Superannuation

As we approach the end of the financial year, it’s time to ensure that your Self-Managed Superannuation Fund (SMSF) is well-prepared for the upcoming year. We’re here to help you stay ahead of the game with a handy checklist of important considerations to address before the year-end 30 June 2023.

1. Have you paid your minimum payments? Make sure you withdraw your minimum pension payment from your fund’s bank account before 30 June 2023 to stay compliant and avoid any financial implications. Failing to do so might result in the inability to claim Exempt Current Pension Income, which could lead to a 15% tax on income generated from pension assets. Let’s avoid costly errors!
2. Timing of pension payments To prevent any complications, we recommend withdrawing your pension payments before 15 June 2023. Some financial institutions may require a notice period for transaction processing and administrative costs, so planning ahead will ensure a smooth process.
3. 2023 contribution caps Keep in mind the contribution caps when making contributions to your SMSF to avoid additional tax obligations. The contribution caps for the 2023 financial year remain the same as the previous year:
   • Concessional (pre-tax) contributions: $27,500
   • Non-Concessional (after-tax) contributions: $110,000
4. Carry forward rule (concessional contributions) Did you know you can carry forward your unused pre-tax contributions from previous years? This rule allows you to make additional concessional contributions by utilising any unused cap amounts from up to five previous financial years. To be eligible, your total superannuation balance must be less than $500,000 at 30 June of the previous financial year. If you meet the criteria, you may be able to make ‘catch up’ contributions before 30 June 2023. Don’t hesitate to seek assistance in determining your eligibility.
5. Bring forward non-concessional contributions Take advantage of the bring forward rule, which allows you to bring forward contributions from future years and use them within a shorter period. To access the non-concessional bring forward arrangement for 2022/23, you must be under 75 years of age and have a total superannuation balance of less than $1.7 million as of 30 June 2022.
6. Work test Great news! Starting from 1 July 2022, individuals under the age of 75 no longer need to worry about meeting the work test or work test exemption for making or receiving non-concessional super contributions and salary sacrificed contributions. However, if you’re between 67 and 74 years old, you’ll still need to meet the work test to claim a personal superannuation contribution deduction. The work test requires being gainfully employed for at least 40 hours in a period of no more than 30 consecutive days. Time to enjoy a bit more flexibility!
7. Timing of contributions To be eligible for a tax deduction, ensure that all concessional contributions made to the fund during this financial year are received into the fund’s bank account by 30 June 2023. This includes contributions made by employers on behalf of employees and individuals making concessional contributions who intend to claim a deduction on their personal tax return. To avoid any complications, we recommend making any final contributions to the fund at least two weeks before 30 June 2023. This is particularly important for employers using clearing house facilities, as processing can take up to 14 days. Let’s make sure everything is in order and avoid any last-minute surprises.
8. Other strategies to maximise contributions Let’s explore some strategies to maximise your contributions:
   • Contributions splitting: You can split up to 85% of your taxable contributions with your spouse to boost their super balance. It’s a helpful strategy if your spouse has a low account balance or if you want to level out your balances for retirement.
   • Government superannuation co-contribution: The federal government provides a tax-free co-contribution to your super fund if you meet the relevant conditions. They will contribute a maximum of $500 for a non-concessional contribution of $1,000 made to a superannuation fund. Even if your contribution is less than $1,000, they will still match it with half the amount.
   • Low-income superannuation tax offset: If you are a low-income earner with an adjusted taxable income of $37,000 or less, you may be entitled to a government superannuation payment of up to $500. The low-income super tax offset (LISTO) is calculated at 15% of your total concessional contributions, with a maximum offset of $500.
   • Spouse Superannuation Tax Offset: If you have contributed to your spouse’s fund, you may be able to claim a tax offset of up to $540, depending on the amount contributed and your spouse’s income. The offset varies based on specific requirements. Check the conditions to see if you qualify.
9. Have you reviewed your paperwork? It’s the perfect time to ensure that your super fund records are up to date and include all the necessary supporting documentation for every asset and transaction throughout the year. Comprehensive records will save you time and money when preparing the annual compliance work for your SMSF. Your accountant will likely request various records, including bank statements, investment contracts, valuations, lease agreements, rental statements, expense invoices, and insurance policy documents.
10. Investment Strategy Remember, all SMSFs are required to have a current investment strategy aligned with your objectives and retirement goals. As we enter the new financial year, it’s essential to review your investment goals and ensure that your current strategy reflects these goals. Prepare, implement, and regularly review your investment strategy to comply with super laws. We want your investments to work effectively for you!
11. The new superannuation “soft” cap of $3 million, set to begin on July 1, 2025, could change how families accumulate wealth, especially with the added tax of 15% on earnings exceeding the cap. Considering this, families might explore investment options like personal portfolios, super, family discretionary trusts, and personal investment companies. Particularly attractive might be personal investment companies for large investments, which offer long-term wealth growth, intergenerational wealth transfer, and tax benefits. However, unique family circumstances necessitate professional advice when setting up such investment structures.

We hope this superannaution checklist helps you prepare your SMSF for the new financial year.

ATO’s Shift in Focus

During the COVID-19 pandemic, the ATO adopted a supportive and lenient approach to assist taxpayers.

The ATO has recently announced a major shift in their focus, prompted by various factors including the lifting of post-COVID restrictions, government revenue objectives, recent court decisions, increased use of advanced data-matching technologies, and additional funding to target tax avoidance.

The ATO’s intensified focus will primarily revolve around the following key areas:

1. Rental property expense claims
2. Family trusts, facing heightened scrutiny
3. Part IV A anti-avoidance changes
4. Assertive debt collection efforts
5. Distinguishing between subcontractors and employees
6. Tax treatment of professional income: Personal versus Business
7. Taxation of superannuation balances exceeding $3 million
8. One-off Tax Lodgement amnesty
9. ATO’s revised stance on taxing entertainers, media, and sporting personalities
10. ATO’s enhanced scrutiny on car logbooks, work vehicles, cryptocurrency, and non-resident income.

To navigate these changes effectively and ensure compliance, we recommend the following actions:

1. Familiarize yourself with the details of the forthcoming changes and understand their potential impact on your tax affairs.
2. Conduct a comprehensive assessment of your taxation risks in light of these changes.
3. Consider the feasibility of obtaining Audit Protection Insurance to safeguard against potential ATO audits or reviews.
4. Seek further assistance from Eclipse if you require any guidance or support.

Should you have any inquiries or require clarification on any aspect of these changes, please do not hesitate to reach out to us.