Post on 17-Sep-2020
SMSF Adviser Guide for Heffron & MLC Wrap
Your comprehensive guide
to working with Heffron
Heffron SMSF Guide
Contents About Heffron ............................................................................................................................................... 1
Award-winning service...................................................................................................................................... 2
Purpose of this guide ................................................................................................................................... 3
Overview ......................................................................................................................................................... 1
Getting Started ............................................................................................................................................. 1
What works best for you & your clients? ............................................................................................................ 1
Setting up a new fund .................................................................................................................................. 9
Up and running ........................................................................................................................................... 13
Getting money into the fund ........................................................................................................................... 13
Personal Cash contributions ............................................................................................................................ 14
Employers - cash contributions ........................................................................................................................ 15
Starting a pension .......................................................................................................................................... 16
Pension payments and making changes ........................................................................................................... 18
Adhoc benefit payments ................................................................................................................................. 19
Pension refresh .............................................................................................................................................. 20
Payment of fees, insurance and other expenses ................................................................................................ 21
Payment of tax .............................................................................................................................................. 22
Private assets ................................................................................................................................................ 23
Stay informed ............................................................................................................................................. 24
Some real examples ................................................................................................................................... 26
Published by Heffron 2015
© Heffron SMSF Solutions 2015
Important Information: The information provided in this guide is not personal advice. It does not take into account the
investment objectives, financial situation or needs of any particular person and should not be relied upon as advice. The
information in this booklet is based on interpretation of the income tax, superannuation and other laws current as at September
2014. While Heffron believes that the information contained herein is reliable, no warranty is given to the accuracy and persons
who rely on it do so at their own risk. We recommend that you seek professional advice before making a financial decision.
Heffron will not be liable for any losses arising from reliance on this information.
About Heffron
SMSF Adviser Guide for Heffron & MLC Wrap 1
About Heffron
Heffron has been at the forefront of providing innovative and reliable solutions for self managed superannuation
fund (SMSF) trustees and their advisers since 1998 and today is one of Australia's largest independently-owned
SMSF service providers. We have a strong reputation for technical excellence and service.
We’re experts at providing SMSF services and we can help you at every stage of the SMSF lifecycle. When you
partner with Heffron, you can be assured we’ll provide you and/or your financial adviser with everything you need to
set up and run your SMSF.
Financial statements
Tax return
Compliance review
Audit
Actuarial Certificates
Pension calculations
Pension documents
SMSF borrowing
documents
Documentation of
fund changes
Technical support
Education
Tax and
compliance
administration
Contribution
processing
Pension
payments
Storage of fund
documents
Online access to
fund reporting
and documents
Trust Deed and
minutes
Corporate trustee
setup
ATO registration
Investment strategy
documents
Death benefit
nomination documents
About Heffron
SMSF Adviser Guide for Heffron & MLC Wrap 2
Award-winning service
Heffron’s quality of education and training to financial
planners and accountants was recently recognised
when we were awarded the 2013 SMSF Educator of the
Year Award from the SMSF Professionals’ Association of
Australia.
When you choose Heffron for the establishment and
ongoing administration of your SMSF, you can be
assured your fund will be looked after by a team of
experienced SMSF experts. By combining this
experience with state-of-the-art technology, Heffron
can provide you with the highest quality service at a
competitive price.
Contact us to find out more about how we can help you
get the most out of your SMSF:
Address: 1/27 Bulwer Street
Maitland NSW 2320
Postal address: PO Box 200
Maitland NSW 2320
Phone: 1300 792 778
Fax: (02) 4930 2199
Email: heffron@heffron.com.au
Purpose of this guide
SMSF Adviser Guide for Heffron & MLC Wrap 3
set up a fund (or move an existing fund to Heffron)
have all annual returns and statutory reporting handled seamlessly on your behalf
chat to an expert for support on tax or compliance questions
Purpose of this guide
MLC Wrap and Heffron can make SMSFs easy for you and your clients with a comprehensive and integrated
administration experience.
MLC Wrap
MLC Wrap Investments gives you a host of great
benefits around your clients’ investments such as the
ability to:
Heffron
Heffron gives you the comfort of knowing that your
fund’s tax and compliance work is in the safest possible
hands. Our comprehensive range of SMSF services
allows you to:
Heffron’s online reporting adds the SMSF layer to MLC
Wrap’s investment reporting, showing not just the value
of each member’s balance at any time but also:
the tax and preservation components
contributions relative to the contribution limits
pensions relative to the minimum and maximum
payments required for the year
how the fund’s investments align with its
investment strategy…and much more.
Our SMSF guide “The easy way to manager your SMSF” provides a broad
overview of the Heffron SMSF service for trustees.
This comprehensive SMSF Adviser Guide has been developed to help with the
actual mechanics of working with Heffron, MLC Wrap, NAB CMA and your
clients to make running SMSFs as simple as possible.
Access wholesale investments not available directly, including Separately Managed Accounts (SMAs)
Seamlessly buy and sell investments online
Enable online reporting for both you and your clients showing portfolio valuations, market exposure and individual transactions at the click of a button
Manage model portfolios
Have advice fees automatically calculated and collected
Purpose of this guide
SMSF Adviser Guide for Heffron & MLC Wrap 1
Overview
The first step is getting the structure right and what
we’ve found works best, is a combination of two things:
1. an MLC Wrap Investments account to handle all
transactions relating to a specific Wrap account.
This might include receiving dividends, interest,
buying and selling MLC Wrap assets, paying adviser
fees that relate to the assets in MLC Wrap; and
2. a NAB Cash Manager Account (the NAB CMA) as a
cash umbrella from which non-wrap investment
transactions, or transactions relating to the fund as
a whole rather than any individual Wrap account,
are managed. This would include paying tax (or
receiving tax refunds), buying and selling private
assets, receiving private asset income and paying
fees, paying Heffron, audit fees and many more.
As long as Heffron is the administrator of the
SMSF, you as the adviser can transfer money between
your clients’ MLC Wrap Investment accounts and NAB
CMA providing the accounts are set up to allow this.
You can even handle external transactions such as
paying the fund’s tax and other expenses on your
clients’ behalf (your clients will need to authorise you to
transact on their NAB CMA – explained further below).
The way everything works together is explained more in
this Guide. In particular, see Section Some real
examples for case studies on combining MLC Wrap
Investment accounts and NAB CMAs to make running
your clients’ SMSFs simpler and safer.
One thing to note as you read this Guide is that when
an SMSF invests in MLC Wrap, MLC Wrap itself is not a
‘superannuation’ account, it is a conventional
investment account that simply happens to be owned
by a superannuation fund. Remember this when you
need to complete forms for MLC – if particular sections
are to be completed for ‘superannuation accounts’, they
are not relevant for SMSFs that are investing in MLC
Wrap Investments accounts. This means that the
restrictions that normally apply to a super wrap account
won’t apply.
You also have the flexibility to choose how MLC Wrap
Investment accounts are allocated to member accounts
– eg you can have one Wrap per member account, per
member or per fund.
Ready to get started? Read on.
Getting Started
SMSF Adviser Guide for Heffron & MLC Wrap 1
1
Getting Started
What works best for you & your clients?
Before you actually set up a new SMSF or move forward with a fund that has been transferred to Heffron, it pays to
give some thought to the way in which you and your clients will operate it in the future. There are five key decisions
to make.
One MLC Wrap account for the
whole fund or one for each
member/pension account?
SMSFs administered by Heffron can be operated on a
segregated or pooled basis (or a combination of the
two). In other words, if your client’s fund has multiple
member accounts, because there are several members
or even just a combination of pension and non-pension
accounts, you can choose whether you set up:
Just one MLC Wrap Investment account for the
whole fund; or
Multiple MLC Wrap Investment accounts – possibly
even one for each member account.
Which one is best for you and your clients will depend
on their circumstances. Some pros and cons for each
approach often identified by advisers are set out below.
One MLC Wrap
account for the fund?
Or one for each
member/pension
account?
Where will MLC Wrap
and non-MLC Wrap
investment income go? for
How will pooled
expenses / income
be handled?
Should the NAB CMA
be the nominated bank
account for MLC Wrap
Investment accounts?
Where will member
related transactions
such as
contributions &
pensions happen?
Go! 5 1 2 3 4
Getting Started
SMSF Adviser Guide for Heffron & MLC Wrap 2
Why have just one MLC Wrap account?
simpler to transact - if you decide to sell a
particular investment, you would put that into
effect in one MLC Wrap account only, rather than
having to give the same instruction for multiple
accounts.
avoid the costs and effort of making
transactions which really only offset each other –
ie where you may be selling an investment within
the pension portfolio but buying exactly the same
thing in the non-pension portfolio. Minimum
brokerage applies to transactions so two small ones
are more expensive than one big one of the same
total.
sometimes, avoid transactions entirely by, for
example, using cash flow from contributions to
make pension payments.
minimise costs – while costs are aggregated
across all MLC Wrap accounts for funds
transitioning from the MLC Wrap SMSF service,
new funds will be charged on the normal basis. The
same applies for Heffron fees – an additional
charge for segregation will be charged for new
funds.
allows a single asset to be shared by multiple
members or member accounts.
avoid additional work in relation to dividing
shared payments such as tax, audit costs,
Heffron’s fees etc. Regardless of whether or not
the fund is segregated, these fees would be paid
from the NAB CMA in the first instance. But if the
fund is segregated, you could then need to make
appropriate withdrawals from each of the fund’s
various MLC Wrap accounts.
pensions can be set up quickly and without any
need to change the fund’s investments or create a
new MLC Wrap account. In fact, pensions can be
established instantly by you and your clients. While
Heffron will naturally prepare some paperwork to
document this, the paperwork can come later. The
only other thing you need to do is set up the
regular pension withdrawals from the relevant MLC
Wrap account.
you can take advantage of things like share
buy backs without needing to worry about
whether or not each MLC Wrap account meets the
minimum exposure requirements to participate
(since the whole fund’s exposure is in one MLC
Wrap account).
You can minimise the amount of cash
required to be held in the MLC Wrap account ie
combined accounts might allow you to reach the
minimum cash cap of $5,000.
Why have several MLC Wrap accounts?
allows you to easily manage several
investment profiles or tax profiles (pension v
non-pension) by keeping the investments
completely separate.
in a pension fund, isolating the pension assets
allows you to ensure that all of the income and
capital gains associated with a particular
asset is tax free. This is particularly useful if you
expect an asset with large accrued capital gains to
be sold soon after a pension starts and the fund
still has non pension accounts.
very easy for you and your clients to see
exactly how much is held in each member
account and where it is invested. (Although
note that Heffron’s online reporting will always be
able to show you how much is in each member
account as well as much more – such as the
preservation and tax components of each account.
This information is updated monthly.)
avoid the need for an actuarial certificate1 –
these are only needed for pension funds.
contributions and pension payments can be
arranged to / from the particular wrap
account to which they relate. This will be very
transparent to Heffron, you and your clients. In a
pooled fund, we will inevitably require additional
clarification from you from time to time as to how
we should classify particular transactions.
you can choose to take up corporate actions
in some MLC Wrap accounts and not others eg for
pension members but not accumulation.
1 Unless the fund has a defined benefit pension – actuarial
certificates are always needed for these funds.
Getting Started
SMSF Adviser Guide for Heffron & MLC Wrap 3
HINTS
1 - Where the fund has both pension and super accounts,
collapsing the segregation is often best done at 1 July (or
shortly afterwards) rather than late in the financial year.
This is because the fund will need an actuarial certificate
from the time the segregation stops so delaying it until
the new financial year reduces cost.
2 - For funds transferring from the MLC Wrap SMSF
service, remember that one of the benefits of multiple
MLC Wrap accounts has historically been that you and the
client can easily identify how much is held in each
member account. While Heffron will be reporting this
information via its online portal in the future, there will be
a time lag in the first year – some funds won’t be up to
date until around September 2015. We suggest you defer
collapsing MLC Wrap accounts for those funds until they
are up to date.
3 - If an employer or member was making regular
contributions to an MLC Wrap account that is to be closed,
they will need to be advised of the new EFT and account
details. Note that the fund’s Electronic Service Address
(ESA)2 does not change.
2 ESAs are explained in the chapter “Getting money into the fund”
Key points for both
Regardless of the option you choose, there are probably
some important points to bear in mind:
If you wish to manage the investments for ‘pension
accounts’ and ‘accumulation accounts’ separately,
you could operate two MLC Wrap accounts (one for
pensions and one for accumulation accounts) even
if there are in fact multiple members and therefore
multiple account balances supported by each MLC
Wrap account.
This gives you some of the benefits of pooling
accounts (ie it is simpler to transact) without
compromising the tax benefits of being able to
manage pension and non-pension assets
separately.
Even though a single NAB CMA will be shared by all
MLC Wrap accounts, the fund can still be classified
as a ‘segregated’ fund for tax purposes.
This is because the CMA itself can be divided into
several ‘sub’ accounts – Heffron will automatically
keep track of this for you and our online portal will
show you the balance of each member account
including the NAB CMA component.
What does become important is that you watch the
balance for each member when making
withdrawals from the NAB CMA.
For example, if you pay the fund’s audit fee and
the share attributable to one member account
takes their share of the NAB CMA below $0, the
fund has actually stopped being segregated
(because effectively one member account has
made a notional ‘loan’ to another member
account).
The decision to segregate (or not) is not
necessarily permanent – trustees can change their
mind at any time.
Collapsing segregations
You can stop operating the fund on a segregated basis
and combine multiple MLC Wrap accounts into one at
any time.
If the trustee decides to stop segregating, simply
making that decision is enough to change the status of
the fund to ‘unsegregated’. From that point on, tax and
the allocation of investment earnings, can be worked
out on the assumption that the fund is no longer
segregated, even if it takes a little time to actually
combine the investments into a single MLC Wrap
account.
You won’t even need to change the members’ pensions
– ie they don’t need to be paid up-to-date first because
they are not actually stopping, the trustee is just
changing the way the fund’s investments are organised
behind the scenes. It means that Heffron can
implement the change immediately and the changes to
the investments can follow.
Of course, the logical next step is to combine the MLC
Wrap accounts. Complete the ‘SMSF Account
Consolidation form’ to do this and email it to
services@mlc.com.au and mysmsf@heffron.com.au and
let Heffron know the effective date for the change.
This form will allow you to carry any regular
withdrawals across to the ‘pooled’ MLC Wrap account
and choose the right bank account to be the nominated
bank account (generally the new NAB CMA)
Getting Started
SMSF Adviser Guide for Heffron & MLC Wrap 4
2
3
4
Where will member related
transactions such as contributions
and pensions happen?
Where will MLC Wrap and non-MLC
Wrap investment income go?
What about pooled income /
expenses?
It is in answering these questions that you will settle on
a role for the NAB CMA.
MLC Wrap Investment accounts already have cash
accounts and this isn’t replaced by the NAB CMA (your
client will still be required to hold 1% of the MLC Wrap’s
investments in its cash account, up to a maximum value
of $5,000). So why add the NAB CMA? The NAB CMA
gives you a number of extra tools that help you run
your clients’ SMSFs.
Why add the NAB CMA?
So why add the NAB CMA? The NAB CMA gives you a
number of extra tools that help you run your clients’
SMSFs.
A common transaction account for
segregated funds. If there are multiple MLC
Wrap accounts in the fund (ie you run ‘segregated’
funds), it provides an ‘umbrella’ or ‘shared’ account
to handle transactions that might relate to several
individual MLC Wrap accounts. For example, fees
that relate to the fund as a whole can be paid from
the NAB CMA. Similarly, a shared bank account is
essential for the payment of tax when you run
segregated funds. Tax is always paid as a single
refund or payment as the ATO only recognises one
taxpayer (the SMSF), not the individual accounts.
However, a single tax payment might actually be
made up of (say) payments from some MLC Wrap
accounts and refunds to others. The NAB CMA
allows the fund to quickly and easily meet its tax
obligations.
Great traditional banking features. It provides
a range of standard banking features that are
useful in the day-to-day running of the SMSF. For
example, the NAB CMA allows:
o Direct debit arrangements for regular
contractual fees such as fund
administration, audit etc
o Traditional online banking facilities such
as electronic transfers without the
requirement for signed forms etc. In
fact, as long as Heffron is the
administrator, the CMA is the NAB
CMA and the fund has at least one
MLC Investment Wrap - you can
even transact on the client’s behalf
using NAB Connect (discussed below).
This allows you to pay tax, fees and
expenses such as private asset
expenses on the client’s behalf
efficiently
o Cheque books, debit cards etc – while
not all of these will be appropriate for
all clients, they are an option for those
who want it. A client in their 70s whose
sole source of income is their SMSF
pension may well value these features
o On line access to view balance and
transaction histories
As long as Heffron is the
administrator, the CMA
is the NAB CMA and the
fund has at least one
MLC Investment Wrap
Getting Started
SMSF Adviser Guide for Heffron & MLC Wrap 5
o Urgent same day domestic payments.
In contrast, the Wrap can only pay
adhoc costs by cheque and withdrawals
for pensions etc must be in accordance
with strict protocols and supported by
the relevant paperwork. The difference
in approach makes perfect sense – MLC
Wrap accounts must cater to a variety
of situations for a large number of
individual accounts where controls are
important. The NAB CMA is specifically
dedicated to just one client’s SMSF and
can literally be ‘self managed’. Of
course it will be vital that the client
always complies with the law.
o The ability to add a ‘narration’ to any
online transaction which is passed
directly to Heffron via a daily data feed.
This allows you to tell us (for example)
exactly what a particular transaction is
without having to advise us separately.
This is not just about saving Heffron
time – it’s about making the whole
process quicker and more efficient. If
we know everything we need to know
from the data we receive automatically,
we ask you fewer questions and our on
line reporting is accurate and timely.
Combining MLC Wrap Investment accounts with NAB CMAs gives your clients the best of both worlds – an excellent
investment hub coupled with transaction account for the SMSF as a whole. This puts you and your clients in the
driving seat when it comes to managing all the fund’s transactions, not just the ones related to investments.
The exact role that the NAB CMA will play for your clients’ funds will depend on a number of other decisions you
make.
For example, some funds may well have all contributions and pension payments facilitated via MLC Wrap Investment
accounts and will simply use the NAB CMA to pay expenses that relate to the fund as a whole (or which are required
to be paid via a direct debit arrangement), income and expenses relating to private assets and tax.
In fact if the fund has only one MLC Wrap Investments account, even some of these could be facilitated directly via
the MLC Wrap Investments account, leaving only a very small role for the NAB CMA.
The exact role that the NAB CMA will play for your clients’ funds will
depend on a number of other decisions you make
Getting Started
SMSF Adviser Guide for Heffron & MLC Wrap 6
Other funds might adopt a different approach and instead position the NAB CMA as a central cash ‘hub’ through
which all transactions flow:
Getting Started
SMSF Adviser Guide for Heffron & MLC Wrap 7
In fact, in the extreme, even the investment income
earned by MLC Wrap could be paid directly into the
CMA rather than the MLC Wrap’s cash account.
How will you generally decide? We have set out some
case studies in Section Some real examples. But
some common themes are that the NAB CMA will
typically play a more prominent role as a central cash
hub if the fund has substantial private assets and/or
operates segregated accounts. A fund with a single MLC
Wrap Investment account may well find that the NAB
CMA is used very little.
A related question – will you transact on the NAB CMA
for your clients?
You don’t have to transact for your clients but the fact
that you can is a significant benefit to both your
practice and your clients. It means that:
Clients can leave the administrative work of their
SMSF to Heffron and you – although obviously this
creates some additional work and responsibility for
you;
You can ensure they don’t make mistakes like
underpaying their pension, making payments from
their SMSF that should be personal expenses etc;
You and Heffron are completely in control and
aware of all transactions occurring within the SMSF
– creating efficiencies for both businesses and
comfort and security for clients.
This is the practical reality that encouraged the MLC
Advice and Licensees Boards to allow advisers to
transact on the SMSF’s cash management account
providing that:
1. The cash management account is a NAB CMA (so
while clients can set up alternative CMAs if they
wish, if you operate under any of the licensees in
the NAB group, you will not be able to transact on
it);
2. The SMSF has a MLC Wrap Investments account;
and
3. Heffron is the administrator of the SMSF.
Transacting is simple.
1. Set up NAB Connect
If you haven’t already done so you should register
for NAB Connect. (Note that if you had funds
transferring from the MLC Wrap SMSF service, this
will have happened automatically).
NAB Connect is essentially internet banking for
businesses and is accessed from exactly the same
place as NAB’s conventional internet banking
(www.nab.com.au select NAB Connect from the
drop-down menu on the right).
A few points about NAB Connect:
Security You will receive a user name and RAS
token – the token is used to generate a
password in real time when you use the
system.
Just one user name and RAS token is
required for your entire client base, you
don’t need one for each client account but
you may have a separate one for each
adviser in your practice.
Visibility All your clients’ NAB CMAs will be linked to
a single profile. Hence when you login,
you can see all your clients’ NAB CMAs in
one portal.
Sharing If you have others in your office that need
to (say) prepare transactions for your
approval, they can apply for their own
RAS token.
The system has several levels of security
so that you can assign different
permissions and capabilities to different
people.
Software There is no need to install new software
to access NAB Connect – it’s a web
application. It’s also accessible via mobile
devices
Getting Started
SMSF Adviser Guide for Heffron & MLC Wrap 8
5
2. Client authority
You’ll need client authority to transact on their
behalf. For funds transferring from the MLC Wrap
SMSF service, a NAB CMA Authority form was
provided to clients in late March 2015.
For new funds and those transferring from another
administrator, it will be completed as part of
setting up the new NAB CMA. If there is an
existing NAB CMA in place, client authority will be
provided using NAB CMA authority forms.
3. Login and transact
From NAB Connect you can:
o Transfer money to MLC Wrap accounts. To
make sure it goes directly to the right MLC
Wrap account, you should obtain individual
EFT details for each MLC Wrap account
(see Section Up and Running – Getting
money into the fund, for more details);
o Transfer money to your clients’ bank
accounts. This is perfect for making top-up
pension payments, adhoc withdrawals etc.
Of course, you may also need to transfer
money from MLC Wrap to their NAB CMA
first to do this – discussed further below.
o Pay third parties.
o Set up direct debit arrangements.
Should the NAB CMA be the
nominated bank account for MLC
Wrap Investment accounts?
While MLC Wrap Investment accounts can make regular
payments to any number of bank accounts, only one
may be the ‘nominated’ bank account.
The nominated bank account is unique in that MLC
Wrap can use straight-through processing (STP) to
make payments from MLC Wrap to that nominated
account. In other words, the transaction can be
arranged via n-link with no requirement for you to send
form to MLC Operations. Please note that STP partial
cash withdrawals can only be made to a nominated
bank account where the client is also set up for e-
reporting on their MLC Wrap accounts (discussed
below). We expect that many clients will select the
NAB CMA as the nominated bank account for each MLC
Wrap account.
Why?
Given that the NAB CMA will often be used to make
payments that relate to several MLC Wrap accounts (eg
tax), the straight-through processing will be extremely
useful to be able to move money from MLC Wrap to the
NAB CMA seamlessly in anticipation of the combined
payment.
What are the downsides?
Making the NAB CMA the nominated bank account will
mean that your clients’ personal bank accounts cannot
also fill this role. This is relevant for clients with
pensions who might otherwise make additional
payments directly from MLC Wrap to their personal
(nominated) bank account. If their NAB CMA becomes
the nominated bank account there will be two ways to
potentially make these top-up payments:
1. Make the extra payment directly from MLC Wrap
by completing a withdrawal form on n-link (which
your clients must sign before the money will be
released); OR
2. Transfer funds from MLC Wrap to NAB CMA
(carried out via n-link, as it is the nominated bank
account, no forms are required) and then to your
clients bank account (via NAB Connect).
Remember that making the NAB CMA the nominated
bank account for a pension client will not have any
impact on the regular payments they have set up to
facilitate the pension payments – each MLC Wrap
account can provide an unlimited number of these to
any bank account.
One other step is required for straight-through
processing –MLC Wrap must be set up as eReporting.
This will mean that neither you nor your clients will
receive paper statements – they will only be provided
by email. While eReporting is the default setting for
new MLC Wrap Investment accounts, existing clients
who wish to change to eReporting can amend their
preferences by calling 132 652 or logging into Investor
Online and selecting ‘Reduce Paper waste’ from the
home page.
Setting up a new fund
SMSF Adviser Guide for Heffron & MLC Wrap 9
Call us on 1300 792 778
the first time you use the
form and we can register
you for our online services
as well as guide you
through the process.
Setting up a new fund
The simplest way to set up a fund is to use our online
services.
Call us on 1300 792 778 the first time you use the form
and we can register you for our online services as well
as guide you through the process to capture all the
information we need to do the legal documentation and
also start the process of setting up the MLC Wrap and
NAB CMA.
5 steps to set up a new fund
Log into our online
services and select
‘Fund Establishment’
Review the Fund
Establishment pack,
sign and return it
Heffron registers the
fund with the ATO
and apply for an
ABN and TFN
Heffron reviews the
signed Fund
Establishment pack
Heffron sends you the
Fund Establishment
pack
Fund Established
and ready for rollover!
5
Log into our online
services and select
‘Fund Establishment’
and follow the easy
instructions
Review the Fund Establishment pack, sign and return it
Heffron returns the original documents to you for your clients’ records
Heffron reviews the signed Fund Establishment pack and registers the fund with the ATO
4 3 2 1
Setting up a new fund
SMSF Adviser Guide for Heffron & MLC Wrap 10
HINT
If you would like us to set up one
or more MLC Wrap Investment
accounts and the NAB CMA at the
same time as establishing the
fund, just say so in the ‘notes’
section of the fund establishment
form
1 Log into our online services, select
‘Fund Establishment’ and follow the
easy instructions
Log into our online services, select ‘Fund Establishment’
and follow the easy instructions to enter the information
needed to set up the fund.
We check your responses along the way, looking for
common errors that potentially hold up the
establishment process. Some of our many checks and
balances include identifying invalid addresses, incorrect
TFNs, invalid trustee companies (such as a company
that has been deregistered according to the ASIC
database) or trustee arrangements where the
combination of trustees and members doesn’t match
the superannuation rules.
We can even highlight situations where the data
entered may well be right but would be unusual (such
as two members with the same date of birth). All of this
is provided in real time as you complete the form.
We also deal with a range of compliance matters like
documenting the investment strategy, death benefit
nominations, whether or not the fund should be
registered for GST etc to minimise the chance that
these are neglected later on. The full list of issues
clients and their advisers should consider before
starting this form are set out in our SMSF Guide.
Setting up a new fund
SMSF Adviser Guide for Heffron & MLC Wrap 11
HINT
We expect that many clients will
want to flag the NAB CMA is the
‘nominated bank account’ for each
MLC Wrap Investment account.
This will allow you to move money
from MLC Wrap to NAB CMA
without requiring paper forms or
client signatures. We will provide
the form needed for this (‘Update
account details’) as part of the
establishment pack or you can
make the change on n-link at any
time (Portfolio Facilities > Bank
accounts, and have the client sign
the Account Alteration form).
HINT
Make sure Section G of the NAB
CMA application form is
completed, making you an
‘Authorised User’ for NAB Connect
– this will be essential in allowing
you to move money from NAB
CMA to MLC Wrap Investment
accounts for investment purposes
and also for making external EFT
or BPay payments such as tax on
your client’s behalf
HINT
All the fund’s MLC Wrap
Investment accounts also need to
be set up for eReporting to allow
you to move money seamlessly
between the MLC Wrap and NAB
CMA. This is the default option for
all new accounts but you can
check any time by viewing the
‘Electronic Reporting’ option within
the ‘Account Details’ tab in n-link.
If the client isn’t opted in to
eReporting, they will need to
amend their preferences by calling
132 652 or logging into Investor
Online and selecting ‘Reduce
Paper waste’ from the home page.
2
3
Heffron sends you the Fund
Establishment pack
We send you a package of documents ready for signing
by your client (generally the next day). We can also
email copies if preferred but we generally find that thef
quickest and simplest process for both you and your
clients is if the package is sent by post. This gives us an
opportunity to clearly identify what your client needs to
sign so that the documents are executed correctly first
time every time.
With our service, you can set up both a fund and a
corporate trustee at the same time – we attend to both
and send you a single set of documents for your clients
to sign. We also pre-populate the MLC Wrap and NAB
CMA application forms as well as the relevant FSC AML
forms for your clients and these are included as part of
the document pack.
Return the pack to us
Setting up a new fund
SMSF Adviser Guide for Heffron & MLC Wrap 12
4
5
Fund Established
and ready for rollover!
Heffron reviews the signed Fund
Establishment pack and registers
the fund
We check the document execution, make sure
witnessing requirements have been dealt with correctly
and then register the fund with the ATO. We also
handle the remaining liaison with both MLC and NAB on
your behalf to ensure they have everything they need
to open the fund’s MLC Wrap accounts and NAB CMA.
This includes, for example, sending them the fund’s
TFN and ABN when these are issued by the ATO and
providing a certified copy of the fund’s trust deed. We
don’t ask you or your client to deal with these
yourselves.
MLC and NAB will advis e both Heffron and you of your
clients’ account numbers as soon as the accounts are
opened.
The original documents are
returned to you (for your clients’
records) in a professional leather
folder
What are the timeframes?
Receipt of
initial
documents
Within 2 business days
We will post the initial documentation to set up a fund the same day or next day after you lodge
the request online
Fund
establishment
The fund will ‘exist’ as soon as the client signs the documentation
TFN and ABN Up to 28 days
The ATO advises that issuing of a fund TFN and ABN should occur within 28 days – in practice it
is generally much quicker
Investment
accounts
The fund’s NAB CMA and MLC Wrap Investment accounts will be ready for action as soon as the
ABN and TFN have been received
Fund details
online
Within 7 days of issuing the fund’s ABN
The ATO will put some details about the fund on the Australian Business Register
(www.abr.business.gov.au) and the Super Fund Lookup register (www.superfundlookup.gov.au).
It is these registers that your clients ‘existing’ super funds will consult before agreeing to rollover
existing balances to the SMSF.
Up and running
SMSF Adviser Guide for Heffron & MLC Wrap 13
Up and running
Getting money into the fund
Money can be deposited into the fund either directly to MLC Wrap or via NAB CMA.
There are slightly different steps depending on the nature of the transaction but some are common in all cases:
Deposit
Method Into the NAB CMA? Into the MLC Wrap?
Electronic
funds
transfer
The fund’s NAB CMA will have a BSB and
account number – deposits can be made
using these details using the normal
internet banking processes.
You can also have payments made directly to MLC Wrap
by EFT. Simply register here:
http://wealth.mlc.com.au/site/cms/web/public/forms/eft
to obtain the MLC Wrap Investment account’s individual
EFT details.
Note that if a single fund has multiple MLC Wrap
accounts, register each one that will receive payments
by EFT to receive unique details for that account.
BPay not available Enter the Biller Code (10959) and your client’s MLC Wrap
Reference Number. You can obtain the relevant MLC
Wrap’s BPay reference number by calling MLC.
Cheque Cheques should be:
made payable to
“[Name of SMSF]”
crossed "Not Negotiable"
then banked by you or the trustee
directly into the NAB CMA at any NAB
branch.
Cheques should be:
made payable to
"MLC Wrap Investments - [Name of SMSF]"
crossed "Not Negotiable"
attached to the relevant form (see later sections of
this Guide for an explanation of which forms to use)
scanned and emailed to mysmsf@heffron.com.au
then posted to MLC
How do you decide whether to deposit money into your clients’ NAB CMA or their MLC Wrap?
See Section Some Real Examples
HINT
If the fund has transferred from MLC Wrap SMSF and had already registered for
EFT, these details can remain in use. Note, however, that the EFT details under
the old service were specific to the SMSF as a whole, not individual wrap
accounts. This means MLC and Heffron may need to ask you for extra
information to allocate the contribution to the correct Wrap account and classify
it correctly. If the fund has more than one member, and contributions are to go
to different MLC Wrap accounts, you should consider applying for new details
and providing these to contributors. Don’t forget to also give any employers the
Electronic Service Address (see Section Employers - cash contributions below)
Up and running
SMSF Adviser Guide for Heffron & MLC Wrap 14
Personal Cash contributions
Clients wishing to make one-off personal contributions to their SMSF should simply follow the cash deposit process
above.
What happens next depends on whether the contribution is paid to their NAB CMA or MLC Wrap Cash Account:
Let us know:
The type of contribution (personal – concessional,
personal – non-concessional, spouse, other)
For whom it was made
An email to mysmsf@heffron.com.au is sufficient for this
purpose OR it can be included in the narration entered as
part of the internet banking process.
When you want to move funds from your clients’ NAB
CMAs into their MLC Wrap Investment accounts, you
simply use NAB Connect.
Complete an ‘Additional and regular investments’ form
and submit this to MLC (services@mlc.com.au).
Also send a copy to Heffron (mysmsf@heffron.com.au)
with one change (below).
As a general rule, the sections on MLC forms that only
relate to superannuation accounts should be ignored (as
the fund holds a traditional investment account rather
than a superannuation account).
However, adding some additional information to this form
by completing Section 4 (below) is a convenient way of
also advising Heffron of the information we need. Where
a single MLC Wrap Investments account relates to more
than one fund member, please also tell us which member
the contribution relates to by including their name next to
the contribution type here:
If we need any further information, we will contact you.
Contribution paid into
the NAB CMAs
Contribution paid into
the MLC Wrap Cash Accounts
Up and running
SMSF Adviser Guide for Heffron & MLC Wrap 15
Employers - cash contributions
Follow the steps above for cash deposits depending on
whether the employer contributions are to be paid into
your clients’ NAB CMAs or MLC Wrap Cash Accounts.
In the future, most employers will be required (by law)
to make contributions electronically, and to send full
details of each contribution to the fund's ‘Electronic
Service Address’ (ESA). The fund’s ESA is like a special
digital post office box that is used to pass information
from the employer directly to Heffron. Make sure your
clients’ employer(s) have the ESA for their fund. A letter
for this purpose will have been provided as part of the
Fund Establishment pack (or separately for existing
funds moving from MLC Wrap SMSF to the Heffron
administration service).
The information we need (name of the employer, name
of the contribution recipient, type of contribution, date,
amount) will be available to us via the ESA. If the
information is insufficient, we will contact you for
details.
Where the employer is not providing electronic data to
the fund’s ESA, MLC or Heffron may contact you for
additional information. To avoid being asked the same
question twice, simply cc mysmsf@heffron.com.au on
any information you provide to MLC about the nature of
the transaction.
Up and running
SMSF Adviser Guide for Heffron & MLC Wrap 16
Starting a pension
As you know, pensions provide a number of excellent planning opportunities in SMSFs and it’s an area in which
Heffron is well placed to support you. The steps to follow when starting a pension depend on whether you wish to
‘segregate’ the new pension account to a separate wrap or whether you will run the fund on a ‘pooled’ basis. (See
Section Getting Started for some suggestions on this).
Starting a pension in a pooled fund Starting a pension in a segregated fund
1. Notify Heffron (via email to
mysmsf@heffron.com.au) of:
the member’s name
the date the pension will start (this can
be whatever date the trustee formally
decided to start the pension, it need not
wait for the paperwork to be prepared)
whether it will be reversionary (and if so,
to whom)
the amount used to start the pension (or
just ‘whole balance’)
the condition of release
2. We will prepare various documents (minutes,
a product disclosure statement, notification of
the minimum / maximum pension payment
and forward them to you.
3. The documents should be signed by the client
and returned to us (mysmsf@heffron.com.au)
along with any documentation required for
MLC Wrap (see below)
4. Establish the regular withdrawals to make the
pension payments either from:
NAB CMA (using NAB Connect); or
MLC Wrap (via n-link – go to the
‘Portfolio Facilities’ panel and then
Regular Withdrawal / Automatic Income
Distribution > Add Facility. Your clients
will need to sign the completed
instructions and these should be emailed
to services@mlc.com.au). Note that you
can also provide these instructions by
completing the paper ‘MLC Wrap Update
Account Details’ form).
1. If a new MLC Wrap Investments account is required,
open this by completing the MLC Wrap Investments
Series 2 application form. Note that a new MLC Wrap
account is not always required – even in a segregated
fund. See below.
2. If applicable (see below) transfer the relevant assets
between MLC Wrap accounts.
3. Notify Heffron (via email to mysmsf@heffron.com.au) of:
the member’s name
the date the pension will start (this may depend on
when a new MLC Wrap is established if this is
applicable)
whether it will be reversionary (and if so, to whom)
the amount used to start the pension (or just ‘whole
balance’)
the condition of release
4. We will prepare various documents (minutes, a product
disclosure statement, notification of the minimum /
maximum pension payments) and forward them to you
5. The documents should be signed by the client and a copy
returned to us (mysmsf@heffron.com.au) along with a
copy of any documentation required for MLC Wrap (see
below).
6. Establish the regular withdrawals to make the pension
payments either from:
NAB CMA (using NAB Connect); or
MLC Wrap. If the payments are to come from a new
MLC Wrap account, the regular withdrawals can be
established as part of the MLC Wrap application
process. If they are to be paid from an existing MLC
Wrap account, set up the regular withdrawal via n-
link – go to the ‘Portfolio Facilities’ panel and then
Regular Withdrawal / Automatic Income Distribution
> Add Facility. (Your clients will need to sign the
completed instructions and these should be emailed
to services@mlc.com.au). Note that you can also
provide these instructions by completing the paper
‘MLC Wrap Update Account Details’ form).
Up and running
SMSF Adviser Guide for Heffron & MLC Wrap 17
When using n-link or completing paper forms,
remember that while the account holder is a
superannuation fund (the client’s SMSF), MLC Wrap
itself is not a superannuation account. Hence you
should set up (say) a ‘regular withdrawal’ rather than
regular pension payments.
Is a new wrap account always required if
the fund operates on a segregated basis?
Not necessarily. If the whole balance in an existing MLC
Wrap account is converting to pension phase and the
member is no longer receiving contributions, no new
account is required – the existing account can simply be
reclassified as a ‘pension account’ in Heffron’s systems.
This does not affect MLC Wrap as MLC no longer
maintains records as to which accounts are pension
accounts and which are non-pension accounts.
However, a new MLC Wrap account will be required for
segregated funds if:
1. Only part of the balance is converting to a
pension. Note that the ‘pension’ account can be
either the existing MLC Wrap or the new one –
depending on how you arrange the transfer of
assets between the two. For example, you could
decide to classify the existing wrap as the pension
account and move assets which will remain in
accumulation phase to the new wrap. Or you
could do the exact opposite. Generally you should
do whatever is easiest as the choice you make has
no impact on tax or the ongoing administration of
the fund;
2. The member will continue to receive contributions.
In this case, you would generally establish a new
wrap account to receive those contributions.
Make sure you advise the member and
employer (if applicable) of the new EFT
details – otherwise the contributions will be
banked in their MLC Wrap account which you have
just decided to classify as a pension account. The
Electronic Service Address for contributions will
remain the same – this only changes if you move
to a different fund.
The pension can start whenever you are confident that
the ‘pension’ assets are separated from the ‘non-
pension assets’. For example, if the member’s whole
balance is converting to a pension and the new MLC
Wrap account is purely to accept future contributions,
the pension can start before this new account has been
established – it will just be important to ensure that it
has been set up and new EFT details provided to the
employer before any contributions are paid. Even if the
employer accidentally contributes to the pension
account, this can be rectified without compromising the
pension.
What does Heffron do then?
Regardless of whether you operate the fund on a
pooled or segregated basis, Heffron will:
Keep you posted on how your clients’ pension
payments compare to the minimum amount they
must take over the year (or maximum if applicable)
– this information is available from our online portal
at any time and is updated monthly;
Proactively alert you towards the end of the
financial year if it appears that the payments will
fall short of the required minimum;
Complete all tax reporting for the member and the
fund (PAYG summaries, IAS / BAS).
Note also that there is no requirement to take regular
pension payments – SMSF members can draw
payments on whatever frequency they wish, including
just once a year or on an ad hoc basis.
See how much your clients need to withdraw this year
using our online portal.
Up and running
SMSF Adviser Guide for Heffron & MLC Wrap 18
Pension payments and making changes
Pension payment amounts can be changed at any time.
Note also that sometimes a member might draw
pension payments from both the MLC Wrap
Investments accounts and NAB CMAs – both classify as
payments from the fund and therefore help meet the
minimum payment obligations. A good example is the
final ‘top-up’ that is often required at the end of the
year to make sure the minimum payment requirements
are met. Clients might draw a regular monthly amount
from their MLC Wrap Investments account, but arrange
that final payment as an electronic transfer from their
NAB CMA via online banking - just because it can be
quicker and simpler than completing forms.
One instance where you might need to make changes
to clients’ regular pension payments is each new
financial year when their minimum payment will
change. The way this works is as follows:
1. Estimated 30 June balance
We will receive daily updates on transactions
made by your clients’ SMSFs and will formally
review, reconcile and update their records once a
month. This means that in late July / early August,
an estimate of the balance of every member
account will be available on our online portal. It
might not be final for a number of reasons – we
won’t have received tax reporting from the fund’s
investments, we won’t have sought revaluations of
any private assets etc. However, in many cases, it
will be a very close estimate of the actual balance
at 30 June.
2. Estimated minimum payment for the
forthcoming year
Our adviser portal will also show an estimate
minimum (and maximum if applicable) pension
payment for the forthcoming year for each of the
member accounts.
3. Final schedule of pension payments
(based on audited accounts)
Once we have completed the annual accounts and
the fund has been audited, we will provide a final
schedule of the amounts that must be drawn from
each pension account during the forthcoming
year.
You can change your clients’ monthly pension
payments at any time – ie in July (when you know
the estimated amount) or when you receive the
audited financial statements and know the
confirmed amount.
You can also track how your clients’ actual
payments compare to the amounts they must
draw over the full year at any time on our online
portal.
4. Proactive prompt before 30 June
We will also contact you in May / June if your
clients’ regular drawings will not be sufficient to
ensure that their minimum payment obligations
are met.
Pensions paid from NAB CMAs Pensions paid directly from MLC Wrap
Adjust the regular withdrawals via NAB Connect and let
us know what has changed (and for whom) by emailing
mysmsf@heffron.com.au
Adjust the regular withdrawals via n-link – go to the
‘Portfolio Facilities’ panel and then Regular Withdrawal /
Automatic Income Distribution. Click on the relevant
Regular Withdrawal Facility and make the required
changes. Your clients will need to sign the completed
instructions and these should be emailed to
services@mlc.com.au). Note that you can also provide
these instructions by completing the paper ‘MLC Wrap
Update Account Details’ form). Email a copy of any forms
to Heffron (mysmsf@heffron.com.au). Let us know what
has changed and for whom.
Up and running
SMSF Adviser Guide for Heffron & MLC Wrap 19
Adhoc benefit payments
From time to time you will need to make adhoc withdrawals for your clients – for example:
A non-pension member might draw a lump sum
A pension member might draw an extra payment over and above their regular pension withdrawals. This could
be a lump sum or a pension payment.
A pension member might need to take an extra payment to make sure they meet the minimum pension
requirements for the year.
Heffron can administer any payment, permitted by law, and can assist you in understanding what is allowed for your
clients. Call us any time.
Payments from NAB CMA Payments directly from MLC Wrap
Make payments from NAB CMAs using NAB Connect. Create a withdrawal via n-link – go to the ‘Portfolio
Valuation’ panel and then Withdrawal > Withdrawal
Details. Your clients will need to sign the completed
instructions and these should be emailed to
services@mlc.com.au) Note that you can also provide
these instructions by completing the paper ‘MLC Wrap
Withdrawal’ form). Email a copy of any forms to Heffron
(mysmsf@heffron.com.au). Let us know which member
has received the additional payment.
Up and running
SMSF Adviser Guide for Heffron & MLC Wrap 20
Pension refresh
From time to time, it makes sense to ‘refresh’ a pension – maybe a pension member has made new contributions or
maybe you want to combine several pensions into one. Technically what happens as part of this process is that one
pension ends, the amounts are combined and a new pension starts.
If the refresh happens at any time other than 30 June, you will need to make sure that the old pension is paid ‘up to
date’ first. Heffron can assist with this (see below). Whether you also need to move assets from one MLC Wrap
account to another depends on whether you operate the fund on a pooled or segregated basis.
Pension refresh in a pooled fund
Pension refresh in a segregated fund
(where each pension account has its own MLC Wrap
Investments account)
1. If the refresh date is any date other than 30 June,
check that the old pension has been paid up to
date (email mysmsf@heffron.com.au to ask us if
you’re not sure.)
2. If the pension is not yet up to date, arrange the
required payment from the NAB CMA or MLC
Wrap as appropriate (see Section Up and Running
– Ad hoc benefit payments)
3. Advise Heffron:
which member accounts are to be combined
on what date
whether the new pension will be
reversionary (and if so, to whom)
4. We will prepare various documents (minutes, a
product disclosure statement, notification of the
ongoing minimum / maximum pension payments)
and forward them to you
5. The documents should be signed by the client
and a copy returned to us
(mysmsf@heffron.com.au)
6. Establish the regular withdrawals to make the
pension payments either from:
The NAB CMA (using NAB Connect); or
The MLC Wrap (via n-link – go to the
‘Portfolio Facilities’ panel and then Regular
Withdrawal / Automatic Income Distribution
> Add Facility. Your client will need to sign
the completed instructions and these should
be emailed to services@mlc.com.au). Note
that you can also provide these instructions
by completing the paper ‘MLC Wrap Update
Account Details’ form).
1. If the refresh date is any date other than 30 June,
check that the old pension has been paid up to date.
(Email mysmsf@heffron.com.au to ask us if you’re not
sure.)
2. If the pension is not yet up to date, arrange the
required payment from the NAB CMA or MLC Wrap as
appropriate (see Section Up and Running – Ad hoc
benefit payments )
3. For the MLC Wrap Investments account that is to be
closed (or from which cash / assets will be
withdrawn), complete the MLC Wrap Withdrawal form
4. For the MLC Wrap Investments account that is to
receive additional money or assets, complete the MLC
Wrap Additional and Regular investments form
5. We will prepare various documents (minutes, a
product disclosure statement, notification of the
minimum / maximum pension payments) and forward
them to you
6. The documents should be signed by the client and a
copy returned to us (mysmsf@heffron.com.au)
7. Establish the regular withdrawals to make the pension
payments either from:
The NAB CMA (using NAB Connect); or
The MLC Wrap (via n-link – go to the ‘Portfolio
Facilities’ panel and then Regular Withdrawal /
Automatic Income Distribution > Add Facility.
Your client will need to sign the completed
instructions and these should be emailed to
services@mlc.com.au). Note that you can also
provide these instructions by completing the
paper ‘MLC Wrap Update Account Details’ form).
8. Forward completed forms to services@mlc.com.au
and mysmsf@heffron.com.au
Up and running
SMSF Adviser Guide for Heffron & MLC Wrap 21
Payment of fees, insurance and other expenses
There are a range of payments that could fall under this general heading. For example:
Fees to anyone other than you such as the auditor, Heffron, costs relating to private assets
Insurance premiums
These are exactly the sorts of transactions for which the NAB CMA is perfect. They generally relate to the fund as a
whole rather than one specific member or account – so even if the fund is being run on a segregated basis it will
make sense to pay them from the NAB CMA. Heffron will then keep track of how much relates to each member
account.
The fact that the NAB CMA comes with the usual range of bank account features such as a cheque book, online
banking and the ability to set up direct debit arrangements means that you and your clients can easily handle these
payments directly from the NAB CMA.
* We strongly recommend you use the NAB CMA for these transactions rather than making payments directly from
your clients’ MLC Wrap Investments accounts.
Some fees will arise on a regular basis and can be streamlined by establishing a direct debit arrangement from the
NAB CMA. This will minimise the work required from you and your clients. For example, when we set up a fund or
take over a new one, we will provide the forms your client needs to sign to set up a direct debit for our fees and
other charges related to the administration of the fund such as audit and actuarial costs. Unfortunately this is not
possible for payments directly from your clients’ MLC Wrap Investment accounts.
Payments from NAB CMA Payments made directly from MLC Wrap
Investments accounts *
1. You should ensure you (or the client) receive an
invoice or other documentation that supports the
payment. For example, you will receive invoices
from Heffron for our fees, audit fees etc. Where we
have not initiated the payment, please email us a
copy of the invoice. (mysmsf@heffron.com.au)
2. Make the payment via NAB Connect or a cheque.
1. You should ensure you (or the client) receive an
invoice or other documentation that supports the
payment. For example, you will receive invoices
from Heffron for our fees, audit fees etc.
2. Complete the MLC Wrap Withdrawal form. Where
the payment relates to multiple wrap accounts, you
will need to complete one withdrawal form for each
one – showing the portion of the fee / tax payment
to be met from each one. Email the form(s) and
invoice to services@mlc.com.au. Where we have
not initiated the payment, please also email us a
copy (mysmsf@heffron.com.au)
3. MLC Wrap will forward a cheque to you so that you
can make the payment.
4. You can forward the cheque to the relevant party.
In the case of tax, we will provide a remittance slip
which should accompany the payment.
Up and running
SMSF Adviser Guide for Heffron & MLC Wrap 22
Payment of tax
Tax payments can include regular instalments lodged
with the fund’s Business Activity Statement or
Instalment Activity Statement or the annual tax bill paid
when the fund’s income tax return is lodged.
This is one payment that will – in practice – need to
some from the NAB CMA unless the fund has only one
MLC Wrap Investments account.
The process for paying tax is exactly the same as any
other cost but there are just a few extra steps that
arise.
1. Heffron will calculate how much tax is
payable
(or refundable) and how this should be divided
between the various member accounts. While the
fund only ever receives one tax bill, it can actually
be made up of several components – eg tax to
pay from one member account but a refund to
another.
2. For segregated funds, Heffron will also
advise you if simply paying that tax bill
from the NAB CMA would cause any of
the members’ ‘share’ of that account to
fall below $0.
For example, let’s say the CMA contains $10,000
and is due to pay a tax bill of $5,000. The account
clearly holds enough cash to make the payment,
but what if the fund is segregated and the NAB
CMA is notionally divided between the two
members as follows : $8,000 for Greg and $2,000
for Mary? If the tax bill would normally be split
exactly evenly between the two members, Mary’s
share isn’t enough to make the payment. If the
fund is to remain segregated, you will need to
transfer at least $500 from Mary’s MLC Wrap
Investments account to her NAB CMA first.
If money needs to be transferred to the NAB CMA
before paying tax, you can do this electronically
providing the NAB CMA is the nominated bank
accounts for your clients’ MLC Wrap Investments
accounts.
3. Pay the tax from the NAB CMA using NAB
Connect.
Up and running
SMSF Adviser Guide for Heffron & MLC Wrap 23
Private assets
Setting up - buying a new private asset
Heffron can support any private assets permitted by law
– there is no approved list or other restrictions. You and
your clients can also buy and sell these assets without
requiring approval from us.
That said, we would strongly recommend you talk to us
first about new private assets you’ve not bought before
in an SMSF environment. Compliance is our focus and
we are well placed to help you verify that a particular
asset can be acquired as planned and help you make
sure you collect the right documentation for the future
(eg documentation needed for audit purposes at the
end of the year).
Once you have confirmed that a particular asset can be
bought in your clients’ SMSFs, we recommend that the
acquisition, subsequent income and all expenses are
managed through the NAB CMA.
Ongoing
We report assets at market value in the fund’s financial
statements and so any private assets will need to be
regularly revalued. This does not mean a formal
valuation carried out by an external professional is
required every year. Our usual approach is as follows:
commercial property investments – you or your
clients should arrange a formal valuation at least
every three years. For the interim years, a
valuation by the trustee will suffice – sometimes
that might even be to adopt the same valuation as
the previous year if the trustee feels that the value
of the asset has not changed during that period;
residential property investments – either the
trustee should provide an updated valuation each
year, or in some cases, we can draw on data for
comparable properties in the same area to provide
a suggested valuation;
unlisted unit trusts and companies – the trustee
should provide an updated valuation each year
based on the market value of the assets held by
these structures.
Note that when the private asset represents a very
large proportion of the fund, the auditor will sometimes
request additional documentation. For example, an
investment in a private company that represents more
than 20% of the fund might warrant additional sign off
by the company’s accountant.
Special rules for segregated funds
There is nothing to prevent a private asset being shared
between several members who each ‘own’ a fixed
proportion of the asset. In our accounting records, we
will make sure that the income and expenses are
divided appropriately. Remember, however, that if the
fund is divided between pension and accumulation
balances, a single private asset such as a property must
be owned by pension accounts or accumulation
accounts, not a combination of the two.
Stay informed
SMSF Adviser Guide for Heffron & MLC Wrap 24
Stay informed
Heffron has a range of services to help you manage
your clients’ SMSFs. Not only are our SMSF experts
available to help on any technical compliance issue
relating to the funds we administer but our online portal
also gives you instant access to important information.
Up-to-date Financial Data
Our portal allows you to see exactly what we see when
it comes to the financial data for your clients. The
investment data is kept up to date on a daily basis via
data feeds directly from MLC Wrap and the NAB CMA
(plus a range of other assets).
At the end of each month, we reconcile these
transactions and check back with you for more
information if there are any that we can’t classify. Once
that process is complete, we formally update all the
member balances and update amounts such as
preservation components, tax components. These
amounts are therefore up to date each month (rather
than daily).
You can use the information in our portal to:
monitor how your clients are tracking relative to
their contribution caps
check their pension payments against the minimum
/ maximum required
view the current asset allocation for the fund as a
whole (and compare this to the fund’s current
investment strategy)
see a full breakdown of all the fund’s investments
as well as finding details such as the fund’s TFN,
ABN and member and trustee data.
Many of these reports can be downloaded as PDFs or in
some cases .csv files so that you can include them in
your advice.
Stay informed
SMSF Adviser Guide for Heffron & MLC Wrap 25
Documents
All the key documents for your clients’ funds are
available from our portal – for example the trust deed,
insurance policies, death benefit nominations, most
recent financial statements, investment strategy,
trustee minutes etc.
They are presented in an intuitive dashboard that
actually gives you much of the information you need
about those documents without requiring you to even
open them.
This dashboard highlights:
any documents that are unsigned (indicated with a
x)
key dates for example, Joe’s death benefit
nomination was signed on 26 June 2008;
extra information relevant to specific documents
(the Power of Attorney we have on file for Joe is an
enduring power of attorney, Alicia’s death benefit
nomination is binding and non-lapsing)
If you need the documents themselves, you can
download them from the portal at any time.
Some real examples
SMSF Adviser Guide for Heffron & MLC Wrap 26
Some real examples
The case studies below are designed to bring together the information in this Guide and highlight how an adviser
might choose to deal with a particular client scenario.
Meet the Smith family.
Stacey and George Smith have been married for years and do everything together – from entertaining the
grandchildren to managing their finances. While they have two children, they are the only members of their SMSF.
All their fund’s assets are in the MLC Wrap.
They are both receiving a pension and because he does occasional consulting work, George still receives
contributions from time to time.
Currently Stacey and George operate a ‘segregated’ structure – their fund has three MLC Wraps:
one each for their pensions; and
one for George’s contributions.
Their adviser is considering whether or not they should collapse their MLC Wrap accounts into one and if so, how
the NAB CMA would fit in.
How would the
various cash
transactions
flow?
Collapse the segregation Leave the segregation in place
Pensions Paid directly from the (combined) MLC Wrap
Investments account.
While they could be passed through the NAB
CMA, there’s really no need.
Paid directly from their respective MLC Wrap
Investments accounts.
While they could be passed through the NAB
CMA, there’s really no need.
George’s
contributions
To the combined MLC Wrap Investments
account.
(Although remember that as it is now pooled
with the two pension accounts, cash flow from
the contributions could be used to partly fund
the regular pension payments.
This doesn’t mean that George is missing out
on his contributions as behind the scenes,
Heffron is carefully tracking each individual
member account. However, there is less need
for the fund to buy and sell investments.)
To George’s old ‘super’ MLC Wrap account.
(Although remember that it’s now a MLC Wrap
Investments account rather than a super
account).
Wrap
investment
income
To the combined MLC Wrap Cash Account. To the cash account for each MLC Wrap
Investments account.
Some real examples
SMSF Adviser Guide for Heffron & MLC Wrap 27
How would the
various cash
transactions
flow?
Collapse the segregation Leave the segregation in place
Tax When their fund receives an annual tax refund
of $10,000, they could have this deposited
directly into the (combined) MLC Wrap
Investments account.
Behind the scenes, Heffron would keep track
of how that refund should be divided between
the three member accounts – as follows:
George (pension) $8,000
Stacey (pension) $4,000
George (super) ($2,000)
Net refund $10,000
(In other words, George’s super account pays
tax while the other two accounts are owed
refunds.)
Alternatively, they would have the refund paid
into the CMA to provide a float for that
account.
When they get their annual tax refund of
$10,000, Heffron tells them that it needs to be
divided up as shown in the left hand column.
Stacey and George bank the refund into their
NAB CMA. Heffron is able to tell their adviser
how it should be divided up and the adviser
transfers the right amounts to / from the
relevant MLC Wrap Investments accounts.
The adviser uses n-link to transfer $2,000 from
George’s old super Wrap account to the NAB
CMA and then NAB Connect to transfer $8,000
and $4,000 to the two MLC Wrap accounts set
aside for the pensions.
Other costs
(administration
fees etc)
From the NAB CMA – generally via a direct
debit arrangement. Of course, for this to work
it will be important to ensure that the NAB
CMA has sufficient cash and it will be
necessary to move money from their MLC
Wrap Investments account to their NAB CMA
from time to time to do this.
Like tax, the fund’s administration and audit
fees are each a single transaction to Heffron
(via direct debit from the NAB CMA) but made
up of payments from several MLC Wrap
accounts.
Stacey is an ex-accountant and she is keen to
do this very precisely – she wants the adviser to
make exact transactions to / from the various
wraps to match what is happening in the NAB
CMA.
George, on the other hand, is a bit more
pragmatic. He feels they should probably leave
a ‘float’ in their NAB CMA and share it between
them. All he really cares about is that Heffron is
tracking this behind the scenes and making sure
that their NAB CMA is carefully allocated
between each member account. He wants to
keep their fund ‘segregated’ and so it’s
important that the notional ‘share’ of their NAB
CMA attributed to each member account is
positive at all times.
Either approach would be fine.
Some real examples
SMSF Adviser Guide for Heffron & MLC Wrap 28
How would the
various cash
transactions
flow?
Collapse the segregation Leave the segregation in place
What bank
account was
chosen to be
the nominated
bank account
for the MLC
Wrap
Investments
account(s)?
The NAB CMA – although this is less critical if
the segregation is collapsed. Remember,
though, that only the NAB CMA can offer the
usual banking facilities such as direct debit
arrangements, a cheque book etc. that might
be valuable for George, Stacey and their
adviser even if most transactions happen via
their MLC Wrap Investments accounts.
The NAB CMA – given that each shared
transaction will require several underlying
transactions from individual MLC Wrap
accounts, it is even more important that the
NAB CMA is the nominated bank account.
What else had
to happen?
George and Stacey needed to:
Collapse the three MLC Wrap
accounts into one. Their adviser
was able to choose one of their
existing accounts and simply
transfer all the assets across to that
account using a simple paper form
(the MLC SMSF Account
Consolidation form);
Re-arrange the regular withdrawals
for pension payments – for
example, if one of the accounts
being collapsed was a pension
account, the regular withdrawal
from that account would cease.
Their adviser was able to do this on
n-link (although they had to sign
the form before it could be acted
upon by MLC)
Advise George’s employer of new
EFT details for the combined MLC
Wrap Investments account (unless
his old super account happens to
have been the one chosen for the
combined account).
Opt into eReporting for the
combined MLC Wrap account.
Give their adviser transaction
authority on their NAB CMA.
George and Stacey needed to:
Opt into eReporting for all their Wrap
accounts and give their adviser
transaction authority on their NAB
CMA (it certainly makes it easier for
them to make sure any ‘top up’
payments required for their pensions
can be made even if they are
overseas at the time).
George’s adviser also made sure that when all
their MLC Wrap accounts converted across to
MLC Wrap Investment accounts, he applied for
EFT details for each one. That way:
Any transfers from the NAB CMA to
the MLC Wrap Investments accounts
could be directed to precisely the
right account.
George could give his employer(s)
new EFT details to ensure that his
contributions could be paid directly to
the right Wrap account. He had to
give his employer the new Eligible
Service Address once the fund moved
to Heffron anyway – he just did it all
at the same time.
Some real examples
SMSF Adviser Guide for Heffron & MLC Wrap 29
Or what about two other examples:
Brad Jones Jane & Peter Gold
About the
client
Brad is single and in accumulation phase.
All his SMSF assets are in MLC Wrap – he has
no private assets.
Jane and Peter have a mixture of pension and
accumulation benefits currently held in different
MLC Wrap accounts. They are both receiving
regular contributions.
In addition, the fund has an investment
property that represents around 70% of the
fund’s assets. Rent is paid monthly and there
are some quarterly expenses that relate to the
property.
Where does
the NAB CMA
fit in?
The transactions into / out of Brad’s SMSF are
simple:
his employer makes regular
contributions – these go directly to
the MLC Wrap via EFT each month
all the income from his MLC Wrap
investments is also deposited into
the Wrap cash account
both are invested by his adviser in
accordance with standing
instructions they agreed when the
Wrap was set up
But he does have some transactions that are
made from his NAB CMA:
his fund pays tax instalments every
quarter. Initially he thought he
would have these paid from the
Wrap but he and his adviser had to
arrange & sign withdrawal forms,
wait for cheques etc. In the end, he
found it more convenient to run a
small cash balance in the CMA and
authorise his adviser to make these
payments to the ATO directly from
the CMA each quarter. Brad’s
adviser uses NAB Connect to make
these payments.
every now and again, his adviser
‘tops up’ the CMA by transferring
some funds across from the MLC
Wrap account to the CMA. The
adviser just uses n-link to handle
this on line – Brad doesn’t need to
sign any forms.
Heffron collects fund
administration, audit and actuarial
For Jane and Peter, the CMA might play a more
central role. One approach for them could be to
have:
all private asset income and
expenses dealt with via the NAB CMA
contributions paid to the NAB CMA
pensions paid from the NAB CMA;
even investment income from the
MLC Wrap paid to the CMA.
All their expenses would be paid through their
NAB CMA, ideally via direct debit to minimise
the work involved in transacting for them. For
example, Heffron’s fees, audit fees, actuarial
fees, council rates, body corporate fees,
insurance and a range of others could all be
automated from their NAB CMA. They no longer
need to complete withdrawal forms and wait for
cheques.
Some real examples
SMSF Adviser Guide for Heffron & MLC Wrap 30
Brad Jones Jane & Peter Gold
fees by a direct debit arrangement.
This is a transaction that the
adviser doesn’t need to arrange – it
is done by Heffron. Because Brad’s
fund was set up after 1 April these
fees are collected monthly.
What bank
account was
chosen to be
the nominated
bank account
for their MLC
Wrap
Investments
account(s)?
The NAB CMA – Brad wants the convenience
of having his adviser top up his NAB CMA from
time to time, and so he made the NAB CMA
the nominated bank account on his MLC Wrap
Investments account.
The NAB CMA – for Peter and Jane it is likely
that the NAB CMA will actually evolve into their
primary cash hub as the majority of their
investment income and expenses comes from
their private asset.
What else had
to happen?
Some other important housekeeping matters
that Brad and his adviser took care of to make
sure things ran smoothly:
When the NAB CMA was set up,
Brad made sure he gave his adviser
transaction authority on the
account. (Remember that this is
only allowed by the MLC Advice and
Licensee Boards if the CMA is a
NAB account, the fund has a MLC
Wrap Investments account and
Heffron is the administrator).
The MLC Wrap Investments
account has opted into eReporting
(essential for the straight through
processing of transactions from the
MLC Wrap Investments account to
the NAB CMA via n-link)
Brad made sure he provided the
EFT details for his MLC Wrap and
his Electronic Service Address to his
employer – that way Heffron
receives data about his
contributions directly from his
employer’s payroll system.
Again, Jane and Peter would need to opt-in to
eReporting and give their adviser transaction
authority on their NAB CMA.
They would also need to provide new EFT
details (the NAB CMA’s) to their employers.
But nothing
ever stays the
same
It’s a few years on. Brad has retired and
wants to start a pension. He’s confident he
won’t be receiving any more contributions.
What if they sold their investment property and
decided to invest the proceeds in their MLC
Wrap Investments account?
What happens? Brad’s adviser can simply instruct Heffron to
start his pension.
There is no need to close the old MLC Wrap
Now their primary investment vehicle would be
the MLC Wrap Investments account. At this
point it is likely they would reduce the role
Some real examples
SMSF Adviser Guide for Heffron & MLC Wrap 31
Brad Jones Jane & Peter Gold
Investments account and start a new one.
The pension can start instantly and all Brad’s
adviser needs to do is establish the regular
withdrawals to meet Brad’s pension payments.
The nominated bank account for their MLC
Wrap Investments account remains the NAB
CMA – Brad’s pension payments are paid
regularly and are set up as a regular
withdrawal to his personal account.
The only time Brad’s adviser needs to get
involved is:
Around June each year to make a
top-up payment if necessary (which
he usually does as a straight
through process from MLC Wrap
Investments account to NAB CMA
and out to Brad).
Early in the financial year to adjust
the regular withdrawal amount (he
does this through n-link but needs
to get Brad to sign the form each
year).
Every now and again when Brad
wants extra money. This is handled
the same way as a top-up
payment.
played by their NAB CMA – for example, we
expect they would have MLC Wrap Investment
income paid to the MLC Wrap Cash Account
rather than the NAB CMA. They would continue
to use the NAB CMA for things like fees, tax etc
but not need such a sizeable cash float.
They may also move to have their contributions
paid directly to their MLC Wrap Investments
account.
What else had
to happen?
George and Stacey needed to:
Collapse the three MLC Wrap
accounts into one. Their adviser
was able to choose one of their
existing accounts and simply
transfer all the assets across to that
account using a simple paper form
(the MLC SMSF Account
Consolidation form);
Re-arrange the regular withdrawals
for pension payments – for
example, if one of the accounts
being collapsed was a pension
account, the regular withdrawal
from that account would cease.
Their adviser was able to do this on
n-link (although they had to sign
the form before it could be acted
upon by MLC)
Advise George’s employer of new
EFT details for the combined MLC
George and Stacey needed to:
Opt into eReporting for all their Wrap
accounts and give their adviser
transaction authority on their NAB
CMA (it certainly makes it easier for
them to make sure any ‘top up’
payments required for their pensions
can be made even if they are
overseas at the time).
George’s adviser also made sure that when all
their MLC Wrap accounts converted across to
MLC Wrap Investment accounts, he applied for
EFT details for each one. That way:
Any transfers from the NAB CMA to
the MLC Wrap Investments accounts
could be directed to precisely the
right account.
George could give his employer(s)
new EFT details to ensure that his
contributions could be paid directly to
Some real examples
SMSF Adviser Guide for Heffron & MLC Wrap 32
Brad Jones Jane & Peter Gold
Wrap Investments account (unless
his old super account happens to
have been the one chosen for the
combined account).
Opt into eReporting for the
combined MLC Wrap account.
Give their adviser transaction
authority on their NAB CMA.
the right Wrap account. He had to
give his employer the new Eligible
Service Address once the fund moved
to Heffron anyway – he just did it all
at the same time.
What if…? What if Brad was continuing to receive
contributions?
He might move to a pooled structure (and
have those contributions paid to the same
MLC Wrap Investments account as his
pension) or he might choose to keep them
separate. If he did want to keep his super and
pension accounts in separate MLC Wrap
accounts, he would probably set up a new
account for contributions rather than
moving his existing wrap account around.
Importantly, the MLC Wrap Investments
account can be reclassified, it doesn’t need to
be closed etc. This is because it is an MLC
Wrap Investments account, not specifically a
super or pension Wrap account.
CONTACT US
heffron@heffron.com.au
1/27 Bulwer Street, Maitland NSW 2320
PO Box 200, Maitland NSW 2320
1300 792 778
Dedicated number for MLC Advice Partnership advisers
http://mlc.heffron.com.au
Access your MLC Advice Partnership resources online