Key Considerations For Your SMSF In The Lead Up To 30 June
The Federal Budget passed down on 3 May 2016 announced major changes to superannuation in terms of concessional and non-concessional contribution limits, the retirement account cap and contribution entitlements (click here to read our full recap of the changes).
With the end of financial year fast approaching, now is the crucial time to optimise your SMSF in terms of current contributions, tax and investment opportunities before a number of changes from the budget come into effect on 1 July 2017.
The current concessional (i.e. pre tax) contributions are capped at $30,000 (for those under age 49) or $35,000 (aged 49 or over on 30 June for the previous income year). However, it was announced in the budget that the concessional cap will be reduced to $25,000 for all individuals (regardless of age) from 1 July 2017. This means that it is a good time to consider making a pre-tax super contribution before 30 June 2016, to maximise the amount you can contribute before it is capped at the lower amount.
A lifetime non-concessional contributions cap of $500,000 was introduced on budget night, effective immediately. This lifetime cap takes into account all after tax contributions made on or after 1 July 2007. Consequently you will need to be aware of the amount of non-concessional contributions you have previously made to your super, to ensure you don’t exceed the new lifetime cap.
If you had made non-concessional contributions in excess of $500,000 before 7.30 pm (AEST) 3 May 2016, you will have reached your lifetime cap but will not be required to withdraw the excess from your fund.
Please note that this differs from the introduction of the retirement account balance cap of $1.6 million for individuals to hold in a tax-free retirement phase from 1 July 2017. For individuals whose pension account balance exceeds this cap, they will need to either withdraw the excess or transfer it back into an accumulation super account before the 1 July 2017 deadline.
It is important for SMSF trustees to review and document their investment strategy regularly. Starting this process before 30 June can be an opportunity to re-evaluate your retirement goals and ensure the fund is progressing in line with your investment strategy. Your review should also include an assessment of your insurance policies and if these are still applicable to your circumstances.
Don’t fall into the trap of leaving these considerations until the last minute. Remember that the longer your money is left in your fund, the greater the benefits. By fine-tuning your SMSF before the end of the 2015-16 year, you can reap both greater contribution opportunities and potential long-term tax savings.
If you have any questions in relation to the above, or SMSF’s in general, please contact your relevant ESV engagement partner on 9283 1666.
Article by Edwina Ring