EOFY SMSF checklist

3 min read

With the end of financial year just around the corner, it’s important your SMSF meets its compliance obligations.

Although much has changed this year, your self-managed super fund (SMSF) must still follow all the rules that relate to it. Let’s take a look at our EOFY SMSF checklist below:

Make sure you draw down the appropriate amount of pension

This is the major area that has changed this year. The Australian Taxation Office (ATO) has confirmed it has halved the minimum amount members must withdraw from their super fund as a pension for the 2019/2020 and 2020/2021 financial years. This acknowledges that members may have seen their balances diminish this year as result of the correction share markets experienced in response to the pandemic. 

SMSF members are required to drawdown between two per cent and seven per cent of their super fund, depending on their age. The amount increases the older a member is. For a full breakdown of the minimum pension drawdown percentages, visit the ATO. 

Keep in mind, however, that while percentages have halved, the minimum amounts must be withdrawn by 30 June 2020. It’s a good idea to leave plenty of time for financial institutions to process these payments, so best not to leave them until the last day. 

Stay within the concessional and non-concessional contribution rules

SMSF members under 65 may be eligible to contribute $25,000 to their fund on a concessional basis this year, which means they may be able to claim a tax deduction for this money, and up to $100,000 on a non-concessional basis. This money comes from their after-tax dollars. These funds must reach your super account before 30 June to be counted as a contribution in the current financial year, so it’s best to make any contributions in plenty of time for banks to process them.

Take advantage of bring-forward and carry-forward provisions

The federal government has amended the super contribution laws so that members that don’t take full advantage of the $25,000 concessional contribution limit can carry forward any unused amounts for five years. The catch? They have to have $500,000 or less in their super fund. That means, if you only contribute $10,000 on a concessional basis to your fund this year, you can carry forward the remaining $15,000 for five years. 

Similarly, if you are 65 or less this financial year, you can bring forward up to $200,000 in contributions from future years to add this year’s cap, allowing for a $300,000 on a non-concessional basis in one year. But you must have a total superannuation balance of less than $1.4 million or less in your fund to be able to take maximum advantage of this provision.

Ensure you meet the work test if you are over 67

Provided they satisfy the eligibility requirements, SMSF members may be able to continue to contribute to their funds after age 65 as long as they meet the work test. This stipulates that anyone aged between 67 and 74 must have worked for 40 hours across a 30-day period to be able to contribute to their fund. From 1 July 2020, the work test will only apply from age 67.

Review the fund’s investment strategy

Now’s the time of year when trustees should review their SMSF’s investment strategy to ensure it still supports members’ financial requirements in retirement. This is an even more important task this year, due to the impact COVID-19 has had on financial markets. As a result, many account balances may have substantially dropped, which means, trustees should review whether the underlying investment strategy is still capable of ensuring members’ financial requirements are adequately met in retirement. 

Check the fund’s capital gains tax position

Before the end of the financial year, it’s important to consider whether any of the fund’s loss-making investments should be sold to offset any capital gains that have accrued. This decision should also be guided by the fund’s investment strategy.

Claim the spouse tax offset

Members may be able to claim up to $540 a year as a tax offset for any contributions made to their spouse’s super fund, as long as their spouse’s income is less than $40,000 including any fringe benefits and super contributions.

Assess eligibility for the low-income super tax offset (LISTO)

Members with an adjusted taxable income of $37,000 a year may be eligible for the LISTO. This is a government contribution that is the equivalent of 15 per cent of pre-tax contributions up to a maximum of $500. 

Review any estate planning requirements

This includes ensuring any binding and non-binding death benefit nominations are current.

Check how assets are held

Assets should be held in the name of the trustees, on behalf of the fund.

Undertake any market valuations

Before the end of the tax year, you may want to make sure any unlisted assets, or assets for which market valuations are not readily available, have been valued. This ensures the assets in the fund are under the transfer balance cap and total superannuation balance limits.

Ensure the fund is properly audited

Each year, the fund should be audited by a tax expert who is qualified and experienced in SMSF audits.

References:

Australian Taxation Office: Minimum annual payments for super income streams

Strategies 15 Oct 2020
With many of us working from home due to COVID-19, it’s important to understand the tax deductions you may be entitled to.
Strategies 10 Jun 2020
Be better prepared for 30 June with our End of Financial Year checklist and maximise your tax time benefits.
Perspectives 11 May 2020
This is an opportune time to ensure any issues are addressed to help protect your SMSF and balances from significant impacts from the current environment.

This was prepared by BT, a part of Westpac Banking Corporation ABN 33 007 457 141 AFSL & Australian credit licence 233714. Information current as at update June 2020. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to your personal objectives, financial situation and needs having regard to these factors before acting on it. This information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. Any tax considerations outlined in this document are general statements, based on an interpretation of current tax laws, and do not constitute tax advice. As such, you should not place reliance on any such taxation considerations as a basis for making your decision. Superannuation is a means of saving for retirement, which is, in part, compulsory. The government has placed restrictions on when you can access your investments held in superannuation. The Government has set caps on the amount of money that you can add to your superannuation each year and over your lifetime on both a concessional and non-concessional tax basis. There will be tax consequences if you breach these caps.  For more detail, speak with a financial adviser or registered tax agent or visit the ATO website. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. Any super law considerations or comments outlined above are general statements only, based on an interpretation of the current super laws, and do not constitute legal advice.