With the end of the financial year (EOFY) getting ever closer, here are five questions you should answer before 30 June to help you get the most out of your self-managed superannuation fund.
By Paul Rickard
1. Can you make additional contributions to super?
If you can, consider making additional super contributions. Concessional contributions include your employer’s 9.5 per cent, any amount you salary sacrifice or, if self- employed, the amount you claim as a tax deduction. Non-concessional contributions are personal contributions – that is, amounts you contribute from your own savings.
Both concessional and non-concessional contributions are capped, as per the following table.
The normal age rules apply. Up to age 65, anyone can make a contribution. If you are between 65 and 75 years, then you must pass the work test, which is defined as working 40 hours over any period of 30 consecutive days.
For those working then, the easiest way to make an additional super contribution is probably going to be via salary sacrifice, so talk to your payroll office promptly.
If you are making a non-concessional contribution, consider whether it should be in your spouse’s name – evening out the super balances between spouses will make more sense if some of the mooted changes to super ever get made law.
2. About to turn 65 or want to make a big one-off contribution to super?
If you have some investments outside of super, or have received a large sum of money and want to make a big one-off contribution to super, then you can potentially access the “bring forward rule”.
Under this rule, you can bring forward the next two years’ worth of non-concessional contributions and contribute three times your non-concessional cap in one go – up to $540,000. A couple could effectively get $1,080,000 into super.
To do this, you must be 64 years of age or younger at the start of the financial year – so if you have turned 65, or about to, this financial year, you only have a few days left to access this rule.
3. Can you claim a tax offset for super contributions on behalf of your spouse?
This tax offset (rebate) has been around for years. If you have a spouse who earns less than $10,800 and you make a spouse super contribution of $3,000, you can claim a personal tax offset of 18% of the contribution, up to a maximum of $540.
The tax offset phases out when your spouse earns $13,800 or more. Effectively, your maximum rebatable contribution of $3,000 is reduced on a dollar-for-dollar basis for each dollar of income that your spouse earns over $10,800.
The offset is then 18 per cent of the lesser of the actual contribution or the reduced maximum rebatable contribution.
Your spouse’s income includes his or her assessable income, reportable fringe benefits and any (though unlikely) reportable employer super contributions.
4. Pensions – have you paid enough?
If you are taking an account-based pension, such as an allocated pension or transition to retirement pension, then you must take at least the minimum payment. If you don’t, then your fund will potentially be taxed at 15 per cent on its investment earnings, rather than the special rate of 0 per cent that applies to assets that are supporting the payment of a super pension.
The minimum payment is based on your age and calculated on the balance of your super assets as at 1 July. The age-based factors are shown below.
For example, if you were aged 66 on 1 July and had a balance of $500,000, your minimum payment is 5 per cent of $500,000 or $25,000. You can take your pension at any time or in any amount(s), but your aggregate drawdown must exceed the minimum amount and be taken by 30 June.
If you commenced a pension mid-year, the minimum amount is pro-rated according to the number of days remaining until the end of the financial year, and calculated on your balance when you commenced the pension.
5. Do you know the tax deductions your SMSF could claim?
There are a number of tax deductions that your super fund could claim. See our article on property SMSF tax deductions if you have a property in your SMSF.
If you don’t, there are still plenty of deductions available to the SMSF in accumulation mode. Your SMSF must be paying tax to claim a tax deduction.
If your fund is in pension, then you aren’t paying any tax and so there is no assessable income to be offset. Where a fund has one member in pension and one member in accumulation, or a member has both an accumulation and a pension account, then you will pro-rata the deduction according to the respective balances of the accumulation amount and the pension amount. Your accountant or actuary will advise you of the percentage that can be claimed.
Some of the expenses that are deductible include:
- the ATO Supervisory Levy
- insurance premiums for death and disability policies
- accounting and auditing fees
- costs of updating a trust deed to comply with the SIS Act
- investment adviser fees
- subscriptions to reports such as the Switzer Super Report
- administrative expenses such as bank fees, filing fees, etc.
Checklist for investing in your SMSF