As it is fast approaching 30 June 2021, I thought it would be prudent to provide you with a checklist of the things to consider in order to maximise the value of your superannuation fund.
If you are under age 67 you can make voluntary contributions without satisfying the work test. You will note that prior to 30 June 2020 this restriction applied to people under age 65.
You can also make non-concessional (after-tax) contributions of up to $100,000 for this financial year but only if your total Super Balance was less than $1.6 million on 30 June 2020.
Note, that if you are under age 65 at any time during this financial year you can potentially make an additional $200,000 non-concessional contribution. That is, the bring-forward rule may mean you are entitled to make good your non-concessional contribution for the 2022 financial year and 2023 financial year in advance.
As non-concessional contributions to super are from after-tax money, some benefits from making these contributions can include:
- No tax on the contributions when made to a super fund,
- Investment returns in super are generally taxed at 15%,
- Once eligible, upon accessing their super, any money previously contributed as a non-concessional contribution will be returned to an individual tax-free,
- Given the higher contribution limits available for non-concessional contributions, compared to other types of contributions to super, non-concessional contributions can be an effective way for an individual to boost their super savings leading into retirement.
- Concessional (tax deductible) contribution
The limit for the tax-deductible or concessional contribution this year is $25,000. Note, where you make a concessional contribution and you intend to claim a tax deduction, your concessional cap of $25,000, includes all employer contribution and salary sacrifice contribution. That is, your personal tax-deductible contribution, salary sacrifice and employer contribution combined, are not to exceed $25,000.
- Your unused Cap
Concessional contribution or before-tax contributions are limited to $25,000 for the 2021 financial year. However, many superannuation members are not aware that if they did not utilise the full value of this concession in either the 2019 or 2020 year they may be entitled to make an additional contribution this year in addition to this years $25,000.
Note also that the tax deductible contribution limit is to increase on 1 July 2021 to $27,500.
- COVID Pension requirement
To help manage the economic impact of COVID-19, the Government reduced the minimum drawdown requirements by half on account-based pensions and market-linked pensions for 2020-21. The Government announced the 50% reduced minimum pension drawdown requirements will be extended for 2021-22.
|Minimum percentage factor (indicative only) for each age group|
|Age||Minimum % withdrawal(in all other cases)||Reduced rates by 50%2020-21 income year and 2021-22 income year (%)|
|65 – 74||5%||2.5%|
|75 – 79||6%||3%|
|80 – 84||7%||3.5%|
|85 – 89||9%||4.5%|
|90 – 94||11%||5.5%|
|95 or more||14%||7%|
Note, if you have not met the minimum pension payment requirements required by 30 June 2021, then your superannuation fund will be required to pay 15% tax on the pension investments rather than those earnings being tax-free where the minimum pension payments have been made.
All pension withdrawals for 2020-21 must be paid by 30 June 2021 and cannot be accrued or adjusted using a journal entry so it is important to attend to this as soon as possible. For example, if you are making pension payments via an electronic transfer, you need to ensure that online transfers show the money coming out of the fund’s bank account by no later than 30 June.
Self Manged Superannuation Funds (SMSF)
- Asset valuations
If you have your own Self Managed Superannuation Fund you are required to value the fund’s assets at their market value as of 30 June each year in the annual financial accounts. Although this can be a straightforward process for term deposits or listed shares and managed funds, it can be quite difficult to ascertain the value of real estate or private companies and units trusts. When valuing SMSF assets, you must comply with the ATO valuation guidelines for SMSFs. Contact us if you have any questions or require assistance.
- Rent relief
For those SMSFs that took advantage of the property relief measures, the ATO implemented to reduce rent in 2020-21, any form of rental relief must end by 30 June 2021. From 1 July 2021, COVID-19 will not be a valid reason for any rental relief and SMSF trustees will need to ensure that all rent is at an arm’s length rate.
- Limited Recourse Borrowing Arrangement (LRBA)
If your superannuation fund had a Limited Recourse Borrowing Arrangement (LRBA) in place there are additional considerations. Where your SMSF was provided with COVID-19 loan repayment relief to assist in meeting loan repayment obligations, this relief should cease by 30 June 2021. From 1 July 2021, any LRBA should revert to the original terms of the loan to ensure that the arm’s length requirements continue to be met. Where the COVID-19 loan relief has resulted in a variation to the original term of the LRBA, provided that interest continues to accrue on the loan and you repay any deferred principal and interest repayments in accordance with the varied terms, the LRBA will be considered to be consistent with an arm’s length dealing.
- Individuals won’t be able to access amounts they contribute to superannuation until they meet a condition of release. Generally, this occurs upon the earlier of either reaching age 65 or fully retiring after reaching preservation age (currently age 57, however, this is increasing over time).
- The impact a personal concessional contribution will have on your cash flow, and whether you can afford this reduction.
Should you have any questions with regard to Superannuation, please submit an online enquiry now or call Peter Quinn on +61 2 9580 9166. We also offer a FREE 45-minute consultation should you have other financial planning, taxation or superannuation issues you may wish to discuss.
The information in this document does not take into account your personal objectives, financial situation or needs, and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.