Maximise year end opportunities and minimise risks Self Managed Super Funds

Transcription

1 Maximise year end opportunities and minimise risks Self Managed Super Funds The end of the financial year will be here before you know it. In this end of financial year update, we have summarised the key superannuation issues you need to be aware of now and in the new financial year. Superannuation is an area that is constantly changing and keeping up can be difficult. We want to help you achieve the best result for your SMSF and yourself. If there is any additional information we can assist you with or help you in any other way, please contact us our office on where your accountant will be happy to assist you. Superannuation contribution caps Concessional contributions are employer based contributions (including contributions made under a salary sacrifice arrangement), and if you are self employed, personal contributions claimed as a tax deduction. Non-concessional contributions are contributions that are made with post tax dollars. 2011/ /2013 Concessional cap $25,000 $25,000 Concessional cap 50 years * above $50,000 $25,000 Non concessional cap** $150,000 $150,000 *If you re aged 65 or over, you must satisfy a work test to make super contributions. You cannot make super contributions beyond the age of 74. **The bring forward rule only applies to people under 65 years of age and once the $150,000 non-concessional cap is exceeded in a year the bring forward rule applies which means no more than $450,000 non concessional contributions can be made in the current and next 2 financial years. Review salary sacrifice arrangements If you are 50 or over and using a salary sacrifice arrangement to get money into your fund, you need to review these arrangements before 30 June to ensure that you are within the reduced concessional contribution cap for 2012/2013. Deductibility of superannuation To claim a tax deduction for super contributions as an employer or as an individual, the payment needs to be received by the fund before 30 June. Merely incurring a liability will not work Page 1 of 5

2 If you are making a personal superannuation contribution that you want to claim as a tax deduction, you need to write to your fund in their approved form and advise them of the amount you intend to claim as a deduction. The superannuation fund then needs to acknowledge your notice of intent and agree to the amount you intend to claim as a deduction. This will normally be in the form of a notice or certificate from the fund and this should be provided to us to confirm the tax deductibility of the contribution. Minimum pension payments As you would be aware, minimum pension draw down amounts apply to account-based annuities and pensions, allocated annuities and pensions, and market-linked annuities and pensions. It is important that at least the minimum pension amount be paid each financial year for all pension members or the superannuation fund can miss out on certain tax benefits. Minimum pension drawdowns have changed again for certain pensions and annuities for the 2012/2013 financial year. Minimum payment amounts for account based, allocated and market linked (term allocated) pensions have been reduced by 25% for 2011/2012 and 2012/2013. Age Minimum % 2011/2012 & 2012/2013 Under 65 3% % % % % % 95 or more 10.5% Buying artwork and other collectibles in your SMSF New regulations guide what collectibles SMSFs can buy and sell, and how those collectibles are managed. Assets acquired by the fund from 1 July 2011 need to immediately comply with new regulations. Assets held by the fund at 30 June 2011, benefit from transitional rules that allow trustees until 1 July 2016 to comply with the new regulations Page 2 of 5

3 The regulations seek to ensure that trustees do not gain a benefit from assets now. For example, you cannot hang artwork purchased by your SMSF on your wall at home (or in your office) or wear jewellery acquired by the fund. This is because the Superannuation Industry (Supervision) Act 1993 (SIS Act) requires that all assets acquired by a SMSF be used for retirement purposes only. If you are using the assets now, you breach the SIS Act as the asset is not exclusively for retirement purposes. Storage of collectibles owned by your SMSF is a major issue and it is important to show that you are not benefiting from the asset now so, no storing the asset at home or in the home of a related party. Nor can you arrange to lend the asset to a related party, even if the asset is being rented. The regulations cover collectable and personal use assets including artwork; jewellery; antiques; artefacts; coins or medallions; postage stamps or first day covers; rare folios, manuscripts or books; memorabilia; wine; cars; recreational boats; and memberships of sporting or social clubs. Review and rectify any outstanding compliance issues If your auditor has highlighted any breaches or issues in previous year fund audits, you should review and rectify these issues by 30 June. SMSF compliance is coming under increased ATO scrutiny and all trustees should ensure that their funds are compliant. Maximum contributions base The amount of superannuation guarantee that your employer is required to pay for you is limited each quarter. The income limit on which the 9% is paid for the 2012/2013 financial year is $45,750 per quarter ($43,820 for 2011/2012). There is no legislative requirement for your employer to make super guarantee payments on incomes above this amount. Super co-contribution Under the co-contribution, the Government will match personal contributions you make (or are made for you) by up to $1,000 in a financial year. The co-contribution is available to those with total incomes of up to $61,920. If your income is less than $31,920, you will receive $1 for every $1 you contribute up to a maximum of $1,000. The maximum amount of $1,000 will reduce by $3.33 for every $100 of income over $31,920, until it phases out altogether once your income is $61, Page 3 of 5

4 The bring forward option and your contributions As you would already know, under the bring forward option, you can make a nonconcessional contribution of up to $450,000 in a single year by bringing forward your contributions for a three year period. That is, you can make a non-concessional contribution of $450,000 in 2011/2012 to quickly get money into your fund and then not make any further non-concessional contributions in 2012/2013 and 2013/2014. The bring forward option is available to people under 65 years of age on 1 July of the financial year. Anyone using this strategy needs to be wary of excess contributions tax (see below) and allow a buffer for unexpected contributions that may inadvertently tip you over your cap. Be wary of Excess Contributions tax Excess contributions tax harshly penalise those who exceed their contributions cap. The excess contributions tax levies a tax of 46.5% on any contributions above your cap. You are personally liable for the tax, not your superannuation fund, although in some cases the tax can be paid from the superannuation fund. If you use the bring forward option and make 3 years worth of contributions in one year, and miscalculate, the resulting contributions tax can be devastating. The Government has introduced changes that allow individuals who breach the concessional cap by up to $10,000 to have these excess amounts refunded to them and included in their own assessable income, rather than in the superannuation fund. This measure is only available for first time breaches (so a once per lifetime limit) and only applies to contributions made from 1 July This will help reduce the level of excess contributions that are taxed at either 46.5% or 93%. It is very easy to be inadvertently caught by the tax if you are unaware of contributions that may be paid to your fund on your behalf, get the timing of payments wrong (the contribution is made on the date the payment is received by the fund), are unaware of the implications of salary sacrifice agreements on your super, or simply lose track. The definition of a contribution is wide. For example, if your life insurance premiums held within your fund are paid by your employer, then the premium paid would count as a contribution. Personally meeting your fund expenses could also be counted as a contribution. For example, if you pay for the fund s accounting fees (rather than the fund) it s considered to be a contribution. It is important to ensure that you know what your concessional and non-concessional contribution limits are and take care to assess what was contributed during the year and allow a buffer for unexpected contributions or miscalculations Page 4 of 5

5 Off market share transfer changes Impending changes will prevent trustees from using off market transfers to transfer shares into their SMSF. For example, if you personally own BHP shares and want to transfer them into your SMSF you could simply complete an off market share transfer to transfer them into the fund. However, the new rules will require you to sell your shares on the market, contribute the proceeds to your fund, then the fund will need to purchase the BHP shares. These changes are not yet law but are expected to apply from July Property in a SMSF Valuation of Property A valuation of your property in your SMSF is required every 3 years. This should be done on or about the 30 June. We recommend you have your valuations up to date and if in doubt of your last valuation attend to this on or about the 30 June Rent Reviews & Appraisals If your business rents a property from your SMSF then you must have a current lease agreement in place. Rent appraisals and rent payable is then required to be adjusted in accordance with this agreement. Please don t hesitate to contact our office is there is anything further we can assist you with in respect to your Self Managed Super Fund ANDERSON CHARTERED ACCOUNTANTS Page 5 of 5