Brisbane’s riverfront is about to welcome Queensland’s most ambitious wellness living precinct, with <a href="https://www.apartments.com.au/developers/kokoda-property">Kokoda Property Group</a> unveiling nearly 12,000 sqm of dedicated health, fitness and social amenity within its $1.5 billion Teneriffe Banks development, the largest of its kind in the state.&nbsp;

Australia is now the four largest market in the USD 584 billion Global Wellness Real Estate sector, and <a href="https://www.apartments.com.au/new-apartments/teneriffe-banks-17-27-skyring-terrace-teneriffe-qld-4005">Teneriffe Banks</a> is setting the benchmark locally, offering residents a complete lifestyle precinct that balances wellness, community and luxury.

From rooftop wellness retreats and 5-star co-working spaces to curated retail and dining, lush green spaces and riverfront walkways, the development has been designed as an ecosystem for modern living. Community gardens, a riverfront amphitheatre and community centre further anchor Teneriffe Banks as a destination that connects residents and the wider community in a way Brisbane has never seen before.&nbsp;

Each of the four residential buildings offers an expansive rooftop retreat featuring infinity pools, mineral plunge pools, hydrotherapy zones, and steam and sauna suites. These spa-level amenities eliminate the need for external memberships, seamlessly integrating exercise, recovery and relaxation into daily life.&nbsp;

[smartcode_project:default project_id=139896 project_image_fid=352274]

Residents of Teneriffe Banks will enjoy exclusive access to The Canopy Club, one of Brisbane’s largest private members' venues. Drawing inspiration from international icons like Soho House but uniquely tailored for Brisbane, the club will feature private dining rooms, a wine cellar and tasting lounge, library, cinema, sports simulator and five-star work spaces, overlooking the Brisbane River.&nbsp;

Complementing this lifestyle is Banks Athletic, a private, residents-only health club offering personalised fitness and holistic wellness programs.

The precinct will also be home to Brisbane’s first five-star Kimpton Hotel Urban Resort, offering guests access to a luxury spa, a fitness centre, signature restaurants, pool club, rooftop cocktail bar and large-scale event spaces. Also forming part of the masterplan is a proposed reimagined marina and landscaped green spaces and gardens among a curated collection of waterfront restaurants, laneway cafes, and boutiques — creating a complete live, work, play lifestyle.&nbsp;

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A recent report by Global Wellness Institute found Australia boasts one of the world’s fastest-growing wellness economies, growing at an annual rate of 7.5 per cent from 2019-2023.

“Luxury living today is about more than just design, it is about how well a place supports mind, body and connection,” said Kokoda Property Group Founder and Managing Director, Mark Stevens.

“With Australia now ranked among the world’s top five global wellness real estate markets, Teneriffe Banks has been designed to meet that growing demand. By blending curated wellness spaces with riverfront greenery and vibrant community amenities, the precinct will set a new benchmark for holistic urban living.”&nbsp;

Stephens said that wellness-focused design is resonating strongly with downsizers and lifestyle-driven buyers alike.&nbsp;

“We’re seeing overwhelming interest from buyers who are drawn to the idea of expansive amenity beyond their own residence, particularly those seeking space without the upkeep. The ability to enjoy a sunrise coffee by the rooftop pool, or build movement and recovery into their daily routine without leaving home, is a drawcard. Low maintenance, high impact living is what today’s market is looking for, and that’s exactly what Teneriffe Banks delivers."

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Set across five architecturally distinct buildings, Teneriffe Banks will deliver over 200 residences, ranging from apartments to modern penthouse residences and woolstore-inspired lofts, each crafted by <a href="https://www.apartments.com.au/architects/studio-mccue">Studio McCue</a>, in collaboration with <a href="https://www.apartments.com.au/architects/cottee-parker-architects">Cottee Parker Architects</a> and <a href="https://www.apartments.com.au/architects/carr-design">Carr</a>.&nbsp;

Further reflecting its commitment to fostering an active, connected lifestyle along the river, Teneriffe Banks is now the naming partner of the Brisbane Marathon Pacers, now known as the ‘Tenerrife Banks Pacers’. The Brisbane Marathon hosts over 10,000 participants from around the world and is only growing in size.&nbsp;

[smartcode_project_cta:default project_id=139896]

Joel Robinson

Kokoda's Teneriffe Banks introduces Queensland’s largest residential wellness offering

Summary:&nbsp;

<ul type="disc">
	<li>A new&nbsp;Golden Age Cinema&nbsp;with multiple screens and creative performance spaces</li>
	<li>Approximately&nbsp;60 metres of retail frontage&nbsp;along Oxford Street for small-scale, street-activating businesses</li>
	<li>53 apartments, including 15 affordable housing apartments</li>
	<li>Landscaped public connections between South Dowling and Verona streets, improving walkability and accessibility.</li>
</ul>

<hr />
&nbsp; 
Developer WT Malouf has confirmed plans to transform the much-loved Verona Cinema site on Oxford Street in&nbsp; Paddington into a new mixed-use destination centred on culture, creativity and community.

The proposal, a State Significant Development Application (SSDA), will deliver a balanced mix of uses including 53 apartments, including 15 affordable, a new Golden Age Cinema with multiple screens and creative performance spaces, and several small-scale, street-activating businesses across its 60 metres of retail frontage.

The development will retain the Verona’s iconic brick façade, recognising the building’s role in Paddington’s cultural life for nearly three decades.

<img alt="Verona" data-entity-type="file" data-entity-uuid="efed0828-5cc4-4d77-a6df-83e7fa5d24ea" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-10-03%20at%209.19.31%E2%80%AFAM.png?VersionId=xHbLRgjfTSkScuLsLW_nRjX0Zi5Cwalo" />

WT Malouf has entered into exclusive arrangements with the operators of Golden Age Cinema &amp; Bar, a much-loved Surry Hills institution named among the Top 100 Cinemas in the World by Time Out. Golden Age will bring four screens and versatile creative spaces back to Paddington, helping to anchor Oxford Street’s future as a cultural and entertainment corridor. 
&nbsp; 
“At a time when Sydney is losing suburban cinemas, we’re committed to creating a bigger and better cinema experience for Paddington,” said Jack Joseph, Director at WT Malouf.

“Golden Age’s arrival will ensure Oxford Street continues to be a home for independent film, live performance and community events.” 
&nbsp; 
The project has been designed in line with the City of Sydney’s Oxford Street Cultural and Creative Precinct strategy, which encourages new investment in cultural space, night-time economy and creative industries. It also aligns with the NSW 24-Hour Economy Strategy, contributing to the revival of Oxford Street as a safe, vibrant and connected cultural precinct that operates by day and night.

<img alt="Verona" data-entity-type="file" data-entity-uuid="ac1895bd-d09f-4cf6-aed4-9a2739c2d9b2" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-10-03%20at%209.19.45%E2%80%AFAM.png?VersionId=NcwfjdR0oF5xPbatoSGOR4oWAZm9yJJT" /> 
&nbsp; 
“This development is about more than apartments,” Joseph said. “It’s about contributing to Oxford Street’s restoration as one of Sydney’s great cultural boulevards, where people come to live, create and socialise.” 
&nbsp; 
‘’The new Verona is a once -in-a-generation opportunity to restore this important part of Oxford Street,’’ said Tim Greer, Director of Tonkins Zulaikha Greer (TZG). 
&nbsp; 
Alongside cultural and creative space, the Verona development will deliver new housing in one of Sydney’s most tightly held suburbs. 15 apartments will be set aside as affordable rental homes for essential workers, ensuring Paddington retains a diverse and connected community. 
&nbsp; 
The project is expected to be determined by the NSW Department of Planning, Housing and Infrastructure in 2026, with construction planned to start later that year and delivery within three years.

Paddington’s Verona Cinema set for luxury apartment transformation and new Golden Age Cinema

The Chatswood CBD is the latest city centre in the cross hair of the Minns Labor Government's push to support new housing.

They're pushing for up to 1,500 apartments on the former Sydney Metro construction site, which will include 180 build-to-rent apartments for essential workers, as well as new retail and commercial spaces and outdoor areas.

<img alt="Chatswood" data-entity-type="file" data-entity-uuid="ec539e11-accf-4844-bbce-1b453e0ee907" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-10-03%20at%209.09.58%E2%80%AFAM.png?VersionId=64L8ymb0LbjKbxcmvUux9TI9qXL8hnkR" />

The remaining mix will be build-to-sell, and incorporate affordable housing. The development will see the adaptive re-use of local heritage building Mowbray House, which operated as a boarding school from 1906 to 1954, for future community use.&nbsp;

Construction on the site is expected to start in late 2026, with the first essential workers expected to move in by late 2028.

Landcom is inviting feedback on the proposal from the community and stakeholders until 9am, Monday 27 October 2025.

<img alt="Chatswood" data-entity-type="file" data-entity-uuid="01cc2e55-a585-4a3f-afb2-bb6213dc59b8" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-10-03%20at%209.09.18%E2%80%AFAM.png?VersionId=ZaaHSI.h_CLRCYloljNdXSa4eigU6vae" />

The Chatswood site is the second&nbsp;to be secured under the Minns Labor Government’s $450 million investment in Landcom to deliver 400 build-to-rent homes for essential workers in Sydney, with 220 essential worker homes already being delivered in Annandale.

&nbsp;

&nbsp;

&nbsp;

&nbsp;

Work is also underway on new build-to-rent apartments on the NSW south coast and work is set to start later this year on new build-to-rent housing in Lismore to boost rental supply in the NSW Northern Rivers.

Premier of New South Wales Chris Minns said essential workers are the backbone of not only Sydney but all of NSW and they deserve to have an affordable place to live near their job and community.

“This will be life changing for essential workers, who will get to live not only near their job but in one of the best-connected areas in all of Sydney.”

Minister for Planning and Public Spaces Paul Scully said people should be able to live, work, relax and play all within one community.

"Delivering both 180 new essential worker homes and 1300 further market and affordable homes will give that opportunity and choice back hundreds of people.

“We’ve dedicated another 180 homes to essential workers in this project so workers like our teachers, nurses, paramedics and police offices can build a life close to both their home and job.

“This is yet another example of density done well, providing additional, homes and jobs in an area that’s already well serviced by public transport, shops, restaurants, schools and health centres.”

&nbsp;

&nbsp;

Landcom CEO Alex Wendler said this is a highly productive time for Landcom where we are sustaining strong momentum across our entire delivery program.

"Here at Chatswood, we are leading the development of a major city precinct to do density well and make homes happen. This is a great example of Landcom making the government’s policy ambitions a reality and bringing to life the kind of housing options our city needs.”

Premier of New South Wales Chris Minns said essential workers are the backbone of not only Sydney but all of NSW and they deserve to have an affordable place to live near their job and community.

NSW Gov, Landcom plan 1,500 new apartments in Chatswood CBD

Dexus' push into the residential development space is moving down to Melbourne, with the real estate asset giant taking on a x at the southern end of St Kilda Road.

Dexus, who has recently starting developing luxury apartments in Sydney's Northern Beaches, is planning a 27-storey tower with over 400 new apartments at the intersection of St Kilda Road and Queens Road.

The proposal, now with VIC Planning, seeks to replace the ageing 19-storey former Cadbury office building at <a href="https://www.apartments.com.au/new-apartments/636-st-kilda-road-melbourne-vic-3004">636 St Kilda Road</a> with a contemporary high-density apartment complex designed by architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/bates-smart">Bates Smart</a>.

According to the Urban Context Report filed to VIC Planning, the development will respond to the site’s landmark location through a "refined and sculptural built form that mediates between the scale of St Kilda Road and Queens Road” while reinforcing “a sense of civic address at this prominent intersection.”&nbsp;

<img alt="First look: Dexus proposes 27-storey residential tower at 636 St Kilda Road" data-entity-type="file" data-entity-uuid="dfd2ebd1-e311-4348-9c7d-b3d73b64ade4" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/St%20Kilda%20bldg.png?VersionId=_DHkdNAj1U3wcH0BX51t2MJYeIMrbG2w" />

The architectural design features active frontages, new pedestrian through-links and an extensive landscape strategy that integrates with the surrounding boulevard character.

The apartment mix is varied, comprising 40 studios, 87 one-bedrooms, 203 two-bedrooms, 66 three-bedrooms, and six penthouses, with each dwelling designed to meet the standards set out in Clause 58 of the Port Phillip Planning Scheme.&nbsp;

A key element of the proposal is a $9.6 million contribution, equivalent to three per cent of the project’s estimated development cost, to the Social Housing Growth Fund, aimed at supporting affordable housing outcomes across Victoria.

<img alt="First look: Dexus proposes 27-storey residential tower at 636 St Kilda Road" data-entity-type="file" data-entity-uuid="7f138f11-5277-461f-8d12-9533b2960586" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/St%20kilda%20rd%20site.png?VersionId=m_ZioKYhwkvekE3ZUF6y7bz.5_5yFPnZ" />

The site’s three street frontages, St Kilda Road, Queens Road, and Queens Lane, enable significant setbacks and design flexibility.

Bates Smart noted the proposal "reinforces the intent for St Kilda Road North to accommodate higher-density, mixed-use development,” leveraging its location near the soon-to-open ANZAC Station tram-rail interchange and the principal cycling corridor along the boulevard.

They emphasised&nbsp;the building’s role as a city-shaping gateway, writing that the proposed tower is “designed to contribute positively to the skyline and urban character of St Kilda Junction,” and would offer visual connections to key city landmarks, including Albert Park Lake and the Shrine of Remembrance.

Public realm upgrades are also proposed as part of the scheme, including a 138 sqm linear park, extensive landscaping, and around 188 metres of active frontages to enhance permeability and safety at the ground plane. A total of 449 car spaces and 120 bicycle spaces are planned across the four basement levels.

<img alt="First look: Dexus proposes 27-storey residential tower at 636 St Kilda Road" data-entity-type="file" data-entity-uuid="dfdbccd3-6954-417e-8543-c6b1f1b5df1b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/St%20KILDA%20rooftop.png?VersionId=.xI5fkVYETzG1WJaiOsOt8Yd4BgQx0DA" />

Dexus is positioning the project as a strategic redevelopment aligned with the St Kilda Road North Precinct Plan. The Planning Report by Urbis states that the distinct features of the site, the emerging context to its interfaces, and the surrounding policy context justify consideration of a taller building” despite the site being subject to Design and Development Overlay – Schedule 26 (DDO26).

St Kilda Road has been one of the most popular streets for residential development in recent years. The likes of Victoriana, The Muse, and St Boulevard are the most recently completed buildings, oriented to look over the adjacent Albert Park Lake, while Gamuda Land is currently developing <a href="https://www.apartments.com.au/new-apartments/fareham-st-kilda-95-st-kilda-road-st-kilda-vic-3182">Fareham</a>, and Hirsch &amp; Faigen has a building in the precinct they will soon launch, just off St Kilda Road on Queens Road.

First look: Dexus joins St Kilda Road apartment ranks with gateway tower proposal

Melbourne’s City Circle tram loops past a dense matrix of culture, education and commerce, but few intersections offer as much access in so little walking distance as the northern end of King Street.

Here, Aspire Melbourne rises 64 storeys from the edge of Flagstaff Gardens, with immediate connectivity to tram and train networks, and pedestrian access to Queen Victoria Market, Marvel Stadium and Melbourne’s major university precincts.

Developed by ICD Property with design by Fraser &amp; Partners, Aspire Melbourne brings 570 apartments to one of the CBD’s most spatially balanced positions, directly between civic green space and key employment infrastructure.

[smartcode_project:default project_id=2575 project_image_fid=248847]

Everything from retail and dining to sporting events, art, theatre, and festivals, or the serenity of the city’s gardens, is within walking distance of Aspire.

Melbourne's thriving coffee culture is showcased in the CBD's cobblestoned laneways, with popular cafes such as Brother Baba Budan, Krimper, Stagger Lee's, Higher Ground, and Manchester Press all nearby.

For culinary enthusiasts, Melbourne offers a variety of dining experiences. Highly recommended establishments include Maha, Farmer's Daughter, Coda, and MoVida Next Door, offering everything from Middle Eastern dinners to a night out.

[smartcode_project:default project_id=2575 project_image_fid=79443]

Getting around Melbourne is as effortless as finding a great cup of coffee, thanks to the city’s clean, reliable and extensive public transport network. Aspire’s curved tower is a short walk from Melbourne Central Station, Southern Cross Station and the Free Tram Zone, offering seamless connections across the CBD and out to suburban precincts.

This inner-city accessibility is complemented by Aspire’s rare proximity to green space. The tower directly overlooks Flagstaff Gardens, the city’s oldest park, with Fitzroy Gardens and the Royal Botanic Gardens also nearby, framing the CBD in natural beauty.

Just 11 minutes on foot, Queen Victoria Market adds another layer of amenity. A longstanding hub of culture and commerce, it offers fresh produce, gourmet foods, artisanal goods and vibrant multicultural fare, all woven into the daily rhythm of city life.

[smartcode_project:default project_id=2575 project_image_fid=79445]

To the west, the CBD’s entertainment quarter features Marvel Stadium, just 750 metres from Aspire, ideal for sports fans and major events.

To the south, Crown Casino along the Yarra River offers entertainment, dining and family-friendly activities, accessible in under 10 minutes by tram.

The Arts Centre Melbourne, a hub for visual art, theatre, music and performance, is also within easy reach by public transport or car.

[smartcode_project:default project_id=2575 project_image_fid=311]

For families looking to set up roots in the CBD, education options abound within a one-kilometre radius of Aspire.

The prestigious Haileybury opened its Melbourne CBD campus in January 2017 offering Melbourne's first Early Learning Centre to Year 12 private school campus in the CBD.&nbsp;

<a href="/developments/north-melbourne-vic-3051">North Melbourne</a> Primary School, South Melbourne Primary School, Ozford College, and Simonds Catholic College are among the other choices, while universities like Victoria University, La Trobe University, and Monash University are less than 600 metres away.

[smartcode_project:default project_id=2575 project_image_fid=79444]

A limited selection of one, two, and three-bedroom apartments remain for sale, with pricing starting from $647,000.

“The Melbourne CBD apartment market has evolved in response to both the strong growth of the overall city as well as the increasing attraction of the CBD which offers unique lifestyle appeal, especially to the fast-growing cohorts of young professionals and university students,” <a href="/project-marketer/colliers">Colliers</a>&nbsp;Managing Director Residential Tim Storey said.

[smartcode_project_cta:default project_id=2575]

On the fringe of Flagstaff Gardens: Aspire Melbourne's prime location

Smsfs

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GUEST OBSERVATION
The fastest growing sector in the economy today is not mining, retailing or even education. It’s superannuation, which accounts for almost 30% more than the total savings held by the banking and mutual sector.
Self-managed superannuation is the fastest growing form of investment vehicle.
This has altered the landscape of both property and share investment. In the property market there are well-established regulations and safeguards. The stock market is a different story.
The proposed takeover of David Jones by the South African-based Woolworths and the deal made by Woolworths to buy Solomon Lew’s stake in David Jones, who happens to own an equally large share of Country Road (another takeover target of Woolworths), highlights the problem.
The board of the takeover target recommends to its shareholders what to do, but there is no formal requirement for shareholder approval. It’s assumed if the shareholders sell, that’s their approval. If they don’t sell, they don’t approve.
In the case of David Jones, a wealthy, assertive investor is getting a side deal not available to other investors.
Why should this happen?
In other countries, a formal takeover requires shareholder approval, thus discouraging side deals to occur where some walk away with large profits and others get what they can.
David Jones
The David Jones takeover provided an opportunity for some to simply profiteer, to the extent they could make more money linking this deal with others, thus cornering Woolworths to pay for deals it may not have planned.
If anything, the David Jones scenario raises questions as to whether a takeover of this nature is manipulative, unfair to ordinary shareholders and a distortion of the market mechanism.
The Australian Securities and Investments Commission (ASIC) has intervened, asking questions about the side deal protecting the interests of David Jones' shareholders by intervening in Woolworths' $2.2 billion takeover bid for David Jones.
As ASIC threatens to withhold its consent to the scheme of arrangement, a core part of the $2.2 billion takeover is arguing that a collateral benefit to one shareholder is not available to the other shareholders. The board is so keen to push the takeover that they are prepared to sell the takeover on the basis that the millions made on the side by Lew should not kill the deal.
Directors should of course be supporting the interest of the company as a whole and of all the shareholders. In the past the <a href="https://www.theguardian.com/business/2006/dec/14/australia.theairlineindustry">Allco Finance Group takeover of Qantas</a> had the same set of facts. A takeover favouring those few in particular linked to the board is a further reason for ASIC’s intervention.
ASIC is not about increasing share prices - it’s about access to a fair price. If one shareholder gets a huge side bonus which increases the prices, should those getting the crumbs be happy? Are their shares the same of those getting the bonus?
ASIC had failed in the Federal Court to force David Jones to secure an <a href="https://www.smh.com.au/business/retail/asic-steps-into-david-jones-country-road-battles-with-demand-for-independent-valuation-20140702-zstnq">independent valuation of the “collateral benefit”</a> that Woolworths was offering to one of its shareholders simply to buy his support for the David Jones scheme of arrangement. ASIC can always withhold a letter of consent for the scheme, on the grounds that all David Jones shareholders are not being treated equally.
In response, David Jones has provided shareholders with additional information to help show shareholders how this deal was done.
All this could be resolved if shareholders were given the complete, true facts in an accessible manner, and if takeover predators were forced to make the same offer to all and let shareholders decide.
Why the loophole exists
Law reform in the area of takeovers is well overdue and belongs to another age. Unlisted companies don’t require shareholder approval for takeovers on the presumption that shareholders don’t have enough information. The idea is public information and scrutiny aren’t as readily available as for listed companies.
This thought process belongs to a pre-internet era and is not very relevant today. The rule has been kept as it tends to favour larger investors who play the game of takeover and sales. Allowing other smaller shareholders more power would complicate the game, which explains why governments have kept their distance from changing these laws.
The world has moved on, and it’s only a matter of time before the predators and profiteers further manipulate the hordes of superannuation investors in the market to extract extraordinary profits.
It’s time for a closer look at shareholders' rights, together with the regulation of the market place, to discourage two-tier takeover offers - one for the well-connected and aggressive market operators and another for the other shareholders.
Michael Peters is lecturer at <a href="https://www.asb.unsw.edu.au/Pages/default.aspx" target="_blank" style="line-height: 1.3em;">Australian School of Business</a>.
This article was originally published on <a href="https://theconversation.com">The Conversation</a>.
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po-LsXgBTHBmX

To protect SMSF investors the stock market needs the same safeguards property has

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Three Charterhill entities owe creditors a combined $11.5 million, according to the latest presentation of accounts.
The Adelaide-based group offered a range of services including SMSF advice, mortgage broking, real estate marketing, property management along with contract negotiation.
Charterhill Group entered insolvency in January, with many clients now caught in the wreckage of chartered accountant George Nowak’s empire.
Some related Charterhill entities are among the unsecured creditors, with about 110 clients having been caught up in the collapse having paid deposits for property purchases, previous reports suggested.
The three of the Charterhill companies have collected just the $25,000 in payments, according to their six-month presentation of accounts, The Advisor said.
The companies are under the control of the receiver, Michael Basedow of Pitcher Partners or under the control of the liquidator, Andrew Heard of Heard Phillips. 
The Charterhill Group operated as a “one-stop shop”, providing advice to clients on the establishment of self-managed superannuation funds, rollover of existing super funds into an SMSF, sourcing and purchase of investment properties, property management, insurance and taxation.
It companies included, Nova Real Estate — in administration; Lending Solutions International — in liquidation; EJ Property Developments (EJPD) (formerly known as Charterhill Group and Bentley Capital) — in receivership and Financial Wellness (trading as EZ Residential) — in receivership.
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jchancellor-FAypfDUnLy

Charterhill owes $11.5 million to creditors

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Westpac has called for the introduction of additional regulatory requirements before any SMSF can be established, in its response to the Financial System Inquiry’s interim report.
The bank says "suitability" remained the most important policy consideration in light of the complexity, ongoing administration and unique risks.
Westpac propose a test requiring an adviser or accountant to be satisfied the benefits from the establishment of the SMSF clearly outweigh the risk.
Westpac suggested the current take-up of borrowing by SMSFs has been a “rational” response to the current policy and tax settings, but has encouraged the inquiry to possibly consider how appropriate caps could ensure leverage does not become a systemic risk.
It also said the current level of official data, and oversight and analysis of the systemic implications of the SMSF sector were insufficient, given the sector’s size and continuing growth rate.
“This poses important issues for the government and SMSF members, including risk of shortfalls in retirement savings due to poor management and/ or mismanagement; calls to compensate SMSF members in the event of a failure; and poor understanding of the economic and financial system implications of the sector,” Westpac stated.
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Westpac sees SMSF borrowing as rational, but seeks to avoid systemic risk prospect

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Self-managed super funds have significantly outperformed their APRA-regulated rivals in six out of the past eight years, <a href="https://www.theaustralian.com.au/business/wealth/those-who-dare-to-diy-set-the-pace-on-super/story-e6frgac6-1226956597252">reports the Australian</a>.
A report from National Australia Bank shows that on average SMSFs had beaten APRA-regulated funds by 22.5% over the period, after paying all costs.
The numbers indicate a $500,000 investment in an SMSF at the start of the 2004-05 financial year would have returned $345,571 net by the end of the 2012 financial year, compared with the average APRA-regulated fund returning $190,100 net.
Recent figures from the Australian Taxation Office show SMSFs have grown by 26.5% to reach more than 1 million members.
The SMSF Professionals’ Association of Australia (SPAA) chief executive Andrea Slattery said recently: “The number of trustees and members exceeding 1 million is an important milestone for the SMSF industry, clearly demonstrating that there is a growing number of people wanting to take direct responsibility for their retirement savings”.
David Gall, executive general manager of banking and wealth solutions at NAB, told the Australian the results showed SMSFs were not a one-hit wonder.
This article first appeared on <a href="https://www.smartcompany.com.au/" target="_blank">SmartCompany</a>.
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SMSFs are a better bet than rival super funds: NAB

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Suggestions that young and naïve investors are rushing to set up self-managed super funds have been debunked by figures from the Australian Taxation Office.
Graeme Colley, director of technical and professional standards at SMSF Professionals' Association of Australia (SPAA), told SmartCompany that despite an increase in <a href="https://www.smartcompany.com.au/finance/superannuation/35704-younger-generation-interest-in-smsf-on-the-rise">popularity with the younger generation</a>, the latest statistics show SMSFs are still very much the heartland of the wealthy and the mature.
“From what we see, it’s still the 50 plus category,” says Colley.
The September ATO figures show the greatest proportion of SMSFs are funds of between $200,000 and $2 million. The number of funds within this range has risen from 63.9% in 2009-10, to 65.7% in 2012-13.
In contrast, funds under $150,000 have been in a decline over this four-period from 20.5% to 17.2%.
Colley says there has been unfounded media speculation young people were rushing into setting up SMSFs.
“What the industry didn’t want to see happen was people brashly going into SMSFs without seeing if it was the right option for them. But we are not seeing that from these figures,” says Colley.
Colley says while the popularity of SMSFs is certainly on the increase, there has been a “steady as she goes” approach to SMSF investment.
“It’s more of a ‘look before you leap’ situation, we don’t want a runaway freight train,” he says.
Colley believes there has recently been a considerable focus given to the education and training of SMSF managers, in the wake of <a href="https://www.smartcompany.com.au/legal/politics/44700-fofa-changes-scrapped-by-senators-as-financial-planners-plead-for-certainty" target="_blank">changes to the financial planning industry.</a>
He says the ATO statistics also put to bed the myth that SMSFs with low balances have an "unhealthy" concentration of their assets in residential property.
“That doesn’t seem to be the case. Funds with property investment seem to be in the $300,000-$400,000 plus range. It is a common sense investment, rather than people with massive mortgages.”
"The notion that SMSFs are piling into residential property with their ears pinned back is simply not supported by the ATO figures,” says Colley.
The SPAA expects another 20,000 SMSF will be created in 2015.
This article first appeared on <a href="https://www.smartcompany.com.au/" target="_blank">SmartCompany</a>.
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SMSFs still the heartland of the mature and wealthy 

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The Federal Treasury's Murray Financial System Inquiry has recommended that self-managed superannuation funds be banned from borrowing to buy assets such as property and shares.
There is no indication the recommendation will be accepted, or how it may be implemented, but the spectre could see the current levels of SMSF property investors further elevated before any announcement in 2015 of changes or grandfathering of the current rules.
<div title="Page 118">
In implementing the recommendation, Murray says funds with existing borrowings should be permitted to maintain those borrowings.
Funds disposing of assets purchased via direct borrowing would be required to extinguish the associated debt at the same time.
<div title="Page 117">
<div>
<div>
Over the past five years, the amount of funds borrowed using LRBAs increased almost 18 times, from $497 million in June 2009 to $8.7 billion in June 2014.
The inquiry opted against imposing a maximum cap on fund assets that can be invested in a single asset other than cash or bonds, saying it would impose additional regulation, complexity and compliance costs on the superannuation system. 
</div>
</div>
</div>
David Murray, chairman of the Financial System Inquiry, said the panel recommended a removal of the exception to the general prohibition on direct borrowing for limited recourse borrowing arrangements by superannuation funds.
</div>
One reason for the recommendation was that it would fulfil the objective for superannuation to be a savings vehicle for retirement income, rather than a broader wealth management vehicle. 
“Restoring the original prohibition on direct borrowing by superannuation funds would preserve the strengths and benefits the superannuation system has delivered to individuals, the financial system and the economy and limit the risks to tax payers,” the report also said.
After borrowings within super funds have risen to $8.7 billion, the FSI noting the level of borrowing was relatively low, but could pose a risk to the financial system.
“Further growth in superannuation funds’ direct borrowing would, over time, increase risk in the financial system,” the report stated.
“Borrowing, even with LRBAs, magnifies the gains and losses from fluctuations in the prices of assets held in funds and increases the probability of large losses within a fund.”
The FSI recommended the government should remove section 67A of the SIS Act on a "prospective basis".
The report noted that lenders can charge higher interest rates given the higher risks associated with limited recourse lending, and often required personal guarantees from SMSF trustees.
There were 44 recommendations to the government from the inquiry, the first wide scale review of the financial system in 17 years. Treasurer Joe Hockey will respond next year.
Previous financial system inquiries, including the Campbell Report in 1981 and Wallis Report in 1997, were the catalysts for major economic reforms in Australia. The Campbell Report led to the floating of the Australian dollar and the deregulation of the financial sector.
The Wallis Inquiry led to streamlined financial services regulation, the creation of the Australian Prudential Regulation Authority (APRA), and the current form of the Australian Securities and Investments Commission (ASIC).
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SMSFs to rush further into property after borrowing ban looms following Murray Financial System Inquiry

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The unfulfilled dream of countless small business owners is to run an active business through their self-managed super fund (SMSF).
The typical driver is to pay tax at half the corporate rate or no tax once the super fund is in the pension phase.
During his 40-plus years advising SMSFs, Martin Murden has had at least one request a year from fund trustees for advice about whether they can operate a business, such as a corner shop, through a self-managed fund.
But Murden, a director of SMSF consulting and auditing with the Partners Wealth Group, says none of these trustees to his knowledge has gone ahead and operated a business through their SMSF after listening to his warnings.
While Murden says that the law does not, in theory, prohibit SMSFs from running active businesses, various superannuation and trust laws make it highly impractical.
Here are five questions that fund trustees should ask themselves before trying to setup an active business in their SMSFs:
<ol>
<li>
Will your fund still comply with the sole-purpose test if running a business? This is the biggest stumbling block to an SMSF operating an active business. Under the sole purpose test, a super fund must be maintained for the purpose of providing retirement or death benefits to members. Indeed, Stuart Jones, author of the Australian Superannuation Handbook 2014-15, published by Thomson Reuters, writes that the Tax Office, as self-managed super regulator, “generally considers” an SMSF is breaching the sole-purpose test if conducting a business. 
</li>
<li>
Does your SMSF trust deed allow the fund to operate an active business? An SMSF may not be permitted by trust law to carry out a business unless expressly empowered under its trust deed, Jones warns. 
</li>
<li>
Can your SMSF business operate without an overdraft? Murden says the strict limits on borrowing by an SMSF will prevent the fund having an overdraft. SMSF are prohibited from borrowing except in limited circumstances. An SMSF can borrow for up to 90 days to pay a member benefit or to cover the settlement of securities such as shares and bonds. (Such loans must not exceed 10% of a fund’s assets.) 
</li>
<li>
Will your SMSF business have to pay cash for its trading stock? An SMSF is prohibited from lending to members or relatives of members, Murden stresses. 
</li>
<li>
Will your SMSF business employ members or relatives of members? While superannuation law does not prohibit a fund from employing members and relatives, their employment may encourage the Tax Office, as SMSF regulator, to take a closer look.
</li>
</ol>
Jones says the regulator may look at the “stated rationale” for employing family members and at the level of income.
In regard to salaries paid to family members, Murden points to provisions in superannuation law requiring funds to conduct their affairs on an arm’s length, commercial basis.
An inflated salary paid to a family member would also be an issue under the sole-purpose test.
As Murden says, it is common for SME owners to own their business premises through their SMSFs. Business real estate is among the few types of assets that SMSFs are permitted to acquire from their members and other related parties.
And business real estate is one of the few types of assets that funds can lease to related parties – including fund members and their businesses – without a restriction on its value.
However, running an active business through an SMSF is much harder to achieve without breaching superannuation and trust laws.
This article first appeared on <a href="https://www.smartcompany.com.au/" target="_blank">SmartCompany</a>.
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Five questions you should ask before trying to run a business through an SMSF

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GUEST OBSERVATION
Self-managed super funds are, and have been, flavour of the month for some time now.
The opportunities SMSFs provide for people to control their retirement incomes can be attractive. Of course, running such a fund has its own costs and the person in control (the trustee) has the onus to ensure the fund performs at an acceptable level.
But there are many rules and regulations that govern SMSFs and they can be a trap for the unwary. A recent Federal Court decision shows what can go wrong.
In the case, the Federal Court imposed civil penalties of $13,000 (plus $5000 in costs) for each of three directors of the corporate trustee of an SMSF in relation to breaches of the superannuation laws involving short-term loans to a related business.
The first respondent, Early Sunshine, was the corporate trustee of the SMSF known as the George MacDonald &amp; Sons Superannuation Scheme No 2. The other three respondents are the directors of Early Sunshine Pty Ltd.
Over a four-year period from 2007 to 2011, the three directors caused the SMSF to make 71 loans to the freight trucking business George MacDonald &amp; Sons of which the respondents were employees, directors and shareholders. The freight trucking business lost its principal customer in 2001 and began to experience significant financial stress in 2007-08 amid the global financial crisis.
Typically, the loans were outstanding for only a few weeks at a time and used to cover the working capital of the business (primarily to pay salaries and wages). A total of $553,568 in loans was made by the SMSF to George MacDonald &amp; Sons.
Each of the 71 separate loans was less than $20,000 (with an average of $7,768). The loans were unsecured and did not bear interest but each loan was ultimately repaid in full. The SMSF also made a $2000 loan to a company controlled by one of the respondents. This loan was unsecured but was repaid on demand with 8.5% interest.
In August 2009, the SMSF's auditor lodged the first of several auditor contravention reports for the relevant years noting breaches of the superannuation law in relation to the loans. The reports recorded breaches of the sole purpose test, the in-house asset rules and the arm's length dealing requirement.
In October 2011, the Tax Office issued the SMSF with a notice of non-compliance. As a result, the SMSF lost its concessional tax treatment and was issued with an assessment of $63,254 for the 2008 year (which it paid in January 2012). In August 2011, the trustee resolved to wind up the SMSF and roll over the members' benefits to an industry fund.
The applicant, as Deputy Commissioner of Taxation (Superannuation), applied to the Federal Court to impose civil penalties. A statement of agreed facts indicated there was no dispute among the parties as to any aspect of the case.
While a maximum civil penalty of $220,000 could apply for each contravention under the relevant superannuation laws, the court imposed a penalty of $13,000 for each director of the trustee of the SMSF, together with $5000 (each) for the Commissioner's costs. The court agreed that the contraventions were "serious" from a regulatory perspective as they involved deliberate, repetitive breaches over a four-year period and put at risk the assets of the fund.
However, the court said it must be remembered that, in the end, the fund did not suffer any loss of capital. The foregone interest income was not significant. In addition, all of the respondents admitted all of the contraventions which were ultimately pressed by the Tax Commissioner and co-operated fully with the Commissioner both at the investigation stage and in the proceeding. Also, the fund has now been wound up and the members’ balances have now been transferred to a public fund which the court noted should ensure they are satisfactorily protected.
The court was also cognizant of the fact that each of the individual respondents had taken full responsibility for their involvement in the contraventions and had expressed remorse and contrition for their conduct.
In the case of multiple contraventions, the court said the pecuniary penalty should reflect the totality of the conduct. Although Early Sunshine was the primary contravener of the superannuation law, the court accepted there was no point imposing a civil penalty on the corporate trustee (which was now dormant). Instead, the court held that the three directors were each liable for a pecuniary penalty of $13,000.
The court initially considered that the penalties proposed by the parties were insufficient. However, after taking into account all of the circumstances, the court ultimately agreed that a penalty of $13,000 (plus $5,000 in costs) for each director was appropriate.
The court reached this conclusion after having regard to the relevant factors and applying the general principles for imposing civil penalties under the superannuation law, as set out in the established cases.
The case is a salutary reminder of the penalties that can apply when SMSFs contravene the laws that govern them. The penalties in this case were significantly lower than the statutory maximum and SMSF trustees can take a lesson from the reasons why the court considered that appropriate.
Terry Hayes is the editor-in-chief of tax news reporting at <a href="https://www.thomsonreuters.com.au/">Thomson Reuters</a>, a leading Australian provider of tax, accounting and legal information solutions.
This article first appeared on <a href="https://www.smartcompany.com.au/" target="_blank">SmartCompany</a>.
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Making loans from SMSFs – court imposes $40,000 in penalties: Terry Hayes

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SPONSORED POST
People who buy property through a self-managed superannuation fund need to consider what to do with the asset after they have retired and how to pass it on after they have passed away. 
SMSFs allow for assets to be handed from one generation to another as an inheritance, but there are regulatory constraints and taxes to take into account. 
Reserves after retirement
At retirement, an SMSF member may start a pension from their fund, in which case the balance will reduce over time. The fund may have sufficient cash flow to support pension payments but as the person ages the proportion of the fund’s balance that must be paid out as a pension increases so it becomes more likely that the property will have to be sold to support the pension. 
If the family has other sources of income, and doesn’t need to draw a pension from the SMSF, it is possible to leave the assets untouched by keeping the fund indefinitely in what’s known as the accumulation phase. 
SMSFs in accumulation phase do not issue a pension but the income and capital gains made within the fund are taxed at 15%, while they would be tax free if the SMSF was paying a pension. For some retirees, the 15% tax is still less than they would pay if they held the property in their own name so there can be advantages to holding it in the SMSF to pass on as an inheritance.
Inheritance
When an SMSF member dies, the assets held in their fund do not automatically form part of their estate. The estate can access the assets and distribute them according to the person’s will but conditions in the SMSF’s trust deed and superannuation laws must also be satisfied.
There have been cases in which surviving SMSF trustees have been able to go against the wishes of the deceased fund member. SMSF members should seek legal advice on how to avoid that risk.
SMSF members may provide their fund with a binding death benefit nomination, which gives direct instructions on who should receive the deceased member’s share of the fund’s assets but there are restrictions on who can be named as the recipient. Whether such a nomination is appropriate will depend on the fund member’s personal circumstances. 
Relationships matter
The way in which beneficiaries receive their inheritance depends on their relationship with the deceased SMSF member.
People who are in what’s classified under superannuation law as a dependent relationship with the fund member can receive their inheritance payment as a lump sum or a pension from the fund. People who are not in a dependent relationship must be paid a lump sum. 
Dependants can include a spouse, de facto or ex-spouse, as well as children who rely on the person for necessary financial support or are aged under 18 years. Other people may qualify as being dependants of the deceased but adult children typically do not.
The amount of tax each beneficiary pays on the inheritance also depends, in part, on whether or not they are a dependant of the deceased. Other factors also influence the amount of tax due, including the tax structure of the fund itself.  
In some cases, a property held through an SMSF can be passed from a deceased fund member to their beneficiaries without leaving the fund. The way the SMSF is structured affects how easy and how costly it is to do this. 
SMSFs can have up to four members. They can be established with individual trustees, where each member is also a trustee, or with a corporate trustee where each member is also a director of the trustee company. 
If the fund was established with individual trustees, the titles on the SMSF’s assets and the individual trustees must be updated when a fund member dies. State governments and any administration systems the SMSF uses may charge fees for these changes.
Funds with a corporate trustee can change their members by updating the corporate trustee’s directors. The fund must notify the Australian Securities and Investments Commission and the Australian Taxation Office of these changes but there is no change to the title of the SMSF’s assets.
Are other vehicles better?
Holding property through an SMSF is just one way to pass the asset on through the generations. Other options include owning the property directly, or through another tax structure such as a company or family trust. Each has its advantages and drawbacks. 
SMSFs can be tax effective in some situations but there may be simpler and less costly alternatives. Each family is different and what’s best will vary depending on individual circumstances. Seek professional advice. 
 
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Set up future generations through estate planning: Forrester Cohen

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Guest Observer
 
One of the most disturbing aspects of the $500,000 lifetime non-concessional contribution (NCC) cap announcement in the 3 May 2016 Federal Budget is that the new lifetime NCC cap catches prior NCC’s made since 1 July 2007.
We consider the implementation of this announcement would effectively give rise to retrospective legislation for almost 9 years (ie, 1 July 2007 to 7.30pm (AEST) on 3 May 2016 is around 3,230 days or just over 8.8 years). Thus, people who have previously relied on the law during this 9 year period in making contributions to their super funds may now have no or little lifetime NCC cap left remaining.
We acknowledge that if your NCCs made during the prior 9 year period did not exceed $500,000, then there may be some remaining cap. For example, if someone had only made $10,000 of NCCs, they will have a $490,000 remaining cap.
However, if someone makes an NCC after the Budget announcement at 7.30pm on 3 May 2016, including any NCCs made in the prior 9 year period that exceeds $500,000, then their super fund must either reject any excess amount or the excess will be taxed at 49% if the member leaves the excess in their super account if possible. (There is doubt as to whether the announcement will allow the excess to remain in the superannuation fund given the little detail on this announced change).
If we trace back recent history, recent limits on making NCCs can be summarised as follows:
•        NCCs prior to 7.30 pm 9 May 2006 — unlimited;
•        NCCs from 9 May 2006 to 30 June 2007 — $1 million;
•        NCC from 1 July 2007 to 7.30 pm 3 May 2016 — $180,000 (indexed figure) per financial year or $540,000 averaged over three consecutive financial years where the member was under age 65 and was eligible to apply the bring forward rule in s 295-85(3) of the Income Tax Assessment Act 1997 (Cth) (‘ITAA 1997’); and
·                NCCs from 1 July 2007 to 7.30pm 3 May 2016 — $500,000 as reduced by any NCCs made from 1 July 2007.
As you can see, given the far more generous contribution caps applying before 4 May 2016, the $500,000 lifetime cap is a retrospective and an unfair change of law made by way of Budget announcement especially as it may not survive the political and legal process that lies ahead.
Before anyone who has made NCCs in the past 9 years makes any further contributions to superannuation, they would be well advised to request ATO confirmation of their NCCs to check whether they will exceed the new cap. The Budget Paper confirms that:
To ensure maximum effectiveness the lifetime cap will take into account all non-concessional contributions made on or after 1 July 2007, from which time the Australian Taxation Office has reliable contributions records …
<h2>Other points on retrospective law</h2>
The Treasurer, Mr Scott Morrison, may argue that the new cap is not retrospective as it does not require NCCs that already exceed $500,000 on 3 May 2016 to be rejected and therefore prior contributions are not adversely impacted.
However, this is an argument equivalent to an argument about ‘splitting hairs’. The prior law permitted NCCs of $180,000 per financial year or $540,000 over three consecutive financial years (if the bring forward rule applied). Moreover, let’s assume that someone had contributed $540,000 of NCCs during the prior 9 years and now wishes to contribute more, they now have a nil lifetime cap. When did the current Government warn the public that the ‘rug may be pulled from underneath them?’
Indeed, the Government has repeatedly promised (particularly leading up to the 2013 election) that there would be no adverse changes in its next term of office without appropriate consultation. In particular, in January 2013, the Coalition released its pre-election policy document Real Solutions, which pledged to "deliver greater stability and certainty" around superannuation laws. "We won't move the goalposts... We will ensure that no more negative unexpected changes occur to the superannuation system," the document said.
However, following Mr Malcolm Turnbull’s appointment as Prime Minister in September 2015, he confirmed that under a Turnbull Government prior policies could be changed. “We've got to be agile all the time" Mr Turnbull told AM's Michael Brissenden on 21 September 2015.
This is despite the repeated requests for stability in respect of our superannuation law due to the ‘long-term’ nature of being locked into a regulatory environment where someone cannot withdraw their money if there is an adverse change in law.
The usual process of retrospective legislation
The Australian Law Reform Commission (‘ALRC’) report on retrospective law recognises that retrospective tax laws may be introduced, typically for tax avoidance or integrity type measures. Moreover, when retrospective tax laws are introduced, they usually only apply for a relatively short-time frame.
Also, these type of retroactive tax changes to address tax avoidance and integrity announcements should be contrasted with superannuation measures where people are ‘locked into’ a regulatory system without being able to easily withdraw their savings. Indeed, most people cannot access their superannuation until they attain age 65 (subject to strict exceptions under strict preservation rules).
The Senate has processes intended to minimise periods of retrospectivity. Standing Order 44 provides that where tax legislation has been announced by press release more than six months before the introduction of the relevant legislation into Parliament (or publication of a draft bill), that legislation will be amended to provide for a commencement date after the date of introduction (or publication).
Further, Ms Michelle Gordon, a High Court judge, commented that retrospective tax law is not only hurting taxpayers but may be making foreign investment less attractive. This comment was made during her presentation to tax experts at the University of Melbourne law school in late August 2012 when she was then a Federal Court judge.
Given that all Federal legislative processes are now in ‘care taker’ mode until after the election on 2 July 2016, there is going to be considerable uncertainty as to whether this lifetime cap announcement will become law and if it does, in what form. The Labor Government has ruled out any retrospectivity to this reform should it win the election.
More detail on the $500,000 lifetime cap
This article has put forward numerous reasons why retrospective law stretching back nearly 9 years should not be tolerated by the Australian community.
Assuming, despite these reasons, that the Government persists to introduce a $500,000 lifetime NCC cap, we note that such a cap is surprisingly low given the summary provided above where some 10 years ago, the amount of personal NCCs (then known as ‘undeducted contributions’) were unlimited in amount.
The NCC cap was then, following a brief transitional period, reduced to $150,000 (as indexed on 1 July 2014 to $180,000) per FY subject to then a $450,000 (as indexed on 1 July 2014 to $540,000) three year bring forward rule until 3 May 2016. This 10 year slide has been a major restriction on what people could previously have contributed to their super savings.
Certainly, there were numerous submissions to Government by different industry bodies and members of the community to restrict the tax concessions in relation to superannuation for those people who had attained a certain monetary threshold within the super system. However, the Government’s response overlooks the fact that these people had contributed on the basis of the law as then applying (which was unlimited prior to the budget announcement in May 2006) and as a result, the Government should not overly restrict the ability for everyone else to accumulate a reasonable amount in superannuation to provide a satisfactory lifestyle in their retirement.
Assuming the Government sees the light of day and drops the retrospective nature of the $500,000 lifetime cap, we also consider the Government has overreacted with a $500,000 lifetime cap. Such a cap does not allow any flexibility for the numerous investment timing and life cycle risks that may arise which we examine in further detail below.
What if a member suffers an investment loss?
Many who have previously contributed more than $500,000 have lost considerable value — many losing far more than 50% on their investments — as a result of the global financial crisis (‘GFC’).
A $500,000 lifetime cap provides no scope or flexibility for these people who may suffer another GFC or another market correction (as in the October 1987 share market crash), where a substantial value of their lifetime savings may be lost in volatile trading over a short-time frame.
Indeed, there are many who were hoping to retire but got GFC’d and are still in the workforce at age 65 and 70, who expected to retire much earlier.
Moreover there have been many thousands of people who have suffered from one of the many fraudulent investment schemes and who will have no chance to accumulate any further super savings as they will generally have burnt up their lifetime NCC cap but unfortunately, and through no fault of their own, have zero or next to no dollars remaining in superannuation.
SMSFs that have entered into contracts pre-budget
SMSFs that have entered into contracts and transactions to buy investments, incurring limited recourse borrowing arrangements to gear up an investment property and other investment contacts that span 7.30pm 3 May 2016, may now be in default of such contracts and stand to lose deposits and suffer considerable loss and damages as a result of the threatened retrospective impact of the new lifetime NCC cap.
So with a mere Budget announcement without any forewarning or transitioning rule, many peoples’ superannuation planning may now be in ruins by the announced change in law.
In contrast, when changes were made to restrict SMSFs investing related unit trusts on 11 August 1999, a special 10 year transitional rule was introduced to allow an SMSF that invested in a related unit trust with borrowings to invest in further units up to 30 June 2009 to enable the unit trust to reduce its debt. Without the introduction of s 71E of the Superannuation Industry (Supervision) Act 1993 (Cth) (‘SISA’), SMSFs would have similarly been caught by an announced change but were granted a 10 year transitioning period.
The timing of the $500,000 lifetime NCC cap is particularly adverse for many SMSFs with related party LRBAs that need considerable cash flow before 30 June 2016 to place their LRBAs on arm’s length terms to comply with recent ATO guidelines. For these SMSFs to comply with the ATO’s recently released Practice Compliance Guideline PCG 2016/5, relevant SMSFs need to make the entire outstanding 2016 FY payments of principal and interest on non-arm’s length loans before 30 June 2016.
Impact on small business
The new cap is particularly unfortunate for business owners who generally are not in a financial position to contribute super throughout their lives and fall outside the CGT small business concessions in div 152 of the ITAA 1997. Many small business owners treat their business as a ‘de facto’ superannuation savings vehicle as they generally do not have enough cash to contribute to superannuation as they are building their business.
Small business owners will also have limited capacity to utilise their SMSFs from now on to acquire their business premises. The proposed lifetime NCC cap will adversely affect many small businesses, farmers and others that wish to invest in real estate, with many properties now in capital cities (and farm land on the city fringes) valued far in excess of $1 million.
Transfers from overseas to Australian superannuation funds
Those seeking to make transfers funds from foreign superannuation funds will also now be limited on what they can transfer to Australian superannuation funds.
Without the ability to transfer savings from foreign superannuation funds, many will leave their moneys in these overseas funds as the upfront tax cost on repatriation may be unviable compared to drawing a steady pension.
Australia should encourage foreign savings to be invested here, but the new lifetime cap imposes severe limits on these savings being available to produce any benefit to the Australian economy.
Conclusions
If there is to be announced legislation by budget or press release, then it should prospective. Being prospective, if the limit is $500,000 then most people will hopefully adjust and learn to live with this new limit. However, to then seek to impose a retrospective 9 year inclusion period on prior contributions when people have gone about their affairs in an ordinary and lawful manner is unreasonable and should not be tolerated by our community. Indeed, the current Government has misrepresented that there will be no adverse super changes. A change of Prime Minister in September 2015 is no excuse for such poor law making.
 
This was written by DBA Lawyers Director Daniel Butler and Special Counsel Rebecca James, who can be contacted below
Daniel Butler, Director (<a href="mailto:dbutler@dbalawyers.com.au" target="_blank">dbutler@dbalawyers.com.au</a>) 
Rebecca James, Special Counsel (<a href="mailto:rjames@dbalawyers.com.au" target="_blank">rjames@dbalawyers.com.au</a>)
 
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