The financial year coming to a close another year in your SMSF journey. With each year, it gets more interesting, with the property market continuing to boom, and the government announcing a raft of changes to shake up the superannuation sector. These changes are going to take effect from 1 July 2017. SMSF Trustees need to be ever more vigilant as the new rules may affect their members and their future planning and more importantly your retirement nest egg. Before we close off on 2017, let’s ensure we review our SMSF Strategy.
Non Concessional Contribution:
There are a number of changes that will impact your contribution strategy. 2017 is the last chance to bring forward a Non Concessional Contribution of $540,000 (given that you had not previously triggered bring forward rule). After 1st July 2017, the Non Concessional Contribution cap will have decreased from $180,000 to $100,000 ($300,000 bring forward) per member. However, for those with a member balance greater than $1.6 million in their super fund, will not be able to contribute over and above this cap.
From 1 July 2017, Concessional Contributions are being reduced to $25,000 no matter your age, so it is vital that you make sure your contributions have been received by your Super Fund before 30th June 2017 – don’t leave it to late. If you have a Salary Sacrificing agreement with your employer or you are making Personal Concessional Contributions to your Super Fund, you may need to review and adjust these contributions to ensure that you do not exceed the Concessional Contribution Cap. The current caps are $30,000 for those aged < 48 and $35,000 for those > 48. Exceeding your contribution cap will result in excess contributions.
Notice of Intention to Claim Tax Deduction:
If you are thinking of claiming a deduction in your Personal Tax Return via Personal Concessional Contributions in your Super Fund, remember that you will need to submit a “Notice of intention to claim a Tax Deduction.”
If eligible, the Government will contribution 50 Cents for every $1 of your Non Concessional Contribution. The co contribution will be allocated to a maximum of $500 per member. To be eligible for the full $500 Co Contribution, your income must be less than $36,021 and your Super Fund member balance is less than $1.6m and your Non Concessional Contribution Cap has not been exceeded.
A Tax Offset of 18% up to $3,000 Non Concessional Contribution for spouse is available if your spouse’s annual income is $10,800 or less and is completely phased out with an income above $13,800. At 1st July 2017, this threshold has been increased to $13,800 and will be phased out at $40,000, however, your spouse’s member balance must be less than $1.6m.
Re-balancing member balances can be achieved via Contribution Splitting. That is, you are able to split up to 85% of your Concessional Contributions into your Spouse’s accumulation balance. This split is made in the financial year after the year that you had received your Concessional Contribution and a “Superannuation Contribution Splitting Application” will need to be lodged with your Super Fund.
If you are in Pension Phase, you must ensure that your Super Fund has paid you a Minimum Pension, which is dependent on your age. If you are < 65 this will be 4% of your pension balance and this % will gradually increase as you get older.
In you have a Transition to Retirement Income Stream, you will also need to ensure that your Minimum Pension has been met. In addition, you must ensure that you have not withdrawn over 10% of your pension balance as this would contravene the SMSF rules. At 1st July 2017, earnings from assets supporting your TRIS will longer receive a tax exemption and will now be taxed at the concessional rate of 15%.
Given the introduction of $1.6m pension cap, you will need to know the current value of your assets before you make any non-concessional contributions in your Super Fund. In addition, if you suspect that your balance in approaching the $1.6m pension cap, you will need to consider having your Super Fund assets re-valued so you can make preparations to ensure that you a within the pension cap.
Do you have insurance in your SMSF? Are you still paying fees in an industry fund? It may be time to seek personalised advice on your insurance. Learn more about the ins and outs of SMSF Insurance.
Salary sacrificing is an arrangement between an employer and employee, where the employee agrees to substitute part of their future salary in return for the employer providing them with other benefits of a similar value.
Salary sacrificing can be a useful strategy to reduce your individual taxable income by sacrificing a portion of your salary into superannuation up to the maximum allowable concessional contribution cap. In superannuation, your wages are taxed at 15% compared to your individual marginal tax rate if received as a salary.
Consider using this strategy to salary sacrifice a portion of your salary or a bonus paid to you before year-end. Now is an ideal time to implement a salary sacrificing arrangement with your employer for the 2016/17 year to maximise your concessional contribution caps by sacrificing an additional portion of your salary into super each pay period.
Don’t leave it to the last minute – review your SMSF strategy now and seek advice from a SMSF Specialist to assist you with end of year superannuation planning. Contact us on 1300 790 110 or firstname.lastname@example.org to get a fresh perspective on your SMSF and GET YOUR SUPER MOVING….
Ivan Filipovic is a leading SMSF Specialist Advisor with Redwood. Ivan has over 17 years provides a range of services across all sectors of Self-Managed Superannuation, Wealth, Property and Finance with an emphasis on long term wealth strategies. Ivan provides detailed strategies at https://redwoodadvisory.com.au/. Ivan is a Chartered Accountant, ASIC registered auditor, Mortgage Broker and Licensed Property Professional.