Year End Considerations for Self Managed Superannuation Funds

With the end of the financial year fast approaching, now is the best time to be proactive and make sure you are on top of your SMSF compliance and strategies. There are a number of key year-end issues that should be reviewed prior to 30 June 2016.

Maximise Concessional Contributions Cap

The standard concessional contribution cap for 2015/16 is $30,000, however, if you were 49 years of age or over on 30 June 2015, you have a higher concessional contribution cap of $35,000.
Concessional contributions include:
• Employer’s super contribution (i.e. compulsory 9.5%);
• Salary sacrifice superannuation; and
• Personal Deductible Contribution.

As announced in the budget, the proposed concessional cap will be reduced to $25,000 from 1 July 2017 regardless of age.

Non-Concessional Contributions 

Whilst not a law, if you are wishing to make non-concessional contributions post budget, you will need to take into consideration all non-concessional contributions made to any of your Super Fund since 1 July 2007.
• The current non-concessional contribution limit of $180,000 will be replaced by a $500,000 lifetime cap.

Taking a Minimum Pension

• If you are in pension phase, ensure that you have withdrawn the minimum required pension by 30 June 2016. This is based on age and pension balance.
• Failure to meet your minimum pension can result in the fund losing the tax free status.
• If you are running a Transition to Retirement Pension, ensure you have not taken more than 10% of your pension balance.
• Minimum payments are based on age at the start of the year (or age when commencing a pension during the year), and for 2015/16 are below.
Age              Percentage factors
Under 65                  4%
65 to 74                    5%
75 to 79                    6%
80 to 84                    7%
85 to 89                    9%
90 to 94                   11%
Aged 95 or older     14%

Spouse Contributions

• If your Spouse earns less than $13,800 per annum and is less than 70 years of age, then you may be eligible for a tax offset of up to $540.
• Under the current 2015/16 tax rules, you may be able to claim an 18% tax offset on super contributions up to $3,000 that you make on behalf of your non-working or low income earning spouse.

Low Income Superannuation Contributions (LISC)

• The LISC is a payment made by the ATO of up to $500 per financial year to help low income earners save for their retirement.
• The LISC is 15% of the concessional contributions you or your employer makes during 2015/16 the financial year.
• To be eligible for LISC your adjusted taxable income must not exceed $37,000.

Market Valuation of Assets

• If your SMSF owns a property or artwork, the Superannuation Act now requires your fund assets to be valued at market value each year. Assets such as property and artwork should be re-valued regularly.
• The market value of assets should be used when preparing your fund's accounts, statements and annual return.

Collectibles & Personal Use Assets

Super Funds that hold collectibles and personal use assets must comply with specific rules for these types of assets from 1 July 2016 or dispose of these assets by 30 June 2016.The new rules that will come into effect from 1 July 2016 are as follows:
• The collectibles and personal use assets must be insured in the name of the fund within seven days of acquisition.
• The decision on where the items are stored must be documented and the written record kept for at least 10 years.
• The collectibles and personal use assets must not be stored in Trustee’s or any related party’s private residence.
• The collectibles and personal use assets must not be leased or used by a related party.

Government Co-Contributions

• If you earn less than $50,454 per annum and make a non-concessional contribution, the Federal Government will match every dollar you contribute to your Super Fund up to a maximum of $500 a year.
• The table below provides examples of how much the Government will co-contribute in line with how much you earn.

Your Total Income     Co- Contribution Available     Your Contribution
$35,454 or less                                  $500                                $1,000
 $50,454                                               $0                                      $0

Non–Commercial LRBA Loans

• Super Funds that have a related party loan or “BYO loan” as a part of a Limited Recourse Borrowing Arrangement (LRBA) must review the terms of the loan in accordance with “ATO ‘safe harbour’ guidelines for related party LRBA”
• The ATO has published a Practical Compliance Guideline on how to ensure such loans will be deemed as commercial so that the income from the LRBA is not treated as Non-Arms Length Income (NALI) and taxed at 47%.
• The ATO initially announced the date to comply with the rules was 30 June 2016. However, the deadline has now been extended to 31 January 2017.

Review Death Benefit Nominations and Wills

• Review your current Death Benefit Nominations (DBN) and Wills to ensure that they are valid and still in accordance with your wishes. It is important to understand that your Super balance does not form part of your Estate. It may be covered by the terms of your Will. However, it is the Trustee of your Super Fund who ultimately determines who will inherit the balance of your Superannuation.
• We suggest you speak to your Solicitor to review your Death Benefit Nomination and Wills.

Contributions Splitting

• Consider splitting contributions to your spouse and have some of your own contributions transferred into their Super Account, as long as they are under 65 years of age and not retired.
• Super contributions can only be split after the end of the financial year.
• You may elect to transfer to your spouse’s Super Account up to 85% of the gross concessional contributions.