Over the past year, individuals have been overloaded with information on how the state of the world will impact their personal financial situation. As a result of all this ‘noise’, you may have missed important changes and updates to superannuation and how they will affect you in the future.
Since February 2020, the Australian Taxation Office (ATO) has issued alerts to Self-Managed Superannuation Fund (SMSF) trustees via email and SMS when changes are made to the SMSF’s records held with the ATO, including:
- Financial institution account details
- Electronic service address
- Authorised contacts
Unfortunately, the ATO alert does not provide any detail about what changes were made to the SMSF’s records.
The ATO alert is not a hoax or scam and is a legitimate form of communication from the ATO.
Nevertheless, we encourage all SMSF trustees to exercise caution when opening unsolicited emails or SMS messages from unknown sources. If you are unsure about the validity of the email or message, we encourage you to contact the ATO directly.
SMSF auditors received a lot of media attention following new and updated independence guidelines issued by the Accounting Professional & Ethical Standards Board (APESB) about how SMSF audits must be conducted.
SMSFs must be audited each year, and the auditor must be independent from both the fund and the accountant or administrator who prepares the financial statements. Many service providers have historically conducted accounting and audit services within the same firm, ensuring separate service lines and Partners are responsible for each function.
Where BDO has traditionally prepared a SMSF’s financial report and audit function, we will be engaging with appropriately qualified independent auditors on behalf of our clients.
From a SMSF trustee’s perspective, we will ensure the transition (if applicable) is seamless and exceptional service is maintained by working with the auditor and SMSF trustee.
We are well placed to prepare the SMSF’s financial reports and facilitate the audit process, including assisting the trustee in responding to the auditor in a timely manner.
SMSFs are required, by law, to be audited annually and the SMSF Annual Return cannot be lodged with the ATO until the audit is complete.
Minimum pension drawdown requirements
For the year ending 30 June 2021, the Federal Government has halved the minimum pension drawdown requirements. The reduced pension drawdown is aimed at helping preserve the capital in an individual’s retirement savings and avoid crystallising potential capital losses.
Age at 1 July*
Minimum pension percentage factor for the years ending 30 June 2020 and 30 June 2021
Standard minimum pension percentage factors
Under age 65
95 or more
It is timely to remind trustees that the fund’s assets should be at market value and the minimum drawdown should be paid in cash from the fund’s bank account before 30 June 2021.
The concessional contributions cap is likely to increase from $25,000 to $27,500 from 1 July 2021, which means the non-concessional contributions cap will rise to $110,000 and the maximum two-year bring-forward amount will increase to $330,000 (subject to the Work Test and the individual’s Transfer Balance Cap).
Your BDO adviser will be able to assist in determining the nature and amount of superannuation contributions you can make for the year ending 30 June 2021.
Individuals under the age of 67 are eligible to make voluntary superannuation contributions without needing to meet the Work Test1. This is an increase to the previous requirement of needing to be under the age of 65, and is designed to progressively align the Work Test with the eligibility age for the age pension (currently legislated to increase from age 66 to age 67 for both men and women by 1 July 2023).
1The Work Test requires an individual to work at least 40 hours in 30 consecutive days in the financial year to be eligible to make non-mandated concessional or non-concessional contributions, subject to the individual’s transfer balance cap.
Transfer balance cap indexation
The general transfer balance cap will be indexed to $1.7 million (currently $1.6 million) from 1 July 2021.
When the general transfer balance cap is indexed to $1.7 million, there will no longer be a single cap that applies to all individuals with a retirement phase income stream.
Each individual will have their own personal transfer balance cap of between $1.6 million and $1.7 million, depending on their circumstances.
To understand how this might impact your retirement savings, contact your BDO adviser.
SMSF trustees that own property either directly or via a unit trust structure should consider if the value of the property has been impacted by all of the events in 2020 (including bushfires, floods and the COVID-19 pandemic).
Now is a good time to obtain a new independent valuation or appraisal if your fund has an interest in real property. If you’d like to discuss this, contact your BDO adviser.
To ensure your SMSF remains compliant with current superannuation legislation, we recommend a SMSF’s Trust Deed be reviewed regularly and kept up to date with all of the recent changes.
Treasury Laws Amendment (Self-Managed Superannuation Funds) Bill 2020 was introduced to Parliament on 2 September 2020. Once passed, this law will increase the maximum number of members that SMSFs and Small APRA Funds (SAF) can have, from four to six.
If you have any concerns or questions about these changes and the impact they will have on your situation, please contact a BDO Superannuation adviser today.