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Superannuation news

Superannuation returns for 2007-08

Superannuation research firm SuperRatings report that returns on balanced superannuation funds are expected to be -6.4% for the 2007-08 financial year. Growth and High Growth options have fared worse, with returns of -9.7% and -11.8% respectively. Returns on the more conservative capital stable and cash investment options are expected to be 0.6% and 5.4% respectively.

SuperRatings note that these are based on preliminary estimates for June, and that final results will be available in late July.

When estimating the value of superannuation in our economic loss reports, one important assumption is the future crediting rate to adopt. We have been assuming a future rate of return of 9% per annum. This was based on an average return of 12.7% pa over the previous 30 years, but with weight given to the average 8.5% pa return over the previous 10 years. As we usually do at the end of each financial year, we will review this assumption.

Superannuation guarantee obligations

From 1/7/08 employers must use an employee's ordinary time earnings as the earnings base for superannuation guarantee contributions. This means that employers must now pay the 9% superannuation guarantee contributions on payment types such as commissions and performance bonuses. It was previously possible for such payment types to be excluded from the earnings base for superannuation purposes.

Further information, and a complete list of payment types which are deemed to be ordinary time earnings, is available at the Australian Tax Office.

Self-Managed Superannuation Funds, ATO rulings

In determination SMSFD 2008/2, the Australian Tax Office has ruled that in-house assets held by a SMSF must be valued at current market value, not historical value.

Examples of in-house assets given by the ATO are "shares in a related company or units in a related unit trust". The value of in-house assets must not be greater than 5% of the value of total assets in the fund. This determination means that when applying this asset acquisition rule, the current market value of the in-house assets must be used.

Further information is available at the Australian Tax Office.

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