After taking a policy of stability for superannuation to the election, the Coalition Government has been re-elected in the 2019 Federal Election, with a small majority of seats in the House of Representatives.
After the introduction of the significant legislative changes which came into effect on 1 July 2017, you may be relieved to hear that for at least the next three years we hope to have sustained stability for super. You may also be relieved to hear the proposal to ban refunds for excess franking credits and other superannuation changes will not be implemented. This means you can focus on managing your financial needs rather than worrying about changing rules.
Before the election, the Coalition did announce tweaks to the superannuation system that we anticipate will be implemented by the Government including:
- Guaranteeing no new taxes on superannuation.
- Greater flexibility for retirement contributions.
- From 1 July 2020, Australians aged 65 and 66 will now be able to make voluntary superannuation contributions, both concessional and non-concessional, without meeting the work test. Previously, this was only available to individuals below 65.
- This also includes extending access to the bring-forward arrangements to individuals aged 65 and 66 which allows individuals to make three years’ worth of non-concessional contributions to their super in a single year.
- The age limit for individuals to receive spousal contributions is increasing from 69 to 74.
- Reducing red tape for superannuation funds — exempt current pension income (ECPI) changes.
- The Government will streamline administrative requirements for the calculation of ECPI.
- Reducing costs for the super industry by including superannuation release authorities in electronic SuperStream Rollovers.
- The Government will provide $19.3 million over three years beginning in 2020-21 to the Australian Taxation Office (ATO) to send electronic requests to superannuation funds for the release of money required under a number of superannuation arrangements.
- Retaining limited recourse borrowing arrangements (LRBAs).
- Increasing the maximum number of SMSF members from four to six.
With the end of financial year now fast approaching and certainty with the Government and its super policies, it is time to ensure everything is in place for your SMSF before 30 June. We have compiled some strategies that you may like to consider and ensure the plans you have in place are the best for you and your SMSF.
For Members in Accumulation Phase
Before 30 June you should:
- Check what your Total Superannuation Balance (TSB) was on 30 June 2018;
- Review if you have any income available to contribute to your fund; and
- Review your total contributions to ensure they are below the caps.
Note: Your TSB is used to track and limit the amount of savings you can have in the super system. A TSB consists of all your accumulation phase and retirement phase benefits, across all your super funds, if relevant. If your TSB was $1.6 million or more on 30 June 2018, you are not eligible to make any non-concessional contributions in the current financial year. However, you can still make concessional contributions regardless of your TSB.
Non-concessional (after tax) contributions are limited to $100,000 for the 2019 financial year and concessional (before tax) contributions are limited to $25,000.
Members under 65 years of age have the option of contributing up to $300,000 over a three-period depending on their total super balance. Transitional arrangements also apply to individuals who brought forward their non-concessional contribution caps in the 2016-17 financial year.
Anyone making large superannuation contributions should exercise extreme care to avoid excess contributions. Making sure you do not exceed the contribution caps will save you both money and time of dealing with excess contributions. We strongly advise you to contact us before making any large contributions to super.
Personal superannuation contributions
Most people, regardless of their employment arrangement, can claim a deduction for personal super contributions they make to their fund until they turn 75. Individuals who are aged between 65 and 75 will need to meet the work test to be eligible to make a contribution and claim the deduction.
If you wish to claim a tax deduction for personal contributions, you must complete and lodge a notice of intent with your fund before June 30 and have this notice acknowledged (in writing) by your fund. For our SMSF clients, this documentation is prepared for you.
Don’t leave your contributions to the last minute
Contributions are included in a financial year if they are received in your fund’s bank account by 30 June. With 30 June falling on a Sunday this year, it would be prudent to make your contributions by Wednesday 26 June to ensure they are received by your fund prior to the end of the financial year.
For super funds other than SMSFs we would suggest making them even earlier – by Monday 17 June as retail and industry funds take extra time to process contributions, even though the payment may have been received by 30 June. This is particularly important if you plan to claim a tax deduction for any of your contributions.
Further, please check the payment methodology required by your particular fund as they typically have specific BPAY codes or electronic funds transfer instructions for different types of contributions and it is problematic to have the contributions reallocated after year end if you use the wrong code or EFT account.
Super tip for employers
Employers only receive a tax deduction for making their employee SG contributions in the same financial year in which the SG contributions are received by the super fund. Therefore, please ensure you make your payments well before 30 June, we suggest no later than Monday 17 June, if you want to claim a deduction for them in the current financial year.
Otherwise, please ensure the June 2019 quarter contributions are paid by 28 July 2019. Missed payments may attract the super guarantee charge (SGC), which is not tax-deductible.
If you meet the relevant work tests and earn less than $52,697, it is also worth considering if you can take advantage of the Government super co-contribution whereby the Government will match your non concessional contributions up to a maximum of $500.
If your partner earns less than $37,000 a year it is worth considering making a contribution to their super account of at least $3,000 as you may be eligible for a maximum tax offset of up to $540 ($3,000 x 18%) against your personal tax liability. The offset reduces as your partner’s income increases above $37,000 and phases out at $40,000 p.a.
Limited recourse borrowing arrangements
If your fund has acquired property using a limited recourse SMSF loan, please ensure you have met the minimum principal and interest repayments required for the current financial year before 30 June.
SMSF fund expenses
For members in the accumulation phase, it is important that any expenses are actually incurred or paid before 30 June to be deductible in the current financial year.
For Members in Pension Phase
Drawing super pensions
If you are in pension phase, you need to ensure the minimum pension has been paid to you for this financial year. Where these requirements have not been met your fund will be subject to 15% tax on your pension investment earnings, rather than being tax free. For our SMSF clients, please contact us if you are not sure of your minimum pension requirement for 2018/19.
Rebalancing accounts between spouses
The end of financial year is also the perfect opportunity to rebalance pension accounts between spouses, to ensure that super balances are as even as possible and the $1.6 million transfer balance cap is maximised for each member. Please contact us if this is of relevant interest to you and we can properly advise if this can be done for you.
How can we help?
If you have any questions or would like advice to ensure you and your fund are well prepared for the end of the financial year and beyond, please contact our team of super advisors on +61 2 9981 2300 or using the below button.
Disclaimer: This article contains general advice only and has been prepared without taking into account particular objectives, financial circumstances and needs. The information provided is not a substitute for legal, tax and financial product advice. Before making any decision based on this information, you should assess its relevance to your individual circumstances. The information provided is objectively ascertainable and therefore does not constitute financial product advice. If you require personal advice, please contact us to arrange an appointment with one of our licensed SMSF advisors.