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Personal Finance

Are you EOFY ready? Checklist for SMSF trustees

Seven items to review on the eve of the new financial year.

The clock is ticking for self-managed super fund (SMSF) trustees as the financial year-end fast approaches. Get your fund in shape by ticking off this checklist before June 30.

Plan contributions

Any contributions must be received by the fund’s bank account before the close of business on 30 June. If you are running late, post a cheque, since a cheque still counts, providing it is in the trustee’s hands before 30 June and there are sufficient funds in your personal account to cover it.

Maximise contributions up to the concessional contributions (CC) cap of $27,500 per year but be careful not to exceed the limit, unless you have carried forward concessional limits and a total super balance (TSB) under $500,000 as of 1 July, 2021.

“The sting has been taken out of excess contributions tax, but you don’t need additional paperwork to sort out the problem,” says SMSF specialist adviser Liam Shorte.

“Check employer contributions on normal pay and bonuses, salary sacrifice and premiums for insurance in super as they may all be included in the limit.”

If your TSB has been under $500,000 in previous financial years, consider making extra contributions using unutilised CC cap amounts. This measure applied from fiscal 2019, so potentially it is possible to make up to $75,000 of CC in a single financial year by using unused CC caps since July 1, 2018.

Consider also making non-concessional contributions (NCC). Up to $110,000 in NCCs can be made per year up to the age of 67 (this changes to 74 from July 1, 2022).

For example, one spouse who has used their transfer balance cap and has excess amounts in the accumulation phase could withdraw funds and recontribute to the other spouse with transfer balance cap space to start a retirement phase income stream. This can increase overall tax efficiency for the couple since more of their savings will be in the tax-free pension phase, according to Shorte.

Other options include co-contributions, where the government can make a contribution up to $500 for after-tax contributions to super, depending on income.

For couples, consider contribution splitting, particularly if one main income earner has a substantially higher balance. Contribution splitting is one of the key benefits of having an SMSF, allowing couples to maximise the benefits of super and equalise balances.

If one spouse has assessable income plus reportable fringe benefits of less than $40,000, consider making a spouse contribution to benefit from the tax offset.

Consider a downsizer contribution

If you have sold your home during the last year and are aged over 65, consider making a “downsizer” contribution of up to $300,000 for each member ($600,000 for a couple). From 1 July, 2022 the eligibility age for downsizer contributions will be lowered to 60 years.

The home must be in Australia, have been owned by you or your spouse for at least 10 years and the sale must be exempt or partially exempt from capital gains tax. A downsizer contribution does not count towards contribution caps or TSB, but does affect the transfer balance cap.

Remember your pension drawdown

For any pensions in an SMSF, the minimum amount must be drawn down before 30 June, otherwise the fund will not be eligible for special tax treatment. The Australian Taxation Office (ATO) has information on the minimum annual payment required.

SMSF trust deeds must satisfy the minimum pension standards, while the fund’s meeting minutes must detail that a member has requested to start a pension and met a condition of release.

Allocate SMSF costs

Any SMSF costs that have been paid by a member personally must be reimbursed, otherwise they will be treated as a contribution.

For example, if the member has paid an insurance premium held in the SMSF via his or her personal credit card, the cost must be reimbursed by the fund, otherwise it will affect the member’s contribution limit.

Check capital gains tax liabilities

“Review any capital gains made during the year and over the term you have held the asset and consider disposing of investments with unrealised losses to offset the gains made,” says Verante’s Shorte.

“If in pension phase, then consider triggering some capital gains regularly to avoid building up an unrealised gain that may be at risk to legislation changes.”

Update records

It is important to collate records of all such transactions and any other fund activities during the financial year, including ensuring that investments are in line with the SMSF’s stated investment strategy and trust deed.

Assets must be valued at market value each year, including property and collectibles.

Look ahead

The year-end period is also an opportune time to consider super planning for the year ahead. For example, if your TSB is set to exceed $1.7 million at 30 June, it could be worthwhile making a withdrawal to get back under the threshold. In the new financial year, you could consider putting this amount and more back into the fund, according to SMSF specialist Meg Heffron.

Shorte also recommends:

  • Ensuring you have a director’s ID, with the 30 November deadline fast approaching;
  • Review estate planning and loss of mental capacity strategies for the fund;
  • Review any SMSF loan arrangements.

With fiscal 2023 on the horizon, there has never been a better time to get your SMSF ready, amid renewed financial market volatility and the potential for yet more regulatory changes.

This is a financial news article to be used for non-commercial purposes and is not intended to provide financial advice of any kind. Opinions expressed herein are subject to change without notice and may differ or be contrary to the opinions or recommendations of Morningstar as a result of using different assumptions and criteria. 

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