As 30th of June approaches there are many things Self Managed Superannuation Fund (SMSF) Trustees must consider to maintain a complying superannuation fund as well as take advantage of tax benefits available. I have listed below the top 10 that comes to mind.
The assets in your SMSF must be valued each financial year. Your accountant will need to report the market value of the assets in the SMSF’s financial statements for income tax purposes and your auditor will need to verify that the SMSF has not contravened any provisions of the income tax and superannuation laws. The valuation that you have arrived at must be based on objective and supportive data – refer to ATO publication “Valuation guidelines for SMSFs”.
You need to make sure contributions are received by your SMSF on or before 30 June – especially if contributions are made by electronic funds transfers as some transactions may not be credited into your SMSF’s bank account until the following business day.
If making a non-concessional contribution, check non-concessional contributions made during the previous two (2) financial years to see if the two year bring forward provision has been triggered. If it has it will affect the amount you can contribute in the current financial year.
The contribution caps for the current financial year (i.e. 1 July 2013 to 30 June 2014) are:
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* Please remember that only people who are aged under 65 at any time in the first year ofcontribution can bring forward two (2) years of non-concessional contributions and make threeyears worth of non-concessional contributions (i.e. a total of $450,000) in one year or over three years.
3. Employer contributions
Employers are required to make Superannuation Guarantee (SG) contributions by the 28th day of the month following the end of the quarter in which an employee’s salary was earned. An employee’s SG contribution for the June 2013 quarter (i.e. last financial year) may have been received by your SMSF around 28 July 2013 (i.e. current financial year). If so you will need to include the SG contribution in your concessional contribution cap for the 2013/2014 financial year.
4. Salary sacrifice contributions
If you have a salary sacrifice arrangement (SSA) with your employer to sacrifice your pre-tax wages for superannuation contributions, those SSA contributions are treated as concessional contributions. Check your records before contributing more concessional contributions to avoid exceeding your concessional contributions cap.
5. Tax deduction on your personal superannuation contributions
A tax deduction is restricted to self-employed people and people who either do not receive any superannuation support (e.g. retirees) or receive very limited superannuation support from their employer. They must also be aged under 75. If you are eligible to claim a tax deduction then you will need to lodge a “Notice of intention to claim a tax deduction” with your SMSF trustee before you lodge your personal income tax return. Your SMSF trustee must also provide you with an acknowledgement of your intention to claim the deduction. The amount claimed as a deduction will change the character of your original non-concessional contribution into a concessional contribution.
6. Spouse contributions
If you are intending to make non-concessional contributions for your spouse, you will need to make sure the contributions are received by your SMSF on or before 30 June in order for you to claim a tax offset on your contributions. The maximum tax offset that you can claim is eighteen per cent (18%) of non-concessional contributions of up to $3,000 (i.e. $3,000 x 18% = $540 maximum claimable). To claim the maximum tax offset your spouse’s income must be $10,800 or less in a financial year. The tax offset decreases as your spouse’s income exceeds $10,800 and cuts off when their income is $13,800 or more. Your spouse must be under 70 year of age. If your spouse is aged 65 to 69, they must be gainfully employed for at least forty (40) hours over thirty (30) consecutive days. You will also both need to be Australian residents for tax purposes and not be living separately and apart on a permanent basis at the time the contribution is made.
7. Contribution splitting
Concessional contributions that you have made into your SMSF can be split between you and your spouse. The requirement is that your spouse must not have reached their preservation age or if they have reached their preservation age, they need to be aged under sixty five (65) and not retired from the workforce. The maximum amount that can be split for a financial year is eighty-five per cent (85%) of the amount of concessional contributions made into your SMSF in that financial year up to your concessional contribution cap. You cannot split non-concessional contributions. If you are intending to do contribution splitting, you must make the split in the financial year immediately after the one in which your contributions were made. This means you can split concessional contributions you have made into your SMSF during the 2012/2013 financial year in the 2013/2014 financial year. You can only split contributions you have made in the current financial year (i.e. 2013/2014) if your entire benefit is being withdrawn from your SMSF before 30 June 2014 as a rollover, transfer, lump sum benefit or a combination of these. If you split your concessional contribution with your spouse, the full amounts of the original concessional contribution counts towards your concessional contribution cap. In addition, you cannot claim the superannuation spouse contribution tax offset for a contribution split to your spouse’s superannuation account.
8. Superannuation co-contribution
If you have made non-concessional contributions into your SMSF, the Commonwealth Government will match your contributions with a co-contribution of up to $500 per year if you are an eligible person. To be eligible you must earn at least 10% of your income from business and/or employment, be a permanent resident of Australia, and under 71 years of age at the end of the financial year. The government will contribute 50 cents for each $1 of your non-concessional contribution to a maximum of $1,000 made to your SMSF by 30 June 2014. To receive the maximum co-contribution of $500, your total income must be less than $33,516. The co-contribution progressively reduces for income over $33,516 and cuts out altogether once your income is $48,516 or more.
9. Low income superannuation contribution (LISC)
If your income is under $37,000 and you and/or your employer have made concessional contributions into your SMSF, you will be entitled to a refund of the 15% contribution tax up to $500 paid by your SMSF on your concessional contributions. To be eligible, at least 10% of your income must be from business and/or employment and you must not hold a temporary residence visa. To receive the refund, you need to make sure that the concessional contributions are received by your SMSF by 30 June 2014.
10. Minimum pension payments
If you are accessing an account-based pension from your SMSF, then you need to make sure that the minimum amount required to be paid under the superannuation law is paid from your SMSF by 30 June 2014 in order for your SMSF to receive tax exemptions. The minimum amount is determined by your age and the percentage value of your pension account balance at either the commencement date of the pension or 1 July each year. See the table below for your percentage value.
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There is no maximum pension payment amount required unless you are accessing your pension under the “Transition To Retirement” (TTR). The maximum amount that you can receive from your SMSF under TTR is ten per cent (10%) of your pension account balance. If you exceed the maximum limit under TTR, then your SMSF will not be entitled to tax exemptions.