by Alex Polorotoff
The concessional contribution cap is currently $25,000. This applies to all concessional contributions, even if they are made to different funds.
This is the first year a member might be entitled to contribute more than the cap. If the Total Super Balance (TSB) for a member on 30 June of the previous year was less than $500,000 then they can carry forward any unused amounts in the cap from the previous year.
The non-concessional contribution (NCC) cap is currently $100,000 however, if a member’s TSB is greater than or equal to $1.6 million on 30 June of the previous year, their NCC cap is nil.
If a member is under 65 they might be eligible to make NCCs in excess of the cap by utilising the ‘bring-forward’ option, assuming they didn’t already trigger this in the past two years. This is determined by the TSB at the end of the previous financial year. If the member wants to bring-forward two years of NCCs ($200,000 this year), their TSB at the end of the previous year must be less than $1.5 million and if they want to bring-forward three years ($300,000 this year), their TSB needs to be less than $1.4 million.
The minimum amount needs to be withdrawn from pension accounts before 30 June. The minimum rate has been halved for this year and the next for most types of pensions.
Payments from transition to retirement pensions cannot exceed 10% of the opening balance. These are deemed to be an accumulation phase pension account and so, ECPI cannot be claimed as it usually is with retirement phase pensions. This may change however if the member has met a nil cashing restriction during the year, giving them the option to change it to a retirement phase pension.
Where a member has withdrawn more than their minimum, the excess withdrawals could be treated as lump sum payments from their accumulation account. This will help preserve their pension balance. If the member doesn’t have an accumulation account, they could still be treated as commutations from their existing pension, to reduce the balance in their transfer balance account.
Payment summaries need to be issued for members receiving benefit payments, where they are under 60 at the time of the payment, by 14 July. However, they don’t have to be lodged with the ATO until 14 August.
Funds are required to value all assets, at the end of each year, at their market value. Certain investments, such as collectibles, property and unlisted securities, may require a formal valuation from an authorised, independent valuer. Given the nature of the valuation, they can take some time to prepare so should be done well in advance of the fund’s accounts being finalised.
Obtaining valuations early is vital, as it can also impact a member’s ability to make certain contributions and start a pension. It can also provide provide time to review in-house assets, should they exceed 5% of the gross asset value of the fund.
Realised capital gains and losses
Where funds have significant realised capital gains and are substantially in accumulation phase, realising capital losses before 30 June can assist with optimising the fund’s capital gains tax position. The ‘wash sale’ rule should be considered though, as it applies where the cost base of an asset is adjusted, say through a sale and purchase of the same asset, but there’s no change in the investment portfolio.
If the fund has significant realised capital losses and is wholly in pension phase, then commuting a small portion back to accumulation will allow the fund to carry forward those losses. An actuarial certificate will also be required.
Investment strategies need to comply with ATO requirements, including ensuring the asset allocation of the fund is in-line with the strategy. This is now of particular importance as auditors are required to lodge a contravention report if the strategy does not meet these requirements for multiple years.
If the fund invests in derivatives, a derivative risk statement is required.
Death benefit nominations
Death benefit nominations should be reviewed regularly to ensure they are still valid and appropriate to the wishes of the members.
If there are exceptional or unforeseen circumstances that impact the ability to lodge the SMSF Annual Return by the due date, a lodgement deferral can be lodged with the ATO. This must be done using the approved ATO form otherwise it may be rejected. During peak periods, such as now, this process can take up to 28 days so should be lodged well before the due date.
We have recently published a number of other articles on our website which can be found in the Resources section. Of particular interest are the articles which discuss the reduction in minimum pension rates for this year and the next, early release for those impacted by COVID-19 and the potential ramifications of having a non-complying investment strategy.