The SMSF Association, the largest industry body, tell us that SMSF's are on course to quadruple in size to more than $2.4 trillion within 18 years, or more than 1-times the nation’s gross domestic product (press here to see how much a trillion really is).
Self-managed super has been the fastest-growing component of the superannuation system and accounts for a third of the nation’s superannuation assets.
So that means there are a lot of new trustees out there. Well for the newbies (and maybe some of the more experienced as well) here are ten things that SMSF Trustees should consider to make the most of their SMSF. Better not to leave the following until the last minute.
1. Valuation. The assets in your SMSF must be valued each financial year based on objective and supportive data. Refer to ATO publication, ‘Valuation guidelines for SMSFs’.
2. Contributions. Ensure contributions are received on or before 30 June, especially if made by electronic funds transfer. A day too late could cause problems.
3. Employer contributions. Check whether Superannuation Guarantee contributions for the June 2014 quarter have been received by your SMSF in July 2014. If so, include the contribution in your concessional contribution cap for the 2014/2015 financial year.
4. Salary sacrifice contributions. Salary sacrifice contributions are concessional contributions. Check your records before contributing more to avoid exceeding your concessional contributions cap.
5. Tax deduction on your contributions. If you are eligible to claim a tax deduction then you will need to lodge a ‘Notice of intention to claim a tax deduction’ with your SMSF trustee before you lodge your personal income tax return. Your SMSF trustee must also provide you with an acknowledgement of your intention to claim the deduction.
6. Spouse contributions. Spouse contributions must be received on or before 30 June in order for you to claim a tax offset on your contributions. The maximum tax offset claimable is 18% of non-concessional contributions of up to $3,000. Your spouse’s income must be $10,800 or less in a financial year. The tax offset decreases as your spouse’s income exceeds $10,800 and cuts off when their income is $13,800 or more.
7. Contribution splitting. The maximum amount that can be split for a financial year is 85% of concessional contributions up to the concessional contributions cap. You must make the split in the financial year immediately after the one in which your contributions were made. This means you can split concessional contributions made during the 2013/2014 financial year in the 2014/2015 financial year. You can only split contributions you have made in the current financial year if your entire benefit is being withdrawn from your SMSF before 30 June 2015 as a rollover, transfer, lump sum benefit or a combination of these.
8. Superannuation co-contribution. To be eligible for the co-contribution, you must earn at least 10% of your income from business and/or employment, be a permanent resident of Australia, and under 71 years of age at the end of the financial year. The government will contribute 50 cents for each $1 of your non-concessional contribution to a maximum of $1,000 made by 30 June 2015. To receive the maximum co-contribution of $500, your total income must be less than $34,488. The co-contribution progressively reduces for income over $34,488 and cuts out altogether once your income is $49,488 or more.
9. Low income superannuation contribution. If your income is under $37,000 and you and/or your employer have made concessional contributions by 30 June 2015, then you will be entitled to a refund of the 15% contribution tax up to $500 paid by your SMSF on your concessional contributions. To be eligible, at least 10% of your income must be from business and/or employment and you must not hold a temporary residence visa.
10. Minimum pension payment. Ensure that the minimum pension amount is paid by your SMSF by 30 June 2015 in order to receive the tax exemption. If you are accessing a pension under the ‘Transition to Retirement’, then ensure you do not exceed the maximum limit also.
This document contains general information only. TTLB Investments Pty Ltd trading as wetalkmoney is not a registered tax agent. If you wish to rely on this letter to determine your personal tax obligations, you should consult with a Registered Tax Agent. In preparing this information, TTLB Investments Pty Ltd did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, a person needs to consider (with or without the advice or assistance of an adviser) whether this information is appropriate to their needs, objectives and circumstances. Any tax estimates provided in this publication are intended as a guide only and are based on our general understanding of taxation laws. They are not intended to be a substitute for specialised taxation advice or a complete assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent. This information is based on our interpretation of relevant superannuation, social security and taxation laws as at 4th June 2015.