With the end of the financial year quickly approaching, now is a good time to check that you have met all your minimum obligations for your Self-Managed Superannuation Fund (SMSF). Here is a checklist of some of the important matters you should consider before 30 June 2019.
1. Has your SMSF met its minimum pension payments?
As in previous years, the Australian Taxation Office (ATO) continues to keep a close eye on SMSFs claiming the exempt current pension income (ECPI) exemptions. In order to claim this for the 2018-19 financial year, the minimum pension payments must be withdrawn from the fund’s bank account prior to 30 June 2019. Please be mindful that 30 June falls on a Sunday this year. Accordingly, we recommend that the payment be made by no later than Friday 21 June 2019 to allow for bank processing times.
If the minimum pension payments are not withdrawn in time, the fund will not be able to claim the ECPI and will instead have to pay up to 15% tax on the income from the pension assets. This could be a costly mistake!
The minimum pension is calculated by multiplying the pension account balance as at 1 July 2018 by the percentage applicable to the individual’s age, based on your age at the beginning of the financial year:
|Age at 1 July 2018
|95 or more
2. Have you maximised your contributions?
2019 contribution caps
When making contributions into superannuation, it’s important to ensure you do not exceed your caps, as this may result in additional tax to pay. The contribution caps for the 2019 financial year remain the same as the 2018 year, being:
|Type of contribution
Bring forward non-concessional contributions
The bring forward cap for non-concessional contributions still applies for those under 65 and remains at three times the non-concessional contribution cap.
*Subject to bring forward rules and the individual’s Total Superannuation Balance being less than $1,600,000.
Carry-forward concessional contributions
The ‘carry-forward concessional contribution’ rules allow an individual to carry forward any unused portion of their concessional contribution cap in a given year on a rolling basis for up to five years, provided their total superannuation balance at the end of 30 June of the previous income year is less than $500,000.
If the first income year unused concessional caps are carried forward is the current year ending 30 June 2019, the first income year additional concessional contributions can be made in respect of unused concessional contribution cap amounts will be the year ending 30 June 2020.
For example, if in the 2018–19 financial year the concessional contributions cap is $25,000 and you contribute $15,000, you will be able to carry-forward your remaining $10,000 for the next five years (if your total superannuation balance is less than $500,000 on the 30 June of the year prior to your contributions).
Timing of contributions
To secure a tax deduction for any concessional contribution for the year ending 30 June 2019, remember that all contributions must be received into the super fund’s bank account by 30 June 2019. This applies to employers making contributions on behalf of employees and for individuals who make a concessional contribution with the intention of claiming it as a deduction in their personal tax return.
As 30 June falls on a Sunday this year, it would be advisable to make any final contributions at least one week in advance, to allow for processing time. This would be particularly prudent where the superannuation fund uses a clearing house facility to process the contributions.
Remember that if you are 65 years old or older, you must meet the ‘work test’ before making any contributions to your fund. This means you must work at least 40 hours in a 30 consecutive day period before you can make contributions.
3. Have you considered other strategies to maximise contributions?
You can split up to 85% of your concessional contributions to your spouse as a means of boosting their super balance. This may be a useful strategy if your spouse does not have much in super, or if you are keen to equalise your balances as you both approach retirement age. There are some restrictions to this, which include:
- You can only split 85% of your concessional contributions from the prior year
- You can only split concessional (taxable) contributions
- Your spouse must be under preservation age, or must be under 65 years of age and not be retired.
Government superannuation co-contribution
The Government continues to make a tax-free co-contribution to your superannuation fund if you satisfy a number of conditions. The maximum co-contribution is currently $500 for a non-concessional contribution of $1,000 made to a superannuation fund. If the non-concessional contribution is less than $1,000, the co-contribution will be half of the non-concessional contribution amount.
Low income superannuation tax offset
An individual with an adjusted taxable income of $37,000 or less will be entitled to a low income superannuation tax offset payment to their superannuation fund, which is calculated at 15% of the total concessional contributions made on their behalf in the income year, up to $500.
Spouse superannuation tax offset
An individual may claim the maximum tax offset of $540 for superannuation contributions they make to an eligible superannuation fund of their spouse (married or de facto) if the sum of the spouse’s assessable income, total reportable fringe benefits amount, and reportable employer superannuation contributions is $37,000 or less. The amount of the offset progressively reduces when that income exceeds $37,000 and completely phases out when the income reaches $40,000.
However, the individual will not be entitled to the tax offset if their spouse has exceeded their non-concessional contribution cap for the year ($100,000 for the year ending 30 June 2019), or the spouse has a total superannuation balance from all of their superannuation accounts equalling or exceeding their total super balance cap of $1.6 million immediately before 1 July 2019.
Superannuation is a complex area, and implementing the right actions and strategies before 30 June is vital to ensure your superannuation savings are maximised. If you require any assistance, BDO’s Superannuation team is here to help. Don’t hesitate to contact your local adviser to seek assistance and ensure your savings are working for you.
Before making any investment or financial decisions you should consider, with or without the assistance of a professional adviser, your particular objectives, and financial circumstance or needs.
The information contained in this article is purely factual in nature and does not take into account your personal objectives, financial situation or needs. The information is objectively ascertainable and, therefore, does not constitute financial product advice.
Further, the above information is provided as an information service only and, therefore, does not constitute financial product advice and should not be relied upon as financial product advice. If you require personal advice that takes into account of your particular objective, financial situation or needs, you should consult your BDO adviser who will be able to assist you in their capacity as Australian Financial Services licensee.