With the end of the financial year fast approaching, now is the perfect time to ensure everything is in place for your clients SMSFs before 30 June. The following are some superannuation strategies that you might want to know more about to get the best results for your clients.
Before the end of the financial year you should:
- Review if your clients have any income available to contribute to their fund; and
- Review their total contributions to ensure they are below the caps.
Non-concessional (after tax) contributions are limited to $100,000 for the 2020 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 contribution penalties. Making sure you do not exceed the contribution caps will save you both money and time of dealing with excess contribution tax.
Contributions are included in a financial year if they are received by your fund during that year. This means that they must be in the SMSF’s bank account by 30 June. It’s always a good idea make contributions on either the 28th or 29th of June to ensure they are received by the fund prior to the end of the financial year.
Drawing superannuation pensions
For pension phase clients, you need to ensure the minimum pension has been paid to them for this financial year. Where these requirements have not been met the fund will be subject to 15% tax on the pension investments, rather than being tax free.
Personal superannuation contributions
Most people regardless of their employment arrangement, will be able to 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.
For clients wishing to claim a tax deduction for personal contributions, just let us know the amount for the claim and we will be able to prepare all the documents they will need to sign. As with any contribution, the claimed amount needs to be received by the fund before June 30.
SMSF fund expenses
It is important that any expenses are actually incurred or paid by the SMSF before 30 June to be deductible in the current financial year. The SMSF should always be paying for SMSF expenses.
Rebalancing accounts between spouses
The end of financial year is also the perfect opportunity to rebalance pension accounts between spouses, to ensure that super balance are as even as possible and the $1.6 million transfer balance cap is maximised for each member.
Transfer Balance Account Reporting (TBAR)
Fund that have commuted or commenced pensions within the financial year will need to lodge a TBAR report with the ATO. Our software will be able to track and prepare the electronic file for you to lodge over the tax agent portal to save you time in managing this yourself.
How can we help?
If you need assistance with any aspect of your end of year fund planning or reporting requirements, please feel free to give me a call to arrange a time to meet so that we can discuss your particular requirements and circumstances in more detail.