In the latest SMSF Adviser Show podcast, Shorte said he is seeing parents using the opportunity of future planning in response to Div 296 to get their adult children involved early in investment decisions and to learn how an SMSF works.<\/p>\n
\u201cParents are getting the kids involved in the investments, getting them to understand what happens, because a lot these investors, they\u2019re locked into what they trust and what they want to invest in, and don\u2019t want to have to come out of an SMF later,\u201d Shorte said.<\/p>\n
\u201cWe\u2019re trying to get the kids in, show them how it works, show them the value of the way their parents have invested longer term, and hopefully they\u2019ll stick with that when they take control of the fund.<\/p>\n
\u201cBut in a lot of cases, it\u2019s also allowing some small business properties to keep that business property in the fund even after the parents pass away because they\u2019ve transferred a lot of the value to the kids over the next 15 years or so.\u201d<\/p>\n
Shorte said although many SMSF trustees left planning for Div 296 late, SONAS Wealth is now getting many new inquiries and although many may have missed some of the strategies that could have been implemented in anticipation of the legislation starting there are still several which can be put in place now.<\/p>\n
\u201cWhat I was really surprised about was that up until now, I\u2019ve had a lot of parents and grandparents that were very reluctant to pass money to the younger generations because they thought they would just blow it. So we started coming up with strategies, saying, \u2018Look, what about if you use a loan agreement to your children or grandchildren? The money has to either go to paying off their mortgage or it has to go back into super for them,\u201d Shorte said.<\/p>\n
\u201cThere\u2019s a big cohort now of the original SMSF trustees, and for them, they don\u2019t want to give up the SMSF, so we\u2019re talking to them about rather than waiting till it becomes necessary for your children to come in or for the SMFS to be shut down, bring them in now. Bring them in 10 years earlier. Show them how you invest. Show them how you want your fund to be structured.<\/p>\n
\u201cIn that way, it\u2019s not such a big surprise as a power of attorney where they have to step in and become a director of the fund because of mental capacity later on. It\u2019s good to see people who\u2019ve actually changed their minds and are starting to look at it now. Instead of it just being their money, they\u2019re starting to think of it as it\u2019s family money and thinking about what\u2019s the best way they can deal with it.\u201d<\/p>\n
\u00a0He added that for funds above the $10 million threshold it\u2019s been a \u201cno-brainer\u201d to move money out to the next generation.<\/p>\n
\u201cA lot of them still have accumulation accounts so they\u2019re already paying 15 per cent on that. Then they\u2019re paying the 15 per cent on the earnings attributable over the $3 million, and then the further 10 per cent above $10 million,\u201d he said.<\/p>\n
\u201cFor them, it\u2019s a no-brainer to just get out of the system and get it into the next generation, and with those, they are people who\u2019ve worked really hard to build their wealth, so they don\u2019t give it away easily. They\u2019re the ones who, in a lot of cases, it\u2019s going to super for their children.<\/p>\n
\u201cTheir children tend to be 55-60 years old, so it makes sense to just lock it into super so their retirements are being taken care of, and they can concentrate on their own adult children that may still be at home or paying off their mortgage themselves. It\u2019s taking a lot of pressure off and the few we\u2019ve done it for, it\u2019s really affected the whole family, and in a couple of cases it\u2019s changed the dynamic of the relationship.\u201d<\/p>\n
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