Thanks Lubos. No using a 15% Super tax code eliminates one path.
I’m not sure I have got there yet though.
Actually I would prefer to track the member contributions in SMSF units. I’m not sure how well this can be implemented in Manager. The idea is I use Managers multi-currency support to track member contributions and unit prices.
- Use a second currency for Super fund units (either an otherwise unused currency or a custom currency).
- Set the currency conversion rate (unit price) = (Business nett present value)/(units issued). Updated whenever a revaluation is done.
- Hold member contributions in these units (pseudo currency) not Australian dollars
To illustrate what I’m trying to achieve a example probably helps.
- Member 1 contributes $11,765 resulting in SMSF tax liability $1,765 and leaving $10,000 for the SMSF to invest.
- Member 1 roll over $100,000 result in no additional SMSF tax liability and leaving all of the $100,000 for the SMSF to invest
- Member 2 contributes $23,529 resulting in a SMSF tax liability of $3,529 and leaving $20,000 for the SMSF to invest.
- Member 2 rolls over $90,000 resulting in no additional tax liability for the SMSF and leaving all of the $100,000 for the SMSF to invest.
At this time the SMSF has a:
- tax liability of $5,294 ($1,765 + $3,529)
- net present value of $220,000 ($10,000 + $100,000 + $20,000 + $90,000)
- Member 1 nett contribution of $110,000 ($10,000 + $100,000)
- Member 2 nett contribution of $110,000 ($20,000 + $90,000)
SMSF then buys an investment, incurs costs and makes a profit on the investments. These can be treated as usual in Manager. To keep things simple the SMSF could:
- Buy a property for $200,000 (entered as an asset in Manager).
- Investment incurs costs of $5,000. Property is leased for $15,000 pa nett.
- Resulting in an investment nett profit of $10,000 ($15,000 - $5,000) and additional tax liability of $1,500
At the end of the year the SMSF needs to show
- $11,765 Contribution Member 1
- $23,529 Contribution Member 2
- $15,000 Investments
- $50,294 Total
So at the end of the year
Gross profit $45,294 ($50,294 - $5,000) Reported Australian tax office
SMSF tax $6794 (15% of $45,294 or $1,765 + $3,529 + $1,500)
Nett profit $38,500
Nett profit $8,500 excluding member contributions
Members nett contribution remains unchanged
- 110,000 (units) Member 1
- 110,000 (units) Member 2
However SMSF nett present value is now $228,500 ($8,500 + $220,000)
So conversion rate SMSF to $A is 1.0386 ($228,500 / $220,000)
In 5 years time assuming the SMSF lease continues to nett $15,000 pa with no other investments, asset appreciation or costs then:
- A further after tax profit of $63,750 (5 x $15,000 - 15% tax) would be added Resulting in a nett present value $292,250 (63,750 + $228,500).
- Member nett contributions unchanged so unit conversion price is 1.3284 ($292,250 / $220,000)
In summary documenting this in Manager requires
- Members contributions to result in a SMSF taxable income. Member contribution recorded reduced by SMSF tax liability. SMSF nett value increase by Member contribution post tax. Perhaps this means it needs to be posted to an income account ie Profit & loss account.
- Members roll over result in no SMSF tax liability. Full value of roll over added to member investment. SMSF nett value increased by full value of roll over. Perhaps this means it needs to be posted to the balance sheet side.
- Ratio of SMSF_nett_present_value / Total_member_after_tax_contributions used to convert between prior member contributions and any new contributions or withdrawals. Perhaps this could be achieved by recording Members contributions in capital accounts in SMSF units not Australian dollars.