This article was originally posted 01 June 2020, and was updated 24 June 2021.
The end of the financial year is approaching quickly, but there is still time to ensure your Self Managed Super Fund (SMSF) is ready for the year ahead. Our team of experts has prepared a checklist of the important matters you should consider before 30 June 2021.
Have you met your minimum pension payments?
Your minimum pension payment must be withdrawn from your fund's bank account before 30 June 2021. The Australian Taxation Office (ATO) continues to monitor SMSFs claiming the Exempt Current Pension Income (ECPI) exemptions, as they have done in previous years. If the minimum pension payment is not withdrawn before the financial year-end, the fund will be unable to claim the ECPI. As a result, the fund will have to pay up to 15% tax on income generated from pension assets, which could be a costly mistake.
As a continuation of the COVID-19 stimulus measures announced in March 2020, the Federal Government extended a 50% reduction in the minimum pension requirements. This concession will apply for the 2020, 2021 and 2022 financial year to allow trustees flexibility when it comes to managing their superannuation assets.
Your minimum pension is calculated by multiplying your pension account balance as at 1 July 2021 by the percentage prescribed in Schedule 7 of the Superannuation Industry (Supervision) Regulations (see table below).
|
Age at 1 July of the relevant financial year |
Standard minimum percentages |
Reduced minimum percentages Applicable for 2019/2020 and 2020/2021 and 2021/2022 |
|
Under 65 |
4% |
2% |
|
65-74 |
5% |
2.5% |
|
75-79 |
6% |
3% |
|
80-84 |
7% |
3.5% |
|
85-89 |
9% |
4.5% |
|
90-94 |
11% |
5.5% |
|
95 or more |
14% |
7% |
The minimum payment amounts as determined under Schedule 7 are rounded to the nearest ten whole dollars.
Remember that some banks require several days' notice when processing transactions. We recommend withdrawing your pension payments by no later than 25 June 2021 to avoid issues.
Have you maximised your contributions?
2021 contribution caps
When making contributions into your superannuation account, you must not exceed your contribution caps. If the caps are exceeded, you may have to pay additional tax. The contribution caps for the 2021 financial year remain the same as the 2020 financial year.
|
Type of contribution |
Cap |
|
Concessional (pre-tax) |
$25,000 |
|
Non-concessional (after-tax) |
$100,000 |
Bring forward non-concessional contributions
The bring-forward cap for non-concessional contributions still applies for those under 65 years of age*. This cap is three times the non-concessional contribution cap, which remains the same as prior years.
*Subject to bring forward rules and the individual's Total Superannuation Balance being less than $1,600,000.
Timing of contributions
All concessional contributions made to the fund for this financial year must be received by the fund's bank account by 30 June 2021 to secure a tax deduction. This includes concessional contributions made by employers on behalf of employees and individuals who wish to make a concessional contribution with the intent to claim the contribution as a deduction in their personal tax return.
We highly recommend making any final contributions into the fund are made as early as possible to ensure that they are processed through the banking system well before the end of the financial year.
Carry-forward concessional contributions
The carry-forward concessional contribution rules allows an individual to carry forward unused portions of their concessional contributions cap, from 1 July 2018. This carry-forward works on a rolling 5-year basis provided the contributor’s total super balance was less than $500,000 at 30 June of the year immediately prior to making the concessional contribution.
The ability to carry forward up to 5 years of unused concessional contribution caps, commenced on 1 July 2018
For example, if in the 2020/21 financial year the concessional contributions cap is $25,000 and you contribute $15,000, you will be able to carry forward the remaining $10,000 for the next five years provided your total superannuation balance was less than $500,000 on the 30 June of the year immediately prior to the year in which you make the contributions.
Have you considered other strategies to maximise contributions?
Government superannuation co-contribution
The government continues to make a tax-free co-contribution to your super fund, provided the relevant conditions are satisfied. The government will make a maximum co-contribution of $500 for a non-concessional contribution of $1,000 made to a superannuation fund. If the non-concessional contribution is less than $1,000, the government will contribute half of the non-concessional contribution made.
Spouse superannuation tax offset
If you have made a contribution to your spouse's fund, you are able to claim a maximum tax offset of $540 provided the requirements are met. To claim the full amount, your spouse's adjusted taxable income must not exceed $37,000. If the amount exceeds $37,000, the amount progressively reduces until it reaches nil when the total income reaches $40,000.
It is important to note you will not be entitled to the tax offset if your spouse has exceeded their non-concessional contribution cap for the year ($100,000 for the financial year ending 30 June 2021) or your spouse has a total superannuation balance equal to or exceeding the transfer balance cap of $1.6 million before 1 July 2021.
Do you need help?
Superannuation is a complex area and implementing the right actions and strategies before 30 June 2021 is vital to ensure your superannuation savings are maximised. If you require any assistance, BDO's Superannuation team is here to help. Don't hesitate to contact your local adviser to seek assistance and ensure your savings are working for you.
Disclaimer
The information contained in this article is purely factual in nature and does not take into account your personal objectives, financial situation or needs. It is provided as an information service only and does not constitute financial product or other professional advice and should not be relied upon as such. Before making any investment or financial decisions you should consider your particular objectives, and financial circumstance or needs. Where information relates to a particular financial product you should obtain and consider the relevant Product Disclosure Statement and obtain advice from a financial adviser before making any decision. If you do require financial advice, please contact the relevant BDO member firms in Australia who will be able to assist you in their capacity as an Australian Financial Services licensee. BDO Australia Ltd and each BDO member firm in Australia, their partners and/or directors, employees and agents do not give any warranty as to the accuracy, reliability or completeness of information contained in this article nor do they accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it, except in so far as any liability under statute cannot be excluded.