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Keeping your SMSF compliant while overseas

Posted on September 27, 2017 by admin

Travelling overseas for an extended period of time is an exciting adventure. What isn’t so exciting is the prospect of breaking compliance laws in relation to your SMSF while enjoying your trip.

There are specific conditions that must be met to deem the self-managed super fund ATO compliant. They are as follows:

Fund recognised as an Australian fund
The SMSF will be recognised as an Australian super fund provided that the setup of and initial contributions are likely to have been made and accepted by the trustee(s) in Australia or at least one of its assets is located in Australia.

Management and control of the fund carried out in Australia
The central management and control of the fund must ordinarily be in Australia. This means the SMSF’s strategic decisions are regularly made, and high-level duties and activities are performed in Australia. Some examples include formulating the investment strategy, reviewing the performance of the fund’s investments and determining how assets are to be used for member benefits.

Generally, fund’s will meet this condition even if its central management and control is temporarily outside Australia for up to two years. If central management and control of the fund is permanently outside Australia for any period, it will not meet this requirement.

Active member test
An “active member” is a contributor to the fund or contributions to the fund have been made on their behalf.

To satisfy the “active member test” trustees should ensure the fund has no active members, or it has active members who are Australian residents and who hold at least 50 per cent of the total market value of the fund’s assets attributable super interests, or the sum of the amounts that would be payable to active members if they decided to leave the fund.

If a member of the fund becomes a non-resident but still wishes to make or receive contributions, they should do this outside of their SMSF, i.e., through a retail or industry super fund. When they return as an Australian resident, they can then rollover the contributions to their SMSF.

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Avoiding mortgage default

Posted on August 26, 2020 by admin

As individuals struggle with cash flow through the coronavirus, the Australian Bankers Association records that repayments on almost 500,000 mortgages have been deferred for six months. While repayments can be delayed, they cannot be avoided altogether.

Lenders can send you a default notice the day your repayment is overdue. However, they could also wait until your repayment is overdue by 90 or more days. When you receive a default notice, you are given 30 days to repay the amounts you have missed in addition to the regular repayment on your loan. Individuals who are struggling with their home loan repayments can avoid mortgage default by considering the following.

Contact your lender
Lenders are generally willing to work with you through financial hardship. Don’t be afraid to contact your lender to discuss your situation and find out what options are available for you. Lenders are often willing to negotiate short-term variations to repayment schedules that both parties can agree to. However, make sure that you do not agree to unrealistic repayment conditions that cannot be met.

Many Australian banks are offering a six-month deferral on mortgage repayments (including interest) for customers who are experiencing financial hardship as a result of COVID-19. If this is you, contact your bank to see if this is an option.

Apply for a hardship variation
Mortgage holders may be able to change the terms of their loan or temporarily pause or reduce their repayments under a hardship variation. A hardship variation can still be requested after you receive a mortgage default. To apply for one, contact your lender’s “hardship officer” and tell them that you wish to change your loan repayments due to financial hardship. This will usually require you to explain why you are struggling to make payments and to estimate how long your financial problems will continue to determine how much you can afford to repay.

After submitting a hardship variation request, your lender must contact you within 21 days with the outcome of your request. They may ask you for more details regarding your request; in this case, they must contact you again within 21 days from when you provide the additional information.

Consider selling your home
Selling your home is a tough decision, but in some cases this may be the better option if your circumstances are unlikely to improve. If you get to the point where your lender takes possession of your home and sells it, it’s likely that you won’t make as much as if you sold it yourself. When you sell your house on your own terms, chances are you will get a better price and avoid having to pay the legal fees passed on by your lender. Inform your lender if you decide to sell your home; they may ask for proof, such as a copy of the contract with your real estate agent or property advertisements.

Renting out your home until you can afford to make repayments again may also be an option if you are able to live somewhere else during this period.

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