The Coalition Government has been re-elected in the 2019 Federal Election, with a small majority of seats in the House of Representatives, after taking a policy of stability for superannuation to the election.
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 that 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.
- Reducing red tape for superannuation funds — exempt current pension income (ECPI) changes.
- Reducing costs for the super industry by including superannuation release authorities in electronic SuperStream Rollovers.
- Retaining limited recourse borrowing arrangements (LRBAs).
- Increasing the maximum number of SMSF members from four to six.
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.
Increasing the age limit for individuals to receive spousal contributions from 69 to 74.
The Government will streamline administrative requirements for the calculation of ECPI.
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.
With the end of financial year now fast approaching and certainty with the Government and its super policies it is the time to ensure everything is in place for your SMSF before 30 June. I have compiled some strategies that you may need to consider and ensure the plans you have in place are the best for you and your SMSF.
Before 30 June you should:
- Review if you have any income available to contribute to your fund; and
- Review your total contributions to ensure they are below the caps.
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.
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.
Drawing superannuation 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 investments, rather than being tax free.
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 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. Any contribution also needs to be received by your fund before June 30.
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.
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.
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.
Transfer Balance Account Reporting (TBAR)
Funds that were paying a pension during 2018-19 may need to complete and lodge a Transfer Balance Account report with the ATO. The date of when you have to report depends on the size of your superannuation balance.
With a deep understanding of the links between our clients’ personal and professional lives, Kelly+Partners offers a coordinated solution across a range of financial services: accounting, tax, superannuation, wealth management, finance, estate planning assistance and family office services.