Dealing With IOOF

10 features that make a platform tax effective

By The IOOF Product Development Team

As the old joke goes, death and taxes are inevitable, but at least death doesn’t get worse every year.

“…or more complicated,” you could add.

As you must know, tax is notoriously difficult for clients to understand, but that’s also why it’s one of the most important things for Financial Advisers to know about. Many of your clients value your tax advice above all else.

One powerful way you can assist your clients with their tax affairs is to make sure they are using a tax effective platform for their investments and superannuation - so what exactly is a tax effective platform?

Essentially, a platform that can claim a high number of the 10 features on the list below should be classified as tax effective.

IOOF Pursuit scores a perfect 10, so let’s take look at what it’s got to offer:

1) Imputation credits flow through to individual members

Some superannuation plans apply imputation credits at fund level only and spread the benefit across all members equally regardless of whether or not every member is invested in the particular investment that delivered the benefit.

Pursuit calculates the imputation credit entitlement of each individual member and passes those exact benefits onto the members account.

2) Administration fees are deductible to member accounts

A member’s assessable income within Pursuit may be offset by the administration fees payable by that particular member. This will result in the member’s super account taxable income being reduced.

3) Adviser fees are deductible to members’ accumulation accounts

Ongoing adviser fees paid from Pursuit Select will be deductible to the members account and will be offset against any assessable income within the fund.

4) Contribution tax paid annually and not on receipt of contribution

Many superannuation funds deduct the 15% contribution tax at the time a contribution is made, whereas Pursuit deducts the 15% contributions tax annually. As a result, Pursuit members may benefit from having their total contribution working for them until the contribution tax is due.

5) Contribution Splitting

Pursuit allows contributions to be split by asset assignment so the originator’s capital gains tax cost base continues for the recipient.

6) In specie transfers

Pursuit can accept ‘in specie’ contributions of investors’ existing holdings in any of the investment funds on the Pursuit investment menu. This alleviates the need to sell and repurchase the underlying investments.

7) Capital Gains Tax-free portability between products

A member may transfer their IOOF Investment Portfolio Service (IPS) to Pursuit and their portfolio remains fully invested at all times. In addition, they’ll pay no Capital Gains Tax (CGT), Stamp Duty or buy/sell spreads.

This is a great feature if you are considering implementing a recontribution strategy, or a strategy to carry losses forward and reduce future CGT.

8) Capital Gains Tax-free transfer to pension

A member rolling from super accumulation into a super pension can transfer all underlying investments without selling and buying them again. This means that on retirement (or when implementing a transition to retirement strategy), your clients’ super does not pay any CGT (or other costs), they do not suffer buy/sell spreads and they are never out of the market.

9) UK pension transfers

Pursuit is recognised by the UK’s HM Revenue & Customs as a 'Qualifying Regulated Overseas Pension Scheme' (QROPS). Transferring a UK pension to an Australian superannuation fund without QROPS status may result in significant penalties.

10) Automatic anti-detriment payments

An anti-detriment payment is basically an adjustment to compensate for the reduction in lump sum death benefits caused by the introduction of the 15% tax on contribution and investment income from 1 July 1988.

Pursuit will automatically pay an anti-detriment payment to eligible dependants, whereas many super funds cannot (or will not) make anti-detriment payments.