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Archive | Superannuation
In an Administrative Appeals Tribunal decision this month in Etmekdjian v. Commissioner of Taxation [2020] AATA 3821 (1 October 2020), the AAT refused to extend a waiver of disqualification to the applicant so the applicant could manage his own self managed superannuation fund (SMSF). The applicant had been disqualified under Part 15 of the Superannuation Industry (Supervision) Act 1993 (SIS Act).
Automatic disqualification and its waiver
There is a thin 14 days following disqualification to apply for a waiver of the disqualification once a person is disqualified: section 126B. In this case the applicant had been disqualified automatically under sub-section 120(3) of the SIS Act on conviction, by a NSW Local Court, for Commonwealth Criminal Code offences. The offences were for dishonestly backdating employee share scheme elections under former section 139E of the Income Tax Assessment Act 1936.
The applicant was outside of the 14 days allowed to seek the waiver so the applicant sought an extension of time to do so from the AAT.
AAT decision
The AAT refused:
to accept that the applicant's unsuccessful appeal to the District Court against the conviction stayed the conviction by the Local Court and thus the date of automatic disqualification for section 120 purposes; and
to allow the extension of time as there was an absence of exceptional circumstances explaining the failure to lodge the application for waiver against disqualification within 14 days.
Context of the AAT decision and Part 15 disqualifications
Deputy President Bernard McCabe observed at the outset in paragraph 1 of the AAT decision:
Managing a superannuation fund – even a small, self-managed fund – is a big responsibility. There is a public interest in managing these funds properly given the tax advantages they enjoy. To that end, the Superannuation Industry (Supervision) Act 1993 (Cth) (SISA) establishes rules designed to ensure prudent management. Part 15 of SISA includes rules regarding disqualified persons. A disqualified person may not be a trustee, investment manager or custodian of a superannuation entity, or be a responsible officer (such as a director) of a corporation that performs those roles: s 126K. A person can be disqualified by the Commissioner of Taxation (where the Commissioner is the regulator) or the Federal Court (where the Australian Prudential Regulatory Authority is the regulator) on a variety of grounds, but a person will be automatically disqualified in circumstances set out in s 120. .…
[2020] AATA 3821 at paragraph 1
The AAT found that it only had power to extend the 14 day period strictly when exceptional circumstances warranted that extension. Deputy President McCabe concluded:
….The law requires that I identify exceptional circumstances that prevented the applicant from complying with the 14 day time limit. It is not enough to establish the applicant had a good excuse, or that non-compliance does not result in any harm, or that the applicant has a good case in relation to the substantive issue. This is not a standard 'extension of time' case.
21. The applicant has failed to identify any 'exceptional circumstances' that prevented him from making the application within the time frame contemplated in s 126B(3). In those circumstances, the decision under review must be affirmed.
[2020] AATA 3821 at paragraphs 20 and 21
The AAT's strict approach is no surprise when it comes to the disqualification rules in Part 15. Part 15 reflects a low tolerance approach in the SIS Act to persons designated unfit to manage a superannuation fund.
Difficulties – SMSFs with a disqualified trustee/director/member
The author has seen Part 15 disqualifications happen on bankruptcy by operation of sub-section 120(1) of the SIS Act.
A person disqualified on bankruptcy, or any other disqualified person such as Mr. Etmekdjian, can't be a trustee, a director of the trustee or a member of a SMSF. A fund with a disqualified participant falls off the register of superannuation funds as a SMSF regulated by the Commissioner of Taxation. The fund becomes (at least notionally) regulated by the Australian Prudential Regulatory Authority (APRA) instead.
So the Australian Taxation Office won't and can't assist once the fund is no longer a SMSF.
Unless a deactivated SMSF, on a participant becoming Part 15 disqualified, can nimbly:
convert to an APRA regulated fund; and
appoint an approved trustee;
based on a power in the trust deed of the fund to do so, or disqualified persons promptly vacate the fund to prevent deactivation, the fund reverts to an administrative no man's land. Even arranging a roll out of benefits to another fund is fraught following deactivation. The fund won't be practically manageable or administrable.
Time for a SMSF deed upgrade?
Lack of capability in a SMSF trust deed to convert a SMSF to an APRA fund is one of a number of indicators that SMSF trust deed may need of an upgrade to comply with today's SIS Act requirements.
Controlling who gets death benefits from a SMSF
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A widower nominated his son and daughter to take equal shares of his superannuation benefits on his death on a basis not binding on the trustee. The daughter, who was the surviving trustee of her father's self managed superannuation fund (SMSF) after his death, appointed her husband as the new co-trustee and excluded the son from control of the SMSF. The daughter refused to pay the son the equal share of death benefits based on the father's non-binding death benefit nomination (DBN). The son unsuccessfully challenged the daughter's conduct in the NSW Supreme Court: Katz v. Grossman [2005] NSWSC 934.
Dilemma – the SMSF trustee's control over where death benefits go
Katz v. Grossman reveals a dilemma with SMSFs: whoever survives a member as trustee of a SMSF generally has significant autonomy as to whom death benefits of a deceased member will be paid to by default unless the member:
has taken effective steps to ensure the DBN is a valid binding DBN (BDBN) to bind the trustee to pay his or her benefits to:
dependant/s nominated by the member; or
the member's estate by nominating the member's legal personal representative (LPR); or
the member has made his or her pension reversionary to their chosen dependant: although a reversionary pensioner generally cannot be an adult child as only death benefits dependants contemplated by section 302-195 of the Income Tax Assessment Act 1997 can receive pension, including reversionary pension, death benefits.
(Exceptions)
The challenge of directing death benefits to dependants
Member control of superannuation is all well and good but selection of dependants to receive death benefits, either by member's DBN or by the trustee of the fund, is fraught and is just as prone to dispute between disgruntled family beneficiaries as disputes over wills (Wills) and deceased estates are.
With superannuation funds generally, and especially SMSFs, it is a challenge for a member to:
maintain an up to date expression of where he or she wants his or her benefits to go on his or her death; and
to effect those wishes by way of a DBN.
In many cases this will be inconsequential such as where a surviving spouse of a deceased member is the surviving trustee, or controls the trustee, and is the obvious dependant of the member to take death benefits. But where dependants are next generation, or where a member has a blended family, surviving trustee decisions to pay death benefits of the deceased may not align with the deceased member's wishes or their DBN especially where trusteeship of the SMSF passes into unexpected and unprofessional trustee hands on their demise.
Section 17A of the Superannuation Industry (Supervision) Act 1993 (the SIS Act) limits who can be or control a trustee of a SMSF to:
the members of the SMSF; or
their enduring attorneys;
unless the fund is a single member fund and, in any case, trustees of a SMSF must be unremunerated in their role as trustee: paragraph 17A(2)(c) of the SIS Act. Member controlled superannuation by a SMSF can be a control vacuum isolated from professional trustee expertise following the death of a SMSF member unless a professional is involved in the limited ways possible under sections 17A and 17B.
Does a SMSF member need to control where their death benefits go?
Is it desirable that the member controls where he or she wants his or her benefits to go in any case? Superannuation is explicitly to provide for a member's dependants when the member dies. The SIS Act defines a dependant:
"dependant", in relation to a person, includes the spouse of the person, any child of the person and any person with whom the person has an interdependency relationship.
Section 10 of the SIS Act
A deceased member may nominate a dependant by a DBN that is not the dependant of the member most truly dependent or most in need of the member's death benefits. That is why it is doubly desirable to have a competent and trustworthy person succeed the member as trustee who will genuinely assess these needs. It is on the assumption that such a trustee will survive the member as SMSF trustee that superannuation fund governing rules (SFGRs) generally give the surviving trustee an open discretion to select the dependant of the deceased member to take the member's benefits unless one of the Exceptions applies.
So even with the guidance of a non-binding DBN (NDBN), which expresses a deceased's wishes as to whom his or her benefits are to be paid, SFGRs, the SIS Act and trust law typically give a superannuation trustee a power to pay benefits to dependants the trustee chooses in the trustee's discretion contrary to and despite a NDBN as occurred in Katz v. Grossman.
The binding death benefit nomination
To immunise a DBN from a wrong choice of trustee, who may select a dependant in their discretion at odds with the member's wishes, a member can use a BDBN. A widow or widower in circumstances similar to Katz v. Grossman can prevent override of their wishes as to who is to be their superannuation dependant to take their death benefits by force of a BDBN to bind the trustee to pay to that dependant.
The BDBN obstacle course
A SMSF member seeking to impose a BDBN to control his or her superannuation needs to be sure it will take effect. There are numerous contingencies. Consider these:
is the capability in SFGRs allowing BDBNs effective and does it have integrity? Does the member appreciate that BDBN forms and arrangements differ from trust deed to trust deed? Not all BDBN arrangements in trust deeds are rigorous;
will the BDBN be validly completed? (Wareham v. Marsella discussed below is an instance of invalid completion of a BDBN);
if the BDBN is stated to be non-lapsing will it take effect as non-lapsing? That is: will the BDBN continue to bind the trustee more than three years after it is made? In the recent case Re SB; Ex parte AC [2020] QSC 139 a non-lapsing BDBN was accepted by the Supreme Court of Queensland. Non-lapsing BDBNs are understood to be feasible for SMSFs following:
Donovan v. Donovan [2009] QSC 26; and
Self Managed Superannuation Funds Determination SMSFD 2008/3 Self Managed Superannuation Funds: is there any restriction in the Superannuation Industry (Supervision) legislation on a self managed superannuation fund trustee accepting from a member a binding nomination of the recipients of any benefits payable in the event of the member's death?
what if the member marries, divorces or commences a reversionary pension after making a BDBN?
will the BDBN have a fraud risk? Who needs to witness completion of a BDBN form by a member under the SFGRs? Depending on arrangements and the regime in the SFGRs for safe custody and verification of a BDBN, is there a risk that a BDBN may be altered by a dishonest successor trustee or a trustee in a conflict of interest with other dependants or "lost" so the BDBN won't take effect as intended by the member? and
what if the SFGRs are subsequently amended so that a BDBN made under former SFGRs of a SMSF no longer comply with the later SFGRs?
So a member looking to rely on a BDBN to direct who will take their superannuation faces a veritable obstacle course turning on:
the SFGRs in the trust deed of the fund;
the member's domestic circumstances; and
the security integrity of the BDBN arrangements;
in his or her quest to have a BDBN complied with by the trustee of the SMSF when the member is no longer around.
Better for a BDBN to be in a member's Will?
Although a payment of death benefits is not a testamentary disposition: McFadden v Public Trustee for Victoria [1981] 1 NSWLR 15, it is desirable that a BDBN should be set out in, or, in the least, kept with, the Will of a SMSF member to avoid some of the above contingencies.
Generally speaking Wills are:
subject to strict witnessing and other evidentiary requirements under state laws which reduce the prospect of fraud. By inclusion of a BDBN in a Will the BDBN can attract the same protections; and
revoked on marriage and, depending on state laws, altered by divorce. A dependant nominated in a BDBN may pre-decease the member. On any of these events BDBNs are ideally revisited and, in that context, a non-lapsing BDBN is especially fraught after a situation where a long-dated BDBN should have been updated to reflect changes in a member's domestic situation. If a BDBN is in a Will there is a greater likelihood that desirable update of a BDBN will not be overlooked.
There is also the advantage of consolidated consideration and expression of the member's wishes for his or her property and financial resources substantially in a single document. Superannuation death benefits of deceased superannuation members now frequently exceed deceased estate property governed by their Wills in value.
To include a BDBN in a Will there needs to be a basis or regime for making a BDBN in a member's Will in the SFGRs (in the trust deed) of a SMSF. Ordinarily SFGRs/SMSF trust deeds do not provide for BDBNs to be set out in a Will and instead require the BDBN to be in a discrete BDBN form.
When there is no BDBN
a BDBN fails;
there is a NDBN but no BDBN; or
no DBN at all;
what assurance does a member have that a trustee will act in the interests of and fairly to the prospective dependants of the member?
There is initially the issue with the first and third cases that there is no satisfactory expression of what the member wishes. This situation arose in the recent Victorian Supreme Court Appeal decision in Wareham v. Marsella [2020] VSCA 92.
Wareham v. Marsella
In Wareham v. Marsella the dependants of the deceased member of a SMSF included:
the deceased's daughter from her earlier marriage, Mrs. Wareham; and
her husband of 32 years up to her death, Mr Marsella.
The deceased had made a BDBN in favour of her grandchildren at the inception of the SMSF but her grandchildren were not her superannuation dependants (see the definition in section 10 of the SIS Act above) so the BDBN was invalid.
Mrs. Wareham was the deceased member's surviving trustee. Relations between her and the husband, Mr. Marsella, were strained. Mrs. Wareham appointed her husband Mr. Wareham as co-trustee. The trustees paid all of the deceased's SMSF death benefits to Mrs. Wareham wholly excluding Mr. Marsella.
At first instance McMillan J. held that Mr and Mrs Wareham had exercised their discretion as trustees without giving real and genuine consideration to the interests of the dependants of the SMSF and:
set aside the exercise of their trustees' discretion to favour themselves; and
removed Mr and Mrs Wareham as trustees of the SMSF.
This result was upheld on appeal to the Court of Appeal.
The court confirmed the wide autonomy the trustees of the SMSF had to select a dependant to take death benefits:
Apart from cases where trustees disclose their reasons, the exercise of an absolute and unfettered discretion is examinable only as to good faith, real and genuine consideration and absence of ulterior purpose, and not as to the method and manner of its exercise.
from Karger v Paul [1984] VicRP 13
Mr and Mrs Wareham did not give reasons for their decision to distribute all of the death benefits to Mrs. Wareham which meant that Mr. Marsella needed to establish:
bad faith;
lack of real and genuine consideration by; and/or
an ulterior purpose of
the trustees in making the decision (the Challengeable Grounds). These are all matters that are challenging to prove before a court particularly where there are no expressed reasons of the trustees for making the decision. However in this exceptional case the Supreme Court could focus on:
the erroneous response by the trustees' lawyers in correspondence with Mr. Marsella over his claim to participate as a dependant. From that it could be shown that the trustees misconceived their obligation to give Mr. Marsella's claim a real and genuine consideration. For instance, the trustees' lawyers had asserted in the correspondence that "Mr. Marsella was not a beneficiary or dependant and had no interest in the fund"; and
the bad faith of the trustees. The court observed that "the decision to pay no part of the death benefit to the deceased's husband of more than 30 years was, at least, remarkable" and the "grotesquely unreasonable" nature of the decision to exclude him was enough to establish bad faith. As there was actual conflict between Mrs. Wareham, a trustee, and Mr. Marsella the court observed that it may remove a trustee in its discretion.
Balanced against that was:
the trustees' resolution to pay Mrs. Wareham which did not reveal errors that establish any of Challengeable Grounds;
the power of the trustees to pay death benefits to a dependant who is a trustee despite the conflict of interest; and
the trustees did not give evidence and so where not examined about their consideration of Mr. Marsella's claims as a dependant;
An exceptional case
So even though Mr. Marsella was successful the case was appealed and hard fought. The trustees' lawyer's unlikely lapses in the correspondence and the extreme outcome and treatment of a husband of more than 30 years were vital to the result especially where SFGRs expressly permit a trustee to favour themselves in death benefits discretionary decisions despite their conflict of interest with other potential dependants that could receive those death benefits.
Where a trustee is more cautious and opaque in the course of:
their decision to pay death benefits to their own benefit, despite their conflict of interest; and
in related correspondence;
the trustee will reveal little which will give a disgruntled dependant Challengeable Grounds to challenge the trustee's exercise of discretion.
In that respect Katz v. Grossman more likely reflects the reality facing most disgruntled family members who miss out on death benefits, especially those who are not a spouse or in an interdependency relationship. In Katz v. Grossman Mr. Katz may not have been in a position to establish the Challengeable Grounds even though:
his father had nominated him on a non-binding basis to take an equal share of his death benefits; and
his sister and her husband as trustees of the SMSF instead distributed all of the death benefits of the father to his sister.
It follows that the authority of Wareham v. Marsella may only assist a spouse or interdependency dependant highly deserving of death benefits as dependants in compelling cases where:
a SMSF's trustee makes identifiable error in the process of discretionary decision-making to pay death benefits to himself or herself despite their conflict of interest with the deceased's spouse or interdependency dependant; and
where that spouse or interdependency dependant can endure legal action to challenge the decision based on the Challengeable Grounds.
Otherwise SMSF members need to ensure the right person or people are their successor trustee of their SMSF if a Katz v. Grossman or other situation where a dependant favoured by the member misses out on death benefits is to be avoided. A valid or current expression of wishes either in a NDBN or better:
in a BDBN, rigorously backed by SFGRs, included in or with the Will of the member to ensure its integrity, reducing the likelihood that a payment of death benefits will be made to the exclusion of a desired or deserving family member especially where, due to the confines of the SIS Act, the member can't be confident that their successor SMSF trustee won't use the opportunity to favour their own benefit; or
where a member foresees that their dependants will be in potential conflict, in next generation or blended family circumstances, by taking steps in accordance with the SFGRs to remove trustee autonomy to make the death benefits payment decision and to instead mandate that death benefits are to be paid to the LPR of the member in compliance with core purposes of superannuation which allow payment of death benefits to the LPR under section 62 of the SIS Act. In that case the member can set out how death benefits are to be left in his or her Will.
Does a SMSF that holds only life insurance satisfy the sole purpose test?
I was recently asked if a SMSF whose only assets are an insurance policy and cash topped up by contributions used to meet premiums on the policy would comply with the sole purpose requirement in the Superannuation Industry (Supervision) Act 1993.
It depends. It will depend on the terms of the life policy and significantly on the age of the member:
The sole purpose test in sub-section 62(1) is structured as follows:
(1) Each trustee of a regulated superannuation fund must ensure that the fund is maintained solely:
(a) for one or more of the following purposes (the core purposes ):
… or
(b) for one or more of the core purposes and for one or more of the following purposes (the ancillary purposes ):
In other words a fund maintained for any of the listed core purposes complies with the sole purpose test. A fund maintained for an ancillary purpose or purposes also complies with the sole purpose test so long as it is also maintained for a core purpose or purposes.
The life insurance policy in question would need to be considered. Will the policy pay out insurance proceeds to the trustee of the fund on the death of the member to be used by the trustee to pay death benefits?
Pursuing a core purpose
If the policy would indemnify the trustee on the death of the member before the member:
ceases gainful employment; or
reaches age 65;
the trustee of the fund would appear to pursue core purposes either in sub-paragraph 62(1)(iv) or (iv) which are:
(iv) the provision of benefits in respect of each member of the fund on or after the member's death, if:
(A) the death occurred before the member's retirement from any business, trade, profession, vocation, calling, occupation or employment in which the member was engaged; and
(B) the benefits are provided to the member's legal personal representative, to any or all of the member's dependants, or to both;
(v) the provision of benefits in respect of each member of the fund on or after the member's death, if:
(A) the death occurred before the member attained the age (65) prescribed for the purposes of subparagraph (ii); and
by taking out life cover to fund these death benefits.
Pursuing an ancillary purpose
If the life cover in the policy:
is in respect of the life of a member who is over age 65 and who has ceased gainful employment; or
only extends cover following both of those events;
then the fund is only maintained for ancillary purposes in sub-paragraph 62(2)(iii) and (iv) which are:
(iii) the provision of benefits in respect of each member of the fund on or after the member's death, if:
(A) the death occurred after the member's retirement from any business, trade, profession, vocation, calling, occupation or employment in which the member was engaged (whether the member's retirement occurred before, or occurred after, the member joined the fund); and
(A) the death occurred after the member attained the age prescribed for the purposes of subparagraph (a)(ii); and
and the fund is not maintained for core purposes and so the fund does not comply with the sole purpose requirement in sub-section 62(1).
To reiterate: where the member has both:
reached the age of 65; and
ceased gainful employment;
or the policy doesn't fund death benefits before either case then core purposes in sub-paragraph 62(1)(iv) and (iv) don't apply to life cover taken out by the fund and the sole purpose test in section 62 could be breached for failure to pursue a core purpose in addition to an ancillary purpose or purposes.
Income from private company investments – the tax scourge of SMSFs
A self managed superannuation fund (SMSF) is generally a low tax entity, particularly when in pension phase where a nil rate can apply and a low 15% rate can apply when not. Still the taxable income of a complying superannuation fund (SF) can be split into a non-arm's length component and a low tax component under section 295-545 of the Income Tax Assessment Act (ITAA) 1997. The non-arm's length component is taxed at the highest individual marginal rate which is 45% in the 2019-20 income year.
The non-arm's length component for an income year is the complying SF's "non-arm's length income" (NALI) for that year less any deductions to the extent that they are attributable to that income.
NALI picked up on audit – even higher tax
The recent case in GYBW v. Commissioner of Taxation [2019] AATA 4262 (GYBW) is a cogent reminder of how NALI taxed at the highest marginal rate can arise in a SMSF. In GYBW a tax shortfall arose as the NALI not returned by the SMSF was detected in an audit by the Commissioner of Taxation. Hence even higher taxes applied including shortfall interest and penalties. There was a reduction in penalties on appeal to the AAT from "reckless" to "failure to take reasonable care" level.
Section 295-550 is one of a number of superannuation rules designed to protect the integrity of the low tax complying SF regime by combatting income shifting arrangements where income, that might be taxed elsewhere to another type of taxpayer at higher rates, is non-commercially shifted to a complying SF that attracts a low rate of tax.
Section 295-550 is directed at non-arm's length dealings where complying SFs (and other superannuation entities) earn income from an arrangement which exceeds the income that the complying SF might have been expected to derive from the arrangement if the parties to the arrangement had been dealing with each other at arm's length.
Where section 295-550 is enlivened all of the income from the arrangement is NALI taxed at the highest rate.
Private companies dividends prone to be NALI
At the forefront of NALI is dividend income from investment by complying SFs in private companies.
In GYBW Senior Member McCabe identified an objective test in sub-section 295-550(2) which looks at a question of fact: is a dividend paid by a private company to a complying SF consistent with an arm's length dealing? A private company dividend paid to a SMSF is NALI to the SMSF if it is not. This objective test replaced the former provisions in Part IX of the ITAA 1936 under which private company dividends were treated as special income (the forerunner to NALI) as a matter of course. That is, unless the Commissioner exercised a discretion that it was unreasonable to treat the private company dividend as special income where the Commissioner became satisfied that the income was earned at arm's length.
Sub-section 295-550(3) sets out factors to be considered in applying the objective test.
The facts and findings in GYBW
In GYBW, the SMSF was the SMSF of a partner in an accounting practice with the pseudonym D. His client and connection pseudonym K had volatile and valuable business interests which could earn significant income from Department of Defence contracts.
D retired from his accounting practice to become the chief financial officer of the B Group.
The various partnership and corporate dealings of K are complex and supporting evidence of them before the AAT was "difficult" and incomplete. The AAT did not accept:
that the evidence, though involving non-related parties D, K, K's trust and the other partners and former partners of K; and
that legal advice received before the SMSF invested in B Holdings;
supported a finding that the shares in pseudonym B Holdings acquired by D's SMSF were acquired on terms where dividends would be earned from the shares consistently with an arm's length dealing.
Senior Member McCabe observed how parties at arm's length from each other can engage in an non-arm's length dealing just as non-arm's length parties can engage in an arm's length dealing. For instance, in the latter case, a family member of the seller acquiring stock exchange listed shares of the seller on a stock exchange. Section 295-550 is directed to the dealing viz. how the SMSF came to earn the private company dividends it earned, not to the relationship of the parties to the arrangement. The AAT was therefore sceptical about the acquisition by D's SMSF of ordinary shares in B Holdings on its formation for a nominal sum where B Holdings was also able to obtain and exploit K's business interests a day later which D contended had negligible value then.
That AAT observed that "Fortune shined on the business" of B Holdings and B Holdings earned more than $10 million over four years which likely explains why it was picked up for an audit by the Commissioner.
Darrelen applicable
After looking at the Explanatory Memorandum with which section 295-550 was introduced Senior Member McCabe concluded that the purpose of the section did not change nor was there any change to the factors to which regard was to be had. Therefore the Full Federal Court decision in Darrelen Pty Ltd v Federal Commissioner of Taxation (2010) 183 FCR 237, which concerned the former provisions in Part IX of the ITAA 1936, remained authoritative in Senior Member McCabe's view. In Darrelen the court had held that dividends paid by a private company were special income. In the case the SMSF had acquired its four shares in that company for a cost far less than their market value in an earlier year of income notwithstanding that the same dividend amount was paid on all 100 shares in the income year it was paid.
The cost to the SMSF of the shares on which the dividend was paid
The cost to the SMSF of the shares on which dividends were paid is a specific factor that can be taken into account under paragraph 295-550(3)(b) in determining whether their payment is consistent with an arm's length dealing. In applying the objective test Senior Member McCabe referred to Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of South Australia Ltd (Clifford's Case) where the High Court set out its views on how to value shares in a company:
The main items to be taken into account in estimating the value of shares are the earning power of the company and the value of the capital assets in which the shareholder's money is invested. But a prudent purchaser does not buy shares in a company which is a going concern with a view to winding it up, so that the more important item is the determination of the probable profit which the company may be reasonably expected to make in the future, because dividends can only be paid out of profits and a prudent purchaser would be interested mainly in the future dividends which he could reasonably expect to receive on his investment. Further, a prudent purchaser would reasonably expect to receive dividends which would be commensurate with the risk, so that the more speculative the class of business in which the company is engaged the greater the rate of dividend he would reasonably require. In order to estimate the probable future profits of a company it is necessary to examine its past history, particularly the accounts of those years which are most likely to afford a guide for this purpose. In order to estimate the rate of dividend that a prudent purchaser could reasonably require on his investment it is necessary to examine the nature of the business and the risks involved and to seek the evidence of business men, particularly members of the stock exchange and experienced accountants, who can testify to the appropriate rate from the prices paid for shares in companies carrying on a similar business listed on the stock exchange or from private sales of shares in such companies or from their general business experience.
[1947] HCA 10; (1947) 74 CLR 358 at p.362
and with the benefit of hindsight, and omissions in the evidence supporting D's SMSF's case about how the SMSF and B Holdings came to benefit in K's business interests, the AAT found that dividends were not consistent with arm's length dealing as they arose from shares acquired for less than their value so evaluated. The AAT found that the dividends received by D's SMSF from B Holdings were NALI.
NALI rules extended to expenses
The NALI rules have extended to losses, outgoing or expenditures that are less than expected to the complying SF by the Treasury Laws Amendment (2018 Superannuation Measures No. 1) Act 2019 in Schedule 2.
Unless GYBW is overturned on appeal SMSF investment in a private company of a related party or in a private company of the connections of the SMSF seem destined for NALI high tax treatment. So SMSFs should be wary of investment in private companies generally: SMSF investment in a private company carries the suspicion that the investment is an opportunity to shift income from a higher taxed entity to a concessionally taxed SMSF.
It follows that the trustee of a SMSF looking to sustain concessional tax treatment needs to adequately document its dealings with and investment in private companies so the arm's length character of the investment can be verified and, where need be, independent valuation supporting consistency with arm's length dealing should be sought.
Changing the trustee of a trust – some elements for success
Structures, Superannuation, Trusts
It is sometimes wrongly assumed that a minute of the current trustee is sufficient to change the trustee of:
a family discretionary trust (FDT); or
a self managed superannuation fund (SMSF) (which must be a trust with a trustee too – see sub-section 19(2) of the Superannuation Industry (Superannuation) Act (C'th) 1993 (SIS Act));
and that a change of trustee will have no serious tax consequences. The second proposition is more likely to be true, but not always.
FDTs and SMSFs invariably commence with a deed which contains the terms (the trust terms or governing rules – TTOGRs) on which the trust commences. That, in itself, is a reason why I contended in 2009 in Redoing the deed that an instrument or resolution less than a deed to change the trustee is prone to be ineffective even where change by less than or other than a deed is stated to be permitted by the TTOGRs in the trust deed.
Changing trustee relying on ability to change in the trust deed
It is thus to the trust deed that one needs to look to find:
whether there is a power in the TTOGRs to appoint a new trustee or to otherwise change the trustee; and
if, so, what the procedure or formalities are for doing so.
Changing trustee relying on the Trustee Acts
If ability to change trustee is not present, or is derelict, in the TTOGRs then the Trustee Acts in states (and territories) provide options for appointing a new or additional trustee which vary state to state.
Trustee Act – New South Wales
In New South Wales: section 6 of the Trustee Act (NSW) 1925 allows a person nominated for the purpose of appointing trustees in the TTOGRs, a surviving trustee or a continuing trustee to appoint a new trustee in certain specified situations such as where a trustee:
has died;
is incapable of acting as trustee; or
is absent for a specified period out of the state.
However an appointment of a new trustee in these situations must be effected by registered deed: sub-section 6(1) That is the deed of appointment must be registered with the general registry kept by the NSW Registrar-General, which is publicly searchable, and the applicable fee to so register the deed must be paid to NSW Land Registry Services for the appointment to take effect.
It is apparent from sub-section 6(13) that registration of a deed of appointment is not required where ability to appoint a new trustee is in the TTOGRs where the TTOGRs express a contrary intention; that is: where the TTOGRs expressly and effectively allow an appointment to be effected without a registered deed.
Trustee Act – Victoria
In Victoria there is a comparable capability for a person nominated for the purpose of appointing trustees in the TTOGRs, a surviving trustee or a continuing trustee to appoint a new trustee in writing in certain specified situations such as where a trustee:
is absent for a specified period out of the state;
under section 41 of the Trustee Act (Vic.) 1958. However this Victorian law does not impose any requirement that the required instrument of appointment in writing must be registered.
Changing trustee by obtaining a court order
The supreme courts of the states and territories are also given a residual statutory capability to appoint trustees under the respective Trustee Acts. However applying to a supreme court for an order to change a trustee of a FDT or a SMSF with sufficient supporting grounds is an option of last resort given likely significant costs and uncertainties of obtaining the order.
Changing trustee by deed
The TTOGRs in a trust deed of a FDT or a SMSF will frequently require that an appointment of a new trustee may or must be effected by a deed. It is desirable that it should do so to ensure the appointment of a new trustee does not become of a matter of uncertainty and difficulty for the reasons I have described in Redoing the deed.
Tax consequences of a change of trustee
As a change of trustee without more generally does not change beneficial entitlements under a trust, the tax consequences are usually benign:
For capital gains tax (CGT), assurance that changing trustee does not give rise to a CGT event for all of the CGT assets held in a trust is diffuse under the Income Tax Assessment Act (C'th) (ITAA) 1997:
Sub-section 104-10(2) concerning CGT event A1 states:
(2) You dispose of a * CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner.
Note: A change in the trustee of a trust does not constitute a change in the entity that is the trustee of the trust (see subsection 960-100(2)). This means that CGT event A1 will not happen merely because of a change in the trustee.
Sub-section 960-100(2) with the Notes below it in fact say:
(2) The trustee of a trust, of a superannuation fund or of an approved deposit fund is taken to be an entity consisting of the person who is the trustee, or the persons who are the trustees, at any given time.
Note 1: This is because a right or obligation cannot be conferred or imposed on an entity that is not a legal person.
Note 2: The entity that is the trustee of a trust or fund does not change merely because of a change in the person who is the trustee of the trust or fund, or persons who are the trustees of the trust or fund.
Similarly sections 104-55 and 104-60 of the ITAA 1997 which concern:
• Creating a trust over a CGT asset: CGT event E1
• Transferring a CGT asset to a trust: CGT event E2
each restate the above Note: viz.
Note: A change in the trustee of a trust does not constitute a change in the entity that is the trustee of the trust (see subsection 960-100(2)). This means that CGT event E… will not happen merely because of a change in the trustee.
A change of trustee can have stamp duty consequences where the trust holds dutiable property such as real estate.
Duty – NSW
Concessional stamp duty on the transfer of the dutiable property of the trust to the new trustee can be denied in NSW to a FDT unless the trust deed of the trust limits who can be a beneficiary, for anti-avoidance reasons: see sub-section 54(3) of the Duties Act (NSW) 1997.
Indeed Revenue NSW withholds the requisite satisfaction in sub-section 54(3) unless the TTOGRs provide or have been varied in such a way so that an appointed new trustee or a continuing trustee irrevocably cannot participate as a beneficiary of the trust. Contentiously satisfaction is withheld by Revenue NSW unless a variation to a FDT to so limit the beneficiaries is "irrevocable" : see paragraph 6 of Revenue Ruling DUT 037, even though that variation may not be plausible or permissible under the TTOGRs of the FDT.
This hard line is taken by Revenue NSW to defeat schemes where someone, who might otherwise be a purchaser of dutiable property who would pay full duty on purchase of the property from the trust, becomes both a trustee and beneficiary able to control and beneficially own the property who is thus able to contrive liability only for concessional duty and avoid full duty,
Duty – Victoria
Although the Duties Act (Vic.) 2000 contains anti-avoidance provisions addressed at this kind of anti-avoidance arrangement, there is no comparable hard line to that in NSW in sub-section 33(3) of the Duties Act (Vic.) 2000 so that the transfer of dutiable property, including real estate, on changing trustee is more readily exempt from stamp duty.
A prominent requirement on changing trustee of a SMSF is notification to the Australian Taxation Office, as the regulator of SMSFs, within twenty-eight days of the change: see Changes to your SMSF at the ATO website.
Where changing trustee involves a corporate trustee then there may also be an obligation to inform the Australian Securities and Investments Commission of changes to details of directors of the corporate trustee, if any. There may be further matters to be addressed if any new or continuing directors are or will become non-residents of Australia and, with SMSFs, the general requirement in section 17A of the SIS Act that the parity between members of the fund on the one hand and trustees, or directors of the corporate trustee on the other, needs to borne in mind and, if need be, addressed.
Taking out tax when superannuation death benefits are paid to deceased estates and testamentary trusts
Who pays tax and how much when a superannuation fund pays out death benefits to a deceased estate or to a testamentary trust is not intuitive. The two technical concepts of "dependant" and "taxable component" in particular are a source of confusion.
Dependant
There are two relevant kinds of dependant. The SIS Act kind of dependant (a spouse of the person, any child of the person and any person with whom the person has an interdependency relationship – section 10 of the Superannuation Industry (Supervision) Act 1993) notably differs from a death benefits dependant under section 302-195 of the Income Tax Assessment 1997 , a subset of (SIS Act) dependant, as a death benefits dependant excludes adult children who are not disabled or in an interdependency relationship. Such an independent adult child can be a (SIS Act) dependant in receipt of a death benefit from a superannuation fund but is not a (section 302-195 of the ITAA 1997) death benefits dependant.
Taxable component
For tax purposes a death benefit is split into a taxable component and a tax fee component. The tax free component is tax free to any dependant but the taxable component is a misnomer when paid to a death benefits dependant (DBD): it's tax free too! So of the four permutations (tax free to DBD, tax free to Non-DBD, taxable to DBD, taxable to Non-DBD) it is when a death benefits dependant receives a death benefit comprising taxable component that the benefit becomes taxable.
Re-contribution
Superannuation benefits can be paid prior to death if a member has satisfied a condition of release such as reaching the age of 65 years. This can be a way of reducing the taxable component of a death benefit that might be taxable to a dependant when paid after the member's death. Member benefits, viz. benefits withdrawn by a member during his or her lifetime, are generally not taxable to the member where the member has reached aged 60. It is permissible to re-contribute withdrawn benefits as non-concessional contributions back into superannuation, which become tax free component, when later paid out by the superannuation fund as death benefits.
Non-concessional limits and caps on re-contribution
However the member must be within non-concessional contribution limits to re-contribute back into superannuation in this way. At over age 65 that involves meeting the work test and being within the non-concessional caps. That is being under:
annual non-concessional contributions of $100,000 p.a. (no bring forward allowed for over age 65s); and
a total superannuation balance of $1.6m.
A look at how a taxable death benefit is taxed
A payment of death benefit that flows to a beneficiary of a deceased estate is something of a three stage event. The tax system looks through to the ultimate dependant in receipt of the death benefit (the third stage) even though the trustee of the superannuation fund may simply be paying death benefits to the legal personal representative of the deceased member who is an allowable (SIS Act) dependant (the first stage).
Non-death benefits dependants only get lump sum death benefits
Only lump sum death benefits can be paid to a dependant who is not a death benefits dependant, such as an independent adult child, so ordinarily we are looking at tax at 15% on a "taxed element" (the usual source [element] of benefits from a SMSF) but other rates can apply: see this table of rates at the ATO website https://www.ato.gov.au/rates/key-superannuation-rates-and-thresholds/?page=12
A curiosity is that taxable lump sum death benefits received by the trustee of a deceased estate are not subject to the medicare levy. Taxable lump sum death benefits viz. taxable component received directly by a non-death benefits dependant from the trustee of a superannuation fund, that is, not indirectly from the fund via a legal personal representative deceased estate dependant, is subject to medicare levy and PAYG withholding.
No PAYG withholding on lump sum death benefit paid by the trustee of the superannuation fund
The ATO also confirms that a lump sum death benefit is not subject to PAYG withholding where it is paid to:
a death benefit dependant (tax free); or
the trustee of a deceased estate – this amount is taxed within the deceased estate broadly in the same way it would be taxed if it was paid directly to the beneficiary.
https://www.ato.gov.au/super/apra-regulated-funds/paying-benefits/taxation-of-super-benefits/?default
The trustee of the superannuation fund is obliged to provide a PAYG payment summary – superannuation lump sum form (NAT 70947) to the trustee of the deceased estate within fourteen days of the payment though.
Obligations of the trustee of the deceased estate
According to the 2018 trust tax return instructions at the ATO website https://www.ato.gov.au/forms/trust-tax-return-instructions-2018/?page=43
A superannuation death benefit paid to a trustee is taxed in the hands of the trustee in the same way that it would be taxed if paid directly to a beneficiary, that is, the portions of the payment are subject to tax to the extent the beneficiary is a dependant or a non-dependant of the deceased. There is no tax payable to the extent that the payment is made to dependants or eligible non-dependants of the deceased.
At stage two, the trustee returns the taxable portions applicable to the non death benefits dependants in the trust return so that the ATO can assess the tax payable by the trustee as if the estate beneficiary/non-death benefits dependant was being directly taxed (with the taxed element generally capped to 15%).
This tax is a final tax paid at the trustee of the deceased estate level so no tax at stage three! A trustee of deceased estate should not include taxable elements of a superannuation death benefit lump sum, otherwise returned and directly and finally taxed, in income in its tax return. Then these amounts will not be further taxed at stage three as income say of a resident adult beneficiary.
Minority SMSF investors and related unit trusts
A popular pro-active SMSF strategy is to skirt the boundaries of the associate rules in Part 8 of the Superannuation Industry (Supervision) Act 1993 (SISA) with minority SMSF investors taking units in a unit trust with no apparent majority controller with other unrelated SMSF or non-SMSF investors. The object of the minority strategy is that the minority SMSF investor and associates have a less than 50% entitlement to income and capital of the unit trust and so the unit trust will not be a related trust of the SMSF automatically. This is an alternative strategy to investing in a non-geared unit trust which complies with Regulation 13.22C of the Superannuation Industry (Supervision) Regulations.
If the minority strategy doesn't work
If the unit trust is, or becomes, a related trust of the SMSF the consequences can be severe. The investment in the related trust by the SMSF is taken to be an in-house asset. A SMSF that fails to remedy an investment of more than 5% of its assets in in-house assets faces loss of complying status potentially causing:
tax at 47% on its current income; and
loss of almost half of the assets of the SMSF in a one-off additional tax bill in the year in which the SMSF becomes non-complying; or
prosecution for civil or criminal breach of a civil penalty provision under the SISA.
An investment in a non-geared unit trust which complies with Regulation 13.22C is specifically excluded from being an in-house asset. The minority strategy does not give the same assurance to a SMSF investor in units in a unit trust which is not Regulation 13.22C compliant.
Control of a trust
The more than 50% entitlement to income and capital test is one of the tests of control of a trust in sub-section 70E(2) of the SISA which determine whether or not a trust is controlled and is thus an associate and, by that, a related trust. An alternate test in paragraph 70E(2)(b), sometimes overlooked by users of the minority strategy, is the directions, instructions or wishes test which is an alternative test of control of a trust. Its formulation:
an entity controls a trust if:
… (b) the trustee of the trust, or a majority of the trustees of the trust, is accustomed or under an obligation (whether formal or informal), or might reasonably be expected, to act in accordance with the directions, instructions or wishes of a group in relation to the entity (whether those directions, instructions or wishes are, or might reasonably be expected to be, communicated directly or through interposed companies, partnerships or trusts);
is based on a similar formulation in sub-section 318(6) of the Income Tax Assessment Act 1936 which deals with associates under the income tax controlled foreign corporations (CFC) rules.
MWYS v. Commissioner of Taxation
The directions, instructions or wishes test in paragraph 318(6)(b) in the CFC rules was recently considered by the Administrative Appeals Tribunal in MWYS v. Commissioner of Taxation [2017] AATA 3037 (22 December 2017) and the companies in dispute with the Commissioner in that case were found not to be associated even though the companies concerned had the same directors.
Deputy President Logan found that, despite the unanimity of the directors of the companies involved, the companies were not associates as it could not be concluded, on the evidence, that the directors of one company, acting in that capacity, would influence themselves acting in their capacity as directors of the other company. Deputy President Logan observed that the arrangements between the companies involved: an Australian listed company and a UK publicly listed company which enabled them to dual list on the ASX and the London Stock Exchange, were for the purpose of compliance with dual listing requirements but, within that framework, the companies were structured with similarity to unrelated joint venturers. No inference could be drawn about one company acting on the directions of the other.
Moreover the strict governance which applied to both of the listed companies actually helped the companies to establish that the directors were acting independently and at arms length from the other company even where the directors were directors of the other company too. Short of a sham, or a cipher, as arose in Bywater Investments Ltd v Federal Commissioner of Taxation [2016] HCA 45 (see our blog -Why setting up offshore companies for Australians is a tricky business), the AAT was prepared to rely on the meticulous corporate documents which set out the distinct responsibilities of the directors of the companies they separately served.
Directors in common
It is certainly clear from MWYS that commonality of directors of a company, or in the case of paragraph 70E(2)(b) of the SISA, commonality of directors of a corporate trustee is not enough, in itself, to amount to a reasonable expectation that one company will act in accordance with the directions, instructions or wishes of the other company or of a group including it.
Is MWYS good news for SMSFs using the minority strategy?
Is the decision in MWYS a relief to minority SMSF investors in unit trusts concerned about paragraph 70E(2)(b) of the SISA? Maybe not. Documents of SMSF trustees and of unit trusts, in which they invest, are far less likely to be as meticulous at keeping the affairs of entities being examined for control apart. A unit trust deed is more likely than, say, a joint venture arrangement to show that the trustee of a unit trust might act in accordance with the directions, instructions or wishes of a unitholder, albeit a minority unitholder.
Frequently, under unit trust deeds, minority unitholders have the right to vote on resolutions which bind the trustee of the unit trust to act. A minority unitholder may not have the votes, alone, to so bind the trustee; but the question posed by the test is whether the trustee is accustomed to act, or whether there is a reasonable expectation that the trustee of the unit trust will act, in accordance with the directions, instructions or wishes of a minority unitholder. The answer in fact is equivocal – yes, if the minority unitholder votes are in the majority and no, if not. So yes, a part of the time or on some occasions. So the minority SMSF investor and the trustee of the unit trust are associated?
What will facts show under scrutiny?
The concern for SMSF users of the minority strategy is: will their position, that the unit trust they invest in is not a related trust, become less defensible under scrutiny from the Commissioner? From the activities of the SMSF investor, its associates and the trustee of the unit trust the Commissioner can gauge how the trustee of the unit trust has reached decisions, which may not have been in accord with documents, whether sound or not, and form a view as to how likely the trustee of the unit trust is likely to have acted on directions, instructions or wishes of the SMSF investor and its associates.
Until the circumstances of a SMSF using a minority strategy, including the relevant documents, are considered it can be uncertain whether a SMSF minority unitholder may "control" a unit trust and cause it to be a related trust.
Aussiegolfa SMSF hits sole purpose flag
Superannuation, Trusts
The sole purpose test in section 62 of the Superannuation Industry (Supervision) Act 1993 (the SIS Act), which requires that superannuation funds be conducted solely for core and ancillary purposes (superannuation purposes) with core purposes including:
funding for retirement from gainful employment of a member;
a member reaching a prescribed age; or
the death of a member,
is fundamental to the integrity of Australia's tax-privileged and compulsory superannuation system.
The sole in sole purpose
In practice section 62 is a difficult provision to apply at the margin because of the ostensible purity of purpose of conduct of a superannuation fund to meet the sole purpose standard, or more precisely, a collection of allowed purposes.
Between commencement of the SIS Act in 1993 and December 2017 the meaning and scope of "sole" in the sole purpose test was not specifically considered in reported court cases.
The opening round
In Case 43/95, 1995 ATC 374 (the Swiss Chalet Case) the Administrative Appeals Tribunal considered whether a superannuation fund had met the sole purpose test where the fund had invested in:
shares which enabled access to a golf club for; and
a Swiss chalet which earned income for the family trust of:
the managing director of the employer-sponsor of the fund. The AAT found that the fund had been conducted for purposes other than superannuation purposes and thus the fund failed the sole purpose test.
The latest play
The Federal Court has now considered "sole" in the sole purpose test and referred, with approval, to the reasoning in the Swiss Chalet Case in Aussiegolfa Pty Ltd (Trustee) v Commissioner of Taxation [2017] FCA 1525. Given the significance of the golf club access of the managing director in the Swiss Chalet Case and the allusion to golf in the name of the trustee of the superannuation fund, one might think that the trustee was looking for the attention and the view of the Commissioner of Taxation, as the regulator of self managed superannuation funds, on the purposes of Aussiegolfa Pty Ltd.
A provisional ball?
Indeed, the facts in Aussiegolfa indicate the trustee sought to test whether residential properties held by self-managed superannuation funds could be used by related parties under the SIS Act.
Facts in Aussiegolfa
In Aussiegolfa the trustee was the trustee of the personal SMSF of the Victorian State Manager of DomaCom Australia Ltd., a managed investment scheme regulated by the Australian Securities and Investments Commission. The trustee of the SMSF and the family of the member of the SMSF invested in units in DomaCom which were directed to and funded investment by DomaCom in a student residential accommodation to be leased to the daughter of the member of the SMSF who was a university student. DomaCom was hopeful that they had initiated an effective and attractive SMSF investment strategy.
Investment in an in-house asset?
The first SIS Act hurdle for the SMSF trustee to overcome in Aussiegolfa was whether there was an investment in a related trust causing the investment to be an in-house asset to which section 82 of the SIS Act would apply (with or without a determination by the Commissioner that the investment was an in-house asset under sub-section 71(4) of the SIS Act).
The investment by the SMSF trustee was in units in DomaCom, a managed investment trust. The Federal Court worked its way through the terms of the constitution of DomaCom, and amendments of it, and a series of product disclosure statements to determine the basis on which the SMSF trustee had invested in DomaCom at the time of its investment. Pagone J. found that the trustee had invested in a sub-trust which was a discrete trust and so a related trust of the SMSF for SIS Act purposes.
Not out of bounds
That finding was despite equivocal provisions in the applicable terms of the constitution of DomaCom which sought to reinforce, unsuccessfully to Pagone J., that the units in DomaCom did not give a unit holder, whose investment had been directed to certain assets and whose income and entitlements were ring-fenced to those assets, an interest in those particular assets and that DomaCom was one indivisible trust of many assets.
It followed from this framing of what was the trust by the Federal Court that the SMSF trustee could not rely on the widely held unit trust exclusion in paragraph 71(1)(h) of the SIS Act from being a related trust and an in-house asset.
… and hitting the sole purpose red flag
Turning to the sole purpose issue, Pagone J. accepted the reasoning in the Swiss Chalet Case and applied authority which explains how a "sole" purpose requirement is to be interpreted and applied. Broadly, Pagone J. concluded that:
the inquiry into sole purpose is a question of fact;
the inquiry is not an inquiry into motive but into the "end sought to be accomplished";
the sole purpose requirement precludes there being any other purpose , however minor; and
there may be facts which could suggest pursuit of other purposes, if those facts were considered separately, but these do not necessarily connote other purposes if they show pursuit for the required sole purpose.
In Aussiegolfa Pagone J. held that providing housing to the daughter of the member of the SMSF was not within and inconsistent with superannuation purposes and so the SMSF failed the sole purpose test.
A two shot penalty
The trustee of the SMSF in Aussiegolfa had hoped that its investment in units in DomaCom would not jeopardise its status as a complying superannuation fund. But due to the decision of the Federal Court:
the units are an in-house asset comprising more than 5% of the assets of the SMSF so section 82 can be applied to deprive the SMSF of complying superannuation fund status if the level of the in-house assets of the SMSF is not brought to 5% or under before the end of the income year following the income year of acquisition of the in-house asset; and
the SMSF can be made non-complying because it has failed the sole purpose test in section 62;
and various other civil and criminal penalties can potentially be applied for both of the SMSF's breaches of the SIS Act by the Commissioner of Taxation.
An uncertain lie in the rough?
Pagone J. observed in Aussiegolfa that there may be circumstances where a lease to a related party would not breach the sole purpose test but, in Aussiegolfa, he observed that the evidence was that the purpose of the investment through DomaCom was, in part, for another purpose of providing housing to the daughter of the member of the SMSF. This is not a complete reassurance to other SMSFs that invest in business real property to lease to a related party. That investment can be excluded from being an in house asset under paragraph 71(1)(g) of the SIS Act but does it follow that the investment is in the circumstances which would not breach the sole purpose test Pagone J. describes? Can we safely infer that an investment that attracts a statutory exclusion from being an in-house asset should be excluded from failing the sole purpose test too?
Checking my card
I have paraphrased particularly in describing how Pagone J. applied the sole purpose test. I also take responsibility for the golfing headings through this post which I appreciate will be vague and wearisome to those lucky enough to be non-golfers.
SMSFs getting practical to invest in land with others
The force of the superannuation law is that investment in land by a SMSF needs to be prudent. An investment needs to be considered in a business-like way.
Limited recourse borrowing is one way to fund investment in real estate. SMSF principals may prefer to arrange equity investment from private connections outside of the SMSF.
Investment as a tenant-in-common?
I am frequently asked about SMSFs participating in land investments as a tenant-in-common with related and unrelated entities of the principals of the SMSF. It is apparent from the NTLG Superannuation sub-committee technical minutes of June 2011, released by the Australian Taxation Office, that tenants in common arrangements for SMSFs are not going to be prudent for the SMSF without careful and restrictive implementation. Wherever other tenants in common could borrow, or use or risk their interest as security, the SMSF tenant-in-common is exposed to uncontrolled risks which would bring into question, for instance, whether the SMSF:
1. has acted prudently pursuing the investment for members for whom it is bound to provide;
2. has breached regulations which prevent charges, or the potential for them, being taken over SMSF property; or
3. has satisfied the sole purpose test.
Investment through a trust?
The tenant-in-common option is frequently turned to because of the restrictive regime that has applied in relation to the investment by SMSFs in related trusts since 1999. Shortly stated, a post 1999 investment by a SMSF in a trust, which is related to the principals of the SMSF, a "related trust", is treated as an "in-house asset" and more than 5% of the assets of a SMSF in in-house assets can leave the SMSF non-complying.
Non-geared unit trust – expressly relieved from being a related trust
The SIS Regulations provide an express exception. A superannuation fund can invest in a non-geared unit trust (NGUT) to which Regulation 13.22C applies without the NGUT being taken to be a "related trust" and thus the investment isn't taken to be an investment in an "in-house asset".
This express exception is especially limited and, aside from relief from "related trust" treatment causing in-house asset difficulty, offers no expansion in the kind of investment that can be pursued with superannuation money. In other words, the investment still needs to address 1 to 3 above, for instance.
The Regulation 13.22C and 13.22D requirements and restrictions on NGUTs essentially mirror the restrictions on regulated superannuation funds. NGUTs cannot borrow and they can only "lend" to operate a bank account. They cannot secure or charge their assets. (A non-SMSF unit holder in a NGUT could give a security over his, her or its units but security could not be given over the assets of the NGUT.) A NGUT cannot run a business – unlike with superannuation funds, this is a direct requirement. Loss of NGUT status, so that the NGUT becomes a related trust triggering in-house asset difficulties follows the merest breach under Regulation 13.22D which can put complying status of a SMSF investor at the mercy of the ATO.
1. Nevertheless a carefully implemented NGUT can be the most practical way to pursue unitised investment in land by related parties and unrelated parties of a SMSF with the SMSF.
2. Compliance with the regulations needs to be closely monitored as stated. Any debtor or creditor, aside from a bank for the (credit only) trust bank account, potentially causes loss of protection from related trust status. Funding of, and money flow to and from, the NGUT without breaching the rules is thus practically challenging. The trustee needs to raise equity (unit) funding whenever any extra funding is required. From a practical and paperwork burden perspective, using partly-paid units is a strategy that might be considered wherever the trust needs a flexible equity facility.
3. The activity of the NGUT that invests in land also needs to be monitored and carefully planned and structured. It is possible for real estate activity by trustees to be considered the carrying on of a business under tax rules. As stated a NGUT cannot carry on a business under the NGUT regulations nor, if it has a trust deed to suit, under its trust deed.
4. Under the special trust rules in NSW, a special trust pays land tax at the highest land tax rate without a threshold. A SMSF can attract a better land tax rate. A NGUT will not automatically qualify for the rate for a SMSF to the extent a SMSF invests in it. However if the NGUT is a "fixed trust" under the land tax rules then a better rate than the special trust rate can be achieved. Hence there can be advantage to structuring a NGUT with a trust deed so that the NGUT can be treated as a fixed trust under the land tax rules.
5. A carefully crafted trust deed can be very useful to assist the trustees of a SMSF and a NGUT to keep within the express requirements and restrictions on NGUTs.
Can I have the real estate in my SMSF?
Real estate can be provided in kind to a member as a superannuation benefit. Prohibitions can apply to acquisitions of real estate from members but this prohibition does not apply going the other way. That is: from a fund to a member on a payment out of the fund as a superannuation benefit.
Still a condition of release needs to be met before a superannuation benefit is provided by a SMSF. Let us say that the fund is in pension mode and the member is over the age of sixty-five so a condition of release is met for a benefit to come from the member's superannuation balance in the fund to the member.
Difficulties providing a real estate benefit from a SMSF in an income stream
A SMSF in pension mode must face these difficulties before releasing a benefit in the form of real estate:
the Australian Taxation Office (ATO), if not the superannuation laws unequivocally, require that a pension (a superannuation income stream) benefit must be paid in money and not in kind;
the benefit can take the SMSF out of pension mode, where the income of the SMSF is tax exempt on its earnings; and in to accumulation mode, where the fund is taxable at 15% on its earnings; depending on how the commutation of pension is done. This could inadvertently cause the capital gain, the SMSF makes on the disposal of the real estate as a benefit, to be taxable to the SMSF; and
the SMSF may not have paid a minimum annual pension payment for the year as required by the superannuation income stream regulations.
Partial commutation solution
A partial commutation of a pension is a work around for these difficulties. A partial commutation of a pension is a commutation of less than the member's pension balance in the fund as a lump sum. That is the member needs to have remaining member pension balance after the commutation. The ATO has indicated that a partial commutation:
being a lump sum benefit, as opposed to a pension benefit, can be paid in kind. In other words, by payment of the property of the superannuation fund;
does not lead to a cessation of the pension and so the SMSF can remain in pension mode and exempt from tax on its earnings including on capital gains; and
can count towards meeting the minimum annual pension payment for the year: Self Managed Superannuation Funds Determination SMSFD 2013/2 but only up to 1 July 2017. The member will thus need to have a sufficient remaining pension balance in the fund to meet the minimum pension benefit from that date.
Doing it
There are a number of traps to implementing this solution:
The governing rules of the SMSF must allow for partial commutations of pensions, the trustee must have a power under the governing rules to pay benefits in kind and the pension arrangements or agreement with the member must reflect this.
The member needs to trigger the partial commutation and the benefit in kind in accordance with the pension arrangements or agreement.
The trustee of the SMSF must value the real estate to ascertain the amount of the lump sum benefit being paid to debit to the member's account.
The member getting the real estate benefit must have a sufficient member account balance remaining after the debit to treat the satisfaction of the benefit in kind as a partial commutation of the pension.
The fund and conveyancing documentation needs to be prepared on an arms length basis as required under superannuation law.
Although there is no capital gains tax if the fund remains exempt from tax in pension mode, other taxes and duties on a transfer of real estate can still apply.
For instance:
GST can apply to the transfer of commercial premises or new residential premises from a SMSF where the fund is registered or is required to be registered for GST.
Stamp duty liabilities vary significantly from state to state. Victoria has concessions on the transfer of dutiable property to a beneficiary of a trust. In New South Wales there is generally no relief from full ad valorem duty. A concession which applies in New South Wales on the transfer of dutiable property to a superannuation fund as a contribution does not apply to a transfer out the other way as a benefit.
Thus, to recap our disclaimer, partial commutation of a pension to provide real estate from a SMSF should be considered case by case and specific advice should be taken in relation to the above general comments.


The Challenge dining chair is a study in the application of technology. The back-legs make up the frame for this sublime chair and have been shaped using the precision of both computer-programmed (CNC) 3-d machines and the hand work of master craftspeople and engineers. The result is a meticulously constructed piece of modern furniture. The juxtaposition of smooth curves and sharp edges gives the Challenge an elegant sculptural appeal.


Mike Dean has been appointed referee for Manchester City's televised home game against West Ham on Sunday.
It will be the first of nine games in an incredibly busy festive period for the Premier League leaders, which could put their title credentials to the test. It will also be the final home game before three away days on the bounce, and Pep Guardiola's men will hope to take maximum points from that fixture and the Southampton game preceding it.
Experienced official Dean has already taken charge of a City game this campaign, the 2-1 win over Bournemouth during which he handed out 10 yellow cards and controversially sent off Raheem Sterling for his celebrations after a late stoppage time winner.
Prior to that, his second-most recent appointment was at Stamford Bridge when he oversaw Chelsea's 2-1 win over Guardiola's side last season, giving the hosts a penalty which Willy Caballero saved before Eden Hazard netted the rebound.


You may be in your organization's C-Suite currently, or you may have upward mobility to be in the future. Regardless of where you are today, you are already empowered to be the Chief Executive Officer (CEO) for your Program (and/or Project). Join bestselling author Ms. Irene Didinsky "Author of the PMI endorsed 2017 released 'Practioner's Guide to Program Management' as she walks us through her ideology and framework for Program Management and how to mirror the impact, accountability and investment in your Program that a CEO has in their company.


Saying goodbye to a beloved pet is one of the most difficult things an owner can experience. However, a local veterinarian is trying to make the process easier on families and the pet.
Dr.Kim Parker is a veterinarian at West Park Animal Hospital. She founded the company A Gentle Farewell - an at home euthanasia service- in 2012. The only one like its kind in Ohio, A Gentle Farewell provides peace and comfort in a beloved pet's last moments.
"At home anyone can be around when they want they can have family members, extended family, other pets can be around to take part in the process and better understanding what's happening as their pet passes," said Dr. Parker.
Her service will take the pet and arrange the cremation. The company covers all of northeast Ohio, from Port Clinton to Ashtabula and south to Ashland and Youngstown. And yes, it will costs more than a visit to the vet based on distance and size of your pet, but peace of mind and comfort is priceless to many families.
For the families that must use the vet clinic, Animal Clinic Northview in North Ridgeville has a room dedicated to those saying goodbye.
"We have incorporated a special room that has it's own entrance in and out of the building when people are in a time of grief the last thing they want to do is marching thru a lobby," said Dr. Hutchison of the Animal Clinic in North Ridgeville.
The room is less sterile than an exam room, has a loveseat and cremation services are done on site.
"It's never an easy decision and the pain and grief are very real, but it's important to know more comfortable ways to say goodbye are available when the time comes," Dr. Hutchison said.
A Gentle Farewell made nearly 600 home visits this year. For more information on their services, click here.


text:
Mariana Sîrbu (* in Iași, Rumänien) ist eine rumänische Violinistin.

Leben
Mariana Sîrbu erhielt ersten Violinunterricht bei ihren Eltern. Anschließend studierte sie bei Ștefan Gheorghiu an der Academia Națională de Muzică in Bukarest. Schon bald nach Beginn ihrer Konzertkarriere wurde sie mit mehreren internationalen Preisen ausgezeichnet. Sie trat als Solistin u. a. in der Berliner Philharmonie, dem Teatro Colón (Buenos Aires), dem Sydney Opera House, dem Wiener Musikverein, dem Concertgebouw (Amsterdam), der Carnegie Hall und dem Lincoln Center (New York), dem Teatro alla Scala (Mailand) und der Suntory Hall (Tokio) auf und gastierte bei zahlreichen internationalen Musikfestivals.

1968 gründete sie das Quartetto Academica, 1985 wurde sie Mitglied des Trio di Milano (mit dem Pianisten Bruno Canino und dem Cellisten Rocco Filippini), 1994 gehörte sie zu den Gründern des Quartetto Stradivari. Von 1992 bis 2003 war sie Konzertmeisterin des Kammerorchesters I Musici.

Mariana Sîrbu spielt auf einer Violine von Stradivari ("Conte di Fontana", 1702), die früher David Oistrach gehörte.

Lehrtätigkeit
Bereits kurz nach ihrem Hochschulabschluss wirkte Mariana Sîrbu einige Zeit als Assistentin ihres Lehrers Stefan Gheorghiu in Bukarest; später unterrichtete sie an der Scuola di Musica di Fiesole in Florenz und gab Meisterkurse in Spanien, Italien, Frankreich, den Niederlanden, Deutschland, der Schweiz, Irland, Kanada, China und Japan. Seit 2002 ist sie Professorin für Violine an der Hochschule für Musik und Theater "Felix Mendelssohn Bartholdy" in Leipzig.

Mariana Sîrbu war oder ist Mitglied verschiedener internationaler Wettbewerbsjurys wie z. B. des Concorso Internazionale Triennale di Liuteria (Cremona), des Concorso Vittorio Gui (Florenz), des Kammermusikwettbewerbs Concorso Lorenzi (Triest), der Streichquartettwettbewerbe in Évian-les-Bains und Bordeaux und des Violinwettbewerbs George Enescu (Bukarest).

Aufnahmen
Sowohl als Solistin als auch als Kammermusikerin hat Mariana Sîrbu Schallplatten bzw. CDs eingespielt, darunter die Violinsonaten und das Tripelkonzert von Beethoven, die Violinsonaten von Enescu, die 12 Concerti L'arte del Violino op. 3 von Locatelli, die 12 Concerti op. 8 und weitere Violinkonzerte von Vivaldi sowie die Klaviertrios von Mendelssohn.

Auszeichnungen
 George-Enescu-Preis (Rumänien)
 Carl-Flesch-Preis (London)
 Maria-Canals-Preis (Barcelona)
 Vittorio-Gui-Preis (Florenz)

Weblinks
 Kurzbiografie auf der Website der Hochschule für Musik und Theater Leipzig

Klassischer Geiger
Musikpädagoge
Hochschullehrer (HMT Leipzig)
Rumäne
Geboren im 20. Jahrhundert
Frau

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text:
Became known the names of mentors of the fifth season of the show "the Voice"
At the end of August in Moscow will begin the first auditions to participate in one of the most popular musical projects in our country!
All, of course, wondering who will judge the show this time. And here is the mystery of the creators of the project opened…
As writes the edition "life!", in the fifth season of the chair of the jury will take the artists who have participated in other seasons of the show: Filipp Kirkorov, Leonid Agutin, Dima Bilan and Polina Gagarina. Refused to shoot only Alexander Gradsky and Pelagia. Last, we will remind, from-for pregnancy.
The fifth season of "the Voice" starts on the First channel at the beginning of September and will be completed traditionally in three months in December. The final will be one participant who will determine the winners.
In the first season of the show Dina Garipova won in the second – Sergey Volchkov, the third – Alexander Vorobiev, and in the fourth – hieromonk Photius.
In Russian show "the Voice" aired in 2012 and has become the equivalent of The Voice, which first appeared in 2010 on Dutch television.
In February of last year, "Voices" appeared children's counterpart, called "Voice. Children."
The scandal involving the father of Tata Bondarchuk will take the investigators
The star of "House-2" Zadoinov will become the hero of "the Bachelor"

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text:
American Football LP3 CD
Includes 16-page lyric and photo booklet.
Fifteen years after American Football's highly influential self-titled debut album (American Football), the band reunited (now as a four-piece, with the addition of Nate Kinsella) and recorded their long-anticipated second album, 2016's American Football (LP2). The release was widely praised, but the band members still felt like their best work was yet to come.
American Football (LP3) is contemplative, rich, expressive, yet with a queasy undercurrent. Featuring guest vocals from Paramore's Hayley Williams, Slowdive's Rachel Goswell, and Land of Talk's Elizabeth Powell, the album is heavy with expectancy, revealing its ideas slowly, eliciting the hidden stories people carry around with them. There was a determination to let the songs breathe, to trust in ideas finding their own pace.
The final result is a definite, and deliberate, stretching of the band - an enduring symbol of elusive emotional landscapes, where introspection can be as dramatic as confrontation.


Green smoothies are great meal replacements. Add in bananas and you will have your daily dose of carbs. A piece of fruit and vegetable here and there and you can meet your daily fiber and nutrient allowance for the day. Do you need protein? Throw in some nuts or seeds.
However, it can be difficult to whip up perfect smoothie all the time, so here are a few smoothie tips and tricks I've learned through years of blending.
Fruits blend better when frozen and you may get away from adding ice. Works best for fruits like bananas, pineapples, berries, papaya, and mangoes. Just remember to peel them first and slice before putting them inside the freezer.
And these frozen fruits will save you some time, too. Whenever I come home from my shopping trip, I cut a good part of the fruits I bought and freeze them for my smoothies… takes only 15-20 minutes and you'll have a week of smoothie ingredients ready for use.
Smoothie too thick? Pour in water, coconut water, nut milk of your choice, or freshly squeezed juice in small amounts. Smoothie too thin? Add in frozen fruits like peaches, mangoes, avocados or bananas. They are the best fruits to create a creamy, thick smoothie. Let the blender whirl for 20 to 30 seconds more.
Smoothie too bitter? Avoid using bitter tasting greens and opt for mild variations such as spinach and bok choy. Oranges, mangoes, and pineapples can add fruity sweetness to the blend. Banana does wonders in neutralizing bitter flavors, too. Or add some ground cinnamon or vanilla extract. Smoothie too sweet? Add some lemon juice or more greens to lessen its sweetness. Blend for 10 to 20 seconds more.
Most people find the following procedure the best when making smoothies. Put the liquid (water, juice, nut milk, etc.) and greens first, followed by frozen fruits, then the fresh fruits last. If you have a high speed, heavy-duty blender, a step by step approach is not needed. You can throw in everything at once.
Like most things, smoothie ingredients are at their best when fresh, not frozen, preserved, canned, or bottled. This applies to both solid (fruits, nuts, vegetables) and liquid (juices). Not only is the flavor better, but you also get more nutrients when taking in fresh produce.
FYI: exception to the rule, fresh veggies and fruits that are immediately frozen when purchased almost lose none of their beneficial nutrients.
Tea is great alone and it will do wonders to your smoothie aside from adding that distinctive taste. Start with green tea because it has a more neutral taste compared to the other variants.
Of course, you need to choose the healthy ones. Throw in a few avocado slices or a tablespoon of hemp/coconut/flax/avocado oil. Not only do these ingredients add to the great flavor, but they also add a few healthy calories to your smoothie and make sure nutrients from other foods get better absorbed. This makes it perfect for a pre-workout drink.
Recent dietary studies are pointing a judgmental finger on sugar as the root of all evil. Well, that's an exaggeration, but refined sugar is terrible for you.
Use nature's sugar instead from sweet ingredients like bananas, natural unsweetened pear juice, apple juice, grape juice, and pomegranate juice. You can also squeeze in a few drops of coconut nectar, raw honey, or maple syrup. Sweet!
Most people turn away from blending because they get bored with the usual smoothie ingredients and routines. In reality, the possibilities are endless. To beat boredom, throw in some exotic fruits like kiwi, papaya or dragon fruit. Coconut meat, goji berries, raw cacao nibs, moringa powder, Aloe Vera chunks, and fresh avocados work great, too.
These are my smoothie tips, but you need not stop here. Be daring. Experiment. Who knows? The next smoothie sensation may come from your own kitchen. Your tips and tricks are much appreciated in the comment box below!


text:
Q: nginx not restarting I installed nginx on my Ubuntu 18.04. After that I made some changes in the default file. Now I am trying to start it but I am getting following error:
$ sudo service nginx restart

Job for nginx.service failed because the control process exited with
error code. See "systemctl status nginx.service" and "journalctl -xe"
for details.

$ systemctl status nginx.service
nginx.service - A high performance web server and a reverse proxy
server    Loaded: loaded (/lib/systemd/system/nginx.service; enabled;
vendor preset: en    Active: failed (Result: exit-code) since Sat
2019-05-25 13:35:03 CDT; 19min a
     Docs: man:nginx(8)   Process: 3220 ExecStart=/usr/sbin/nginx -g daemon on; master_process on; (code   Process: 3219
ExecStartPre=/usr/sbin/nginx -t -q -g daemon on; master_process

May 25 13:35:01 lc2530hz nginx[3220]: nginx: [emerg] bind() to
0.0.0.0:80 failed May 25 13:35:01 lc2530hz nginx[3220]: nginx: [emerg] bind() to [::]:80 failed (9 May 25 13:35:02 lc2530hz nginx[3220]:
nginx: [emerg] bind() to 0.0.0.0:80 failed May 25 13:35:02 lc2530hz
nginx[3220]: nginx: [emerg] bind() to [::]:80 failed (9 May 25
13:35:02 lc2530hz nginx[3220]: nginx: [emerg] bind() to 0.0.0.0:80
failed May 25 13:35:02 lc2530hz nginx[3220]: nginx: [emerg] bind() to
[::]:80 failed (9 May 25 13:35:03 lc2530hz nginx[3220]: nginx: [emerg]
still could not bind() May 25 13:35:03 lc2530hz systemd[1]:
nginx.service: Control process exited, code May 25 13:35:03 lc2530hz
systemd[1]: nginx.service: Failed with result 'exit-cod May 25
13:35:03 lc2530hz systemd[1]: Failed to start A high performance web
serv lines 1-17/17 (END)

$ journalctl -xe
Defined-By: systemd
-- Support: http://www.ubuntu.com/support
--
-- Unit phpsessionclean.service has finished starting up.
--
-- The start-up result is RESULT.
May 25 13:42:32 lc2530hz systemd[1]: Starting Message of the Day...
-- Subject: Unit motd-news.service has begun start-up
-- Defined-By: systemd
-- Support: http://www.ubuntu.com/support
--
-- Unit motd-news.service has begun starting up.
May 25 13:42:32 lc2530hz systemd[1]: Started Message of the Day.
-- Subject: Unit motd-news.service has finished start-up
-- Defined-By: systemd
-- Support: http://www.ubuntu.com/support
--
-- Unit motd-news.service has finished starting up.
--
-- The start-up result is RESULT.
May 25 13:42:53 lc2530hz org.gnome.Shell.desktop[1989]: (/usr/lib/firefox/firefo
May 25 13:42:58 lc2530hz systemd-resolved[782]: Server returned error NXDOMAIN,
May 25 13:47:19 lc2530hz /usr/lib/gdm3/gdm-x-session[1855]: (II) event5  - PixAr
lines 1576-1598/1598 (END)

$  nginx -t
nginx: [alert] could not open error log file: open()
"/var/log/nginx/error.log" failed (13: Permission denied) 2019/05/25
14:01:03 [warn] 3564#3564: the "user" directive makes sense only if
the master process runs with super-user privileges, ignored in
/etc/nginx/nginx.conf:1 nginx: the configuration file
/etc/nginx/nginx.conf syntax is ok 2019/05/25 14:01:03 [emerg]
3564#3564: open() "/run/nginx.pid" failed (13: Permission denied)
nginx: configuration file /etc/nginx/nginx.conf test failed
zulfi@lc2530hz:/etc/nginx/sites-enabled$

/etc/nginx/sites-enabled$ cat default
##
# You should look at the following URL's in order to grasp a solid understanding
# of Nginx configuration files in order to fully unleash the power of Nginx.
# https://www.nginx.com/resources/wiki/start/
# https://www.nginx.com/resources/wiki/start/topics/tutorials/config_pitfalls/
# https://wiki.debian.org/Nginx/DirectoryStructure
#
# In most cases, administrators will remove this file from sites-enabled/ and
# leave it as reference inside of sites-available where it will continue to be
# updated by the nginx packaging team.
#
# This file will automatically load configuration files provided by other
# applications, such as Drupal or Wordpress. These applications will be made
# available underneath a path with that package name, such as /drupal8.
#
# Please see /usr/share/doc/nginx-doc/examples/ for more detailed examples.
##

Default server configuration
server {
    listen 80 default_server;
    listen [::]:80 default_server;

    # SSL configuration
    #
    # listen 443 ssl default_server;
    # listen [::]:443 ssl default_server;
    #
    # Note: You should disable gzip for SSL traffic.
    # See: https://bugs.debian.org/773332
    #
    # Read up on ssl_ciphers to ensure a secure configuration.
    # See: https://bugs.debian.org/765782
    #
    # Self signed certs generated by the ssl-cert package
    # Don't use them in a production server!
    #
    #
    include snippets/snakeoil.conf;

    root /var/www/html;

    # Add index.php to the list if you are using PHP
    index index.php index.html index.htm index.nginx-debian.html;

    #server_name_;

    location / {
        # First attempt to serve request as file, then
        # as directory, then fall back to displaying a 404.
        try_files $uri $uri/=404;
    }

    # pass PHP scripts to FastCGI server
    #   location ~ \.php$ {
    #   include snippets/fastcgi-php.conf;
    #
    # With php-fpm (or other unix sockets):
    #   fastcgi_pass unix:/var/run/php/php7.0-fpm.sock;
    # With php-cgi (or other tcp sockets):
    #   fastcgi_pass 127.0.0.1:9000;
    #            fastcgi_index index.php;
    #            include fastcgi_params;
    #}

    # deny access to .htaccess files, if Apache's document root
    # concurs with nginx's one  #
    #location ~ /\.ht {
    #   deny all;
    #}
}

# Virtual Host configuration for example.com
#
# You can move that to a different file under sites-available/ and symlink that
# to sites-enabled/ to enable it.
#
#server {
#   listen 80;
#   listen [::]:80;
#
#   server_name example.com;
#
#   root /var/www/example.com;
#   index index.html;
#
#   location / {
#       try_files $uri $uri/ =404;
#   }
#} user@lc2530hz:/etc/nginx/sites-enabled$

Somebody please guide me how to restart the nginx.

A: It seems as if your Port 80 is blocked. (nginx: [emerg] bind() to 0.0.0.0:80 failed)
Try:
sudo netstat -lntp | grep ":80"

to find out which process is blocking the port, kill the programm/service and restart nginx.
I'd also advice you to run nginx -t as the user nginx is running as, so the
nginx: [alert] could not open error log file: open() "/var/log/nginx/error.log" failed

gives you a clear indication on wether there actually is a problem writing the logfile. Running this as your standard user may lead to incorrect results if you don't have the same access rights as for example the http user.

A: First validate that the configuration files are valid:
sudo nginx -t

Apply the changes without restarting the Nginx service:
sudo nginx -s reload

If the changes are not applied immediately, restart the service with the following command (unlike the command used in the previous step, it will abruptly close all web client connections):
sudo systemctl restart nginx

In the extreme case, you can kill the process and start it again with:
sudo pkill -9 nginx && sudo systemctl start nginx

In some cases Nginx may fail to restart because some child processes or another process (Apache or httpd) are using port 80 or 443. In these cases I recommend stopping Nginx (sudo systemctl stop nginx) and validate if any process continues to listen in the port 80:
sudo netstat -ant | grep ": 80"

You can see more details with:
sudo lsof -i -P -n | grep ": 80"

To see the running processes more easily you can use htop.
When nobody is using the TCP/80 port, you can start Nginx again:
sudo systemctl start nginx

A: try this, it's for as root user check the service, disable, enable again and start.
sudo -i
systemctl check nginx
systemctl disable nginx
systemctl enable nginx
systemctl start nginx

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