SMSFs cautioned on temptation with super saver scheme

“Now if you have clients with SMSFs, it’s going to be tempting for them to put their kids in their fund for this purpose,” said Mr Burgess.

“Now we know it’s not always a good idea to put kids in the fund. So if you have SMSF clients looking to make use of this measure, it’s probably worth having a discussion with them about the pros and cons of having their children in their SMSF and some of the unintended estate planning outcomes that can result if you’ve got kids in the fund.”

One of the other advice considerations to note, Mr Burgess said, is that the associated earnings are added on top of contributions and that for the current financial year, the ATO is going to calculate the associated earnings right back from 1 July this year.

“Any contributions your clients make this financial year will count towards what they can take out next year. So if they do happen to make any voluntary contributions this year for this purpose, well the associated earnings will be calculated as if that contribution was made on 1 July 2017, even though they may not have made that contribution till June 2018,” Mr Burgess explained.

“So if you’ve got clients interested in doing this, it might actually be a good idea for them to make a voluntary contribution in June next year, because if they do that the associated earnings will be quite high, as if they made it on 1 July 2017.”

He also explained that once the money has been released, the member has to use it to purchase a first home and they have 12 months within which to do that.

“If they don’t they just have to put the money back, if they don’t put the money back, it’s a 20 per cent tax penalty that applies at that time,” he said.