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10 end of financial year tips for your SMSF

Anthony Fensom  |  09 Jun 2020Text size  Decrease  Increase  |  
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The end of another financial year is fast approaching and for self-managed super fund trustees there are several issues to address before 30 June, according to the experts.

1) Make early contributions

Current year contributions must be received by the SMSF prior to 30 June, however it is important to remember that the date on which the fund receives the payment is what counts.

Electronic fund transfers and BPAY can take several days to appear in your account, while clearing houses can hold onto funds for seven to 10 days before providing them to an individual super fund.

With this year’s deadline falling on a Tuesday, aim to make any payments by the previous Friday 26 June or earlier to avoid being caught out.

2) Review concessional contributions (CC)

In a move supported by the SMSF Association, the government has extended the ability to make contributions from age 65 to 67, together with raising the age limit for spouse contributions from 69 to 74.

If the total super balance on 1 July 2019 was under $500,000, consider using the “carry forward” CC cap before 30 June. Super fund members who did not use their $25,000 CC cap in fiscal 2019 can carry forward the unused amount on a rolling basis for five years.

Individuals under the age of 65, and those aged 65 to 74 who satisfy the work test or work test exemption rules, are eligible for carry-forward contributions.

3) Check non-concessional contributions (NCC)

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Thanks to regulatory changes, from 1 July the new age limit of 67 will apply to NCC without meeting the work test. This gives trustees the option of providing up to $100,000 per year in such contributions prior to turning 67.

Parliament is this month also considering legislation that would allow the use of the “three year bring forward rule” up to age 67.

With shares and cash investments both hit by the COVID-19 pandemic, it could be timely for personal tax reasons to move some of these assets into super.

4) Free money from Canberra

For low or middle-income earners, the government offers a co-contribution of up to $500 to boost super balances depending on various eligibility requirements.

The Australian Taxation Office website offers a super co-contribution calculator to help estimate entitlement and eligibility, depending on income and personal super contributions.

5) Boost your spouse’s super balance

The recession caused by COVID-19 has hit many families, making it particularly timely to review super balances.

Should you and your spouse have vastly different super accounts, consider submitting a request to split some of your super contribution with your spouse. Requests need to be made by 30 June of the financial year after the contributions were made, so it is possible to split fiscal 2019 contributions if you lodge a request before the end of this month.

If your spouse has assessable income plus reportable fringe benefits of below $13,800 for the full $540 tax offset or up to $40,000 for a partial offset, consider making a contribution to their super fund. Check the eligibility requirements via the ATO’s website.

6) Check the work test

Under the work test rules, members aged over 65 but under 75 are required to have been “gainfully employed” for at least 40 hours in 30 consecutive days during fiscal 2020 before the SMSF can accept contributions.

But this age has now been raised to 67 as of 1 July. This provides an additional opportunity for those approaching retirement or who have recently retired to implement voluntary super contribution strategies over a longer timeframe than was previously possible.

7) Review insurance and other payments

The rules on default insurance cover changed on 1 April and it is possible some members will have lost cover if they did not opt in for insurance. Under the new rules, insurance is only available to new fund members aged under 25 or with a balance below $6,000 before opt-in.

It is also important to check for amounts that may be defined as a super contribution under TR 2010/1, such as expenses paid on behalf of the fund, debt forgiveness or insurance premiums for cover via super paid from outside the fund.

8) Pension plans and concessions

If you are planning on claiming a tax deduction for personal concessional contributions, it is necessary to have a valid “Notice of intent to claim or vary a deduction for personal super contributions” (NAT 71121).

If you intend to start a pension or plan to make a lump sum withdrawal from your fund, this notice must be lodged first.

If you are already in pension phase, as part of the government’s COVID-19 response the minimum annual payments for fiscal 2020 and 2021 have been reduced by 50 per cent for:

  • account-based pensions and annuities,
  • allocated pensions and annuities
  • market-linked pensions and annuities.

9) Get the strategy right

This will be the year of the SMSF investment strategy, so sit down and review yours to ensure it reflects what is happening in your fund,” says SMSF specialist adviser Liam Shorte.

“Make sure it will satisfy ATO and auditor scrutiny as this will be a red flag this year.”

10) More key tips

Shorte, director at Verante Financial Planning, also suggests the following:

  • If you have provided rental relief to a tenant, related or otherwise, get it documented before 30 June
  • Consider having an enduring power of attorney put in place to ensure someone can step into your shoes in the worst case scenario
  • Review share portfolios to see if you should trigger any tax losses in accumulation accounts before EOFY
  • Finding it all too hard? Consider your advice needs and/or exit strategies.

is a Morningstar contributor.

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