capital value.

Life Expectancy: Life expectancy is based on your age at the start of the pension by using the relevant ABS tables.

Undeducted Purchase Price: Includes personal contributions, CGT exempt and invalidity component.

* Subject to trigger event like turning 60, commutation, death or being 60 at the 1 July 2007. This will automatically fix the tax free and taxable components at the trigger event, (including any Pre 1983 component if the pension started Pre 1 July 1994) where the higher of the two will apply.

# this would only include personal contributions.

If a lifetime pension was purchased that allowed the benefit to revert to a spouse, the life expectancy was taken as the longer of you or your spouse as if you were 5 years younger. With other life expectancy and defined benefit pensions, the life expectancy is just the longer of and your reversionary spouse.

If the superannuation product is commuted, a new deductible amount is calculated based on the new purchase price and the life expectancy at the start of the new income stream.

On the 7th July 2010, new borrowing rules started for self managed super funds. As you will see, they are more restrictive than the first set of rules which began in September 2007.

A repair or maintenance is where the functional efficiency of that individual asset is restored back to what it was or should be regardless of whether it was purchased second hand.

Maintain means any work done to prevent defects, damage or deterioration of an asset or in anticipation of future defects, damage or deterioration to ensure the functional efficiency of the assets is maintained.

# An asset is improved if the functional efficiency of the asset or value of the asset is substantially increased through the addtion of new or substantial features or rights or bringing the structure into a more valuable or desirable form. Minor or trifling increases in functional efficiency or value compared to the acquirable asset as a whole will not amount to an improvement.

The SMSF can drawdown on the borrowing facility it has. This draw down is a separate borrowing according to the ATO....and so long as you meet the relevant tests, it should be fine. A draw down can not be used to extract cash.