⚖️ General Advice Disclaimer This article is general information only and does not constitute personal financial, legal or tax advice. The rules governing SMSFs are complex and individual circumstances vary significantly. You should obtain advice from a licensed financial adviser before acting on anything in this article. The author holds AFSL authorisation through Sonas Wealth Pty Ltd, corporate authorised representative of Viridian Advisory 476223.
Here is a little-known strategy where an SMSF can be involved in owning a business or property through an unrelated unit trust or company structure. This is often ideal for an early-stage business expected to grow rapidly over time where income and growth can be captured tax effectively in the SMSF. Most suited to those who do not need access to the capital and profits until retirement or where you want some in the SMSF and some personally but your shared ownership, between your related parties, does not exceed 50%.
When two unrelated SMSFs co-invest in a trading company, the result can be a genuinely tax-efficient, asset-protected business structure — but it comes with a set of compliance obligations that every trustee needs to understand before proceeding. This guide explains how the structure works, the critical questions to ask, and the key risks to manage. In many cases three unrelated parties can make it a lot less risky in terms of potential SIS law breaches.
The critical first question: is the company a “related party”?
This is the most important compliance question in the entire structure, and the answer determines almost everything else.
Under the SIS Act, a “related party” of your SMSF includes the fund’s members, their relatives, their business partners, and companies or trusts they control. Control means holding the ability to determine more than 50% of the voting rights, or being entitled to more than 50% of dividends or capital. I have a complete article on Related Parties here
With a genuine 50/50 split between two unrelated SMSFs, neither fund’s members control the company outright. Neither party can determine outcomes alone. Accordingly, the company is generally not a related party of either SMSF — and this single fact unlocks the structure. So you can see that 3 unrelated entities will roughly even ownership would make this safer as less chance of one exceeding 50%.
Thinking About an SMSF — or Want a Second Opinion? If you’d like a no-obligation conversation about whether an SMSF is right for your situation — or you want a straight-talking second opinion on an offer you’ve received — reach out. That’s what The SMSF Coach is here for. http://www.smsfcoach.com.au | Sonas Wealth, Sydney www.sonaswealth.com.au
In-house assets — does the 5% rule apply?
SMSF trustees are familiar with the rule that no more than 5% of a fund’s total assets can be “in-house assets” — generally, investments in or loans to related parties. Because the trading company is not a related party (as established above), the shares your SMSF holds do not count as in-house assets based on the ownership relationship alone.
One important note: Regulation 13.22C provides a separate exclusion from the in-house asset definition for investments in certain closely held entities — but that exclusion is only available if the entity does not conduct a business. Since we are dealing with an actively trading company, Reg 13.22C is irrelevant here. The correct answer is that the company is simply not a related party, so the in-house asset classification does not arise in the first place. Here is a great white paper from Leigh Mansell of Heffron’s on In-house Assets
Tax treatment — where the real advantage lives
This structure can be exceptionally tax-efficient, particularly for SMSF members approaching or in retirement phase.
At the company level: A small trading company with turnover below $50 million will typically qualify as a base rate entity and pay company tax at 25%. This tax gives rise to franking credits attached to any dividends paid to shareholders.
At the SMSF level — accumulation phase: Your fund’s effective tax rate on investment income is 15%. When the company pays a franked dividend, the SMSF includes the grossed-up dividend in its assessable income, pays 15% tax, and offsets that liability with the franking credit. Because the company already paid 25% tax, the franking credit typically exceeds the SMSF’s liability — producing a refund.
At the SMSF level — pension phase: If your SMSF is paying pensions and the income qualifies as exempt current pension income, the effective tax rate is 0%. The full franking credit is refunded in cash, making this one of the most tax-efficient investment structures available in Australia.
NALI and arm’s length dealings
Non-arm’s length income (NALI) is taxed in your SMSF at a flat 45%, regardless of whether you are in accumulation or pension phase. Private company dividends are a known NALI risk area, and the ATO scrutinises them carefully.
All dividends must be paid on the same terms to both SMSFs, proportionate to their respective shareholdings, with no preferential treatment flowing to one fund over the other. Arm’s length requirements also apply to any other dealings between your SMSF and the company — including director salaries, lease arrangements, and any services the company provides.
Annual valuation — a compliance obligation you cannot defer
Your SMSF’s financial statements must record all assets at their true market value as at 30 June each year. Shares in a private unlisted trading company must be independently valued by a suitably qualified person using a recognised methodology — typically earnings-based, net tangible assets, or a combination of both. This is not optional; your auditor will require appropriate evidence.
Valuation complexity increases over time, particularly if the company retains significant profits, acquires assets, or if the trading environment changes materially. Factor in the annual cost of a formal valuation — and the management time required to facilitate it — when assessing the overall economics of the structure. My guide to SMSF asset valuations is available here
Before you proceed — a practical checklist
Confirm each of the following before shares are acquired:
Both SMSFs are genuinely unrelated — members are not relatives, business partners, or Part 8 associates of each other in any way
A properly drafted shareholders agreement is executed before shares are acquired
The SMSF investment strategy is updated to specifically contemplate and justify an investment of this type, size, and risk profile
The share acquisition occurs at market value from day one — a below-market acquisition creates permanent NALI taint on all future income from those shares
Dividends will be declared on identical terms for both SMSFs from the outset
An annual independent valuation process is established and budgeted for
The company has a separate ABN, ACN, and bank account entirely independent of any member’s personal finances
Any member who is also a director or employee of the company is remunerated at genuine market rates
Legal advice has been obtained on both the company establishment and the SMSF’s acquisition of shares
Your SMSF auditor has been informed of the investment and understands the basis on which it is not classified as an in-house asset
Always make sure that you’re your strategy complies with relevant superannuation and tax regulations before implementation
Are you looking for advisors that will keep you up to date and provide guidance and tips like in this blog? then why not contact us at our Castle Hill or Windsor office in North West Sydney to arrange a one-on-one consultation, just click the Schedule Now button up on the left to find the appointment options.
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Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
Important information
This article is general information only and does not constitute personal financial, legal, or taxation advice. The rules governing self-managed superannuation funds are complex and fact-specific. Individual circumstances vary significantly, and the application of the rules described in this guide depends on facts that can only be properly assessed by a qualified professional. Before establishing or participating in a structure of this type, seek advice from a licensed SMSF adviser and an experienced tax lawyer. Past tax outcomes are not a guide to future tax treatment.
We have only a short time left to the end of the 2026 financial year to get our SMSF in order and ensure we are making the most of the strategies available to us. Here is a checklist of the most important issues that you should address with your advisers before the year-end.
Get this wrong and your SMSF could lose tax exemptions, trigger penalties, or lock in avoidable tax
It’s been another busy year and I have not had as much time to put this together so if you find an error or have a strategy to add then please let me know. Links were working at the time of writing.
Warnings before we begin:
Know your Own Data: You need to check your personal super balances across all your accounts, contribution limits, total Super Balance and Transfer Balance caps and tax position before implementing any of these strategies as your own particular circumstances may warrant alternative options.
Confirm your annual return lodgement status: Log in to ATO online services and confirm your most recent SMSF annual return for 2025FY has been lodged and shows as processed (near the deadline now). As of December 2025, approximately 93,000 funds had one or more overdue returns. A fund with an overdue return faces penalties, potential interest charges, and likely removal from the Super Fund Lookup register. This can interrupt employer contributions and serious consequences under Pay Day Super requirements for your employer .
High-impact strategies most people miss out without advice
Recontribution strategy for minimising death taxes
Pension vs lump sum strategy
Spouse equalisation for Division 296
Look out for more detail on these as you go through the checklist
The Checklist
1. It’s all about timingwith contributions
If you are making a contribution, the funds must hit the super fund’s bank account by the close of business on 30 June. Some clearing houses hold on to money for up to 14 days before presenting them to the super fund. Some Retail and Industry funds are asking for funds at least to be contributed by the 18th-19th June!
In addition, pension payments must leave the account by the close of business unless paid by cheque in which case the cheques must be presented within a few days of the EOFY. There must have been sufficient funds in the bank account to support the payment of the cheques on 30 June but a cheque should only be your very last-minute option! You can also ask your adviser or administrator about a Promissory Note if time is against you but funds are ready.
So, for SMSFs get your payments in the fund by Monday 22nd June or earlier to be sure (yes I’m Irish) as the 30th is a Tuesday this year. This is even more important if using a clearing house for contributions.
2. Review your Concessional Contributions (CC) options including Unused Carry Forward Limits
The 2025–26 concessional cap is $30,000. This includes all employer contributions, salary sacrifice, and any personal deductible contributions. Log in to ATO online services via myGov and confirm your year-to-date total before making any further contributions.
And remember that you have the ability to make concessional contributions up to age 67 even if not working and to 75 if you meet the Work Test . This is important for those who have retired but may have sold a property or shares and triggered a large capital gain during the year. Do not not exceed your limit unless you have Unused Carried Forward Concessional limits and Total Super Balance under $500K as of last 01 July 2025.
This current 5 year period for Unused Concessional Contributions applies from 2020-21 so effectively, this means an individual can make up to $172,500 of CCs in a single financial year by utilising unapplied unused CC caps since 1 July 2019 and this years limit. Guidance on how to check your Unused Carried Forward Concessional limits via MyGov records available here. ..
This is the last year to use the 2020-21 unused Carried Forward Concessional Caps as they fall outside the 5 year rolling period from 30 June 2026.
Beware that once your Income including Salary, Investment income, Employer SGC, Personal Concessional Contributions goes over $250,000 you will be subject to Div 293 Tax
TIP: The Super Guarantee now remains at 12% but the Concessional limit will rise to $32,500 from 1 July 2026. Re-evaluate your contribution plans for 2026-27
3. Review plans for Non-Concessional Contributions (NCC) options
The 2025–26 non-concessional cap is $120,000. You can only make non-concessional contributions if your Total Super Balance was below $2.0 million at 30 June 2025.
From 1 July 2022 the NCC contribution rules changed and currently the age limit of 75 (28 days after the end of the month your turn 75) applies to NCCs (that is, from after-tax money) without meeting the work test. Check out ATO superannuation contribution guidance.
NCCs are an opportunity to move investments into super and out of a personal, company or trust names.
For those couples where one has a higher balance that may be affected by the proposed Division 296 Tax, it is important to review you option to even-up spouse balances and maximise super in pension phase up to age 75. For couples where one spouse has exhausted their transfer balance cap and has excess amounts in accumulation or above $3m or even the $10m threshold, they are able to withdraw from the higher balance and recontribute to the other spouse who has transfer balance cap space available to commence a retirement phase income stream. This can increase the tax efficiency of the couple’s retirement assets as more of their savings are in the tax-free pension phase environment and may help minimise Div 296 Tax.
TIP 1: If you have considerable additional funds to add to contribution then maybe contribute up to $120,000 before June 30 and then you may be able to contribute up to $390,000 after 1 July to maximise contributions.
TIP 2:From 1 July 2026 the Non-Concessional Cap will rise to $130,000 per year or $390,000 under the 3 Year Bring Forward Rule.
4. Recontribution Strategies
Consider doing the drawdown before 30 June 2026 so that your Transfer Balance Cap and Total Super Balance on 1 July 2026 gets some additional space with the rise in the TBC and TSB full limits to $2.1m. Note that if you had and existing pension(s) at 30 June 2025 your current TBC limit will be anywhere between $1.6m and $2.1m after 1 July (Frustrating for Advisers! so help by providing them your My Gov Super records)
You can also make your tax components more tax free by using recontribution strategies. SMSF members can cash out their existing super and re-contribute (subject to their contribution caps) them back in to the fund to help reduce tax payable from any super death benefits left to non-tax dependants. From 1 July 2022 you can do this until they turn age 75 (contribution to be made with 28 days after the end of the month you turn 75).
5. Downsizer contributions
If you have sold your home in the last year and you are over 55, consider eligibility for downsizer contributions of up to $300,000 for each member.
From 1 jan 2023, the eligibility age to make downsizer contributions into superannuation was reduced from 60 to 55 years of age. All other eligibility criteria remain unchanged, allowing individuals to make a one-off, post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. These contributions will continue not to count towards non-concessional contribution caps.
The $300,000 downsizer limit (or $600,000 for a couple) and the $360,000 bring forward NCC cap allow up to $660,000 in one year contributions for a single person and $1,320,000 for a couple subject to their contributions caps.
PLEASE BE CAREFUL AS THE DOWNSIZER IS A ONCE ONLY STRATEGY AND IF YOU WOULD BENEFIT MORE IN OLDER YEARS USING THE STRATEGY THEN MAXIMISE NCCs FIRST.
6. Calculate co-contributions
Check your eligibility for the co-contribution, it’s a good way to boost your super. The amounts differ based on your income and personal super contributions, so use the super co-contribution calculator. Is your spouse on maternity or paternity leave? See if they could benefit from this strategy to keep their balance growing. If you have moved to part-time work, this may boost your super.
7. Examine spouse contributions
If your spouse has assessable income plus reportable fringe benefits totalling less than $37,000 for the full $540 tax offset or up to $40,000 for a partial offset, then consider making a spouse contribution. Check out the ATO guidance here.
You can implement this strategy up to age 75 as a Spouse Contribution is treated as a NCC in their account (and therefore counted towards your spouse’s NCC cap).
8. Give notice of intent to claim a deduction for contributions first
A notice must be made before you commence a pension or split to a spouse. Many people like to start pension in June and avoid having to take a minimum pension in that financial year but make sure you have claimed your tax deduction first. The same notice requirement applies if you plan to take a lump sum withdrawal from your fund.
9. Consider contributions splitting to your spouse
Consider splitting contributions with your spouse, especially if:
your family has one main income earner with a substantially higher balance or
if there is an age difference where you can get funds into pension phase earlier or
if you can improve your eligibility for concession cards or age pension by retaining funds in superannuation in the younger spouse’s name.
This is a simple no-cost strategy I recommend for everyone here.
Remember, any spouse contribution is counted towards your spouse’s NCC cap.
10. Act early on off-market share transfers
If you want to move any personal shareholdings ETFs. or Managed Funds into super (as a contribution) you should act early. The contract is only valid once the broker or fund manager receives a fully-valid Off Market Transfer form so timing in June is critical. There are likely to be brokerage costs involved. Some fund managers only price weekly/monthly/quarterly so check first. For unlisted managed funds you will also need a new Account Application with the Off Market Transfer form.
11. Review options on pension payments
Ensure you take the standard minimum pension at your age-based rate. If a pension member has already taken pension payments of equal to or greater than the the minimum amount, they are not required to take any further pension payments before 30 June 2025. For transition to retirement pensions, ensure you have not taken more than 10% of your opening account balance this financial year.
Minimum annual payments for pensions.
Age at 1 July
2025FY – Standard Minimum % withdrawal
Under 65
4%
65–74
5%
75–79
6%
80–84
7%
85–89
9%
90–94
11%
95 or older
14%
If a pension member has already taken a minimum pension for the year, they cannot change the payment but they can get organised for 2026/27. No, you can’t sneak a payment back into the SMSF bank account unless you treat to as a new contribution!
If you need more than the minimum pension payments for living expenses then it may be a good strategy for amounts above the minimum to be treated as either:
a partial lump commutation sum rather than as a pension payment. This would create a debit against the pension member’s Transfer Balance Account (TBA). Please discuss this with your accountant and adviser first as all funds now have to report these quarterly to the ATO.
for those with both pension and accumulation accounts, take the excess as a lump sum from the accumulation account to preserve as much in tax-exempt pension phase as possible.
Failure to pay minimum pensions just got a lot more costly
SMSF trustees, accountants and financial advisers should take note of significant changes to pension commencement rules that came into effect on 1 July 2025. These changes impact how pensions are treated for tax purposes if a minimum pension is missed and could have serious implications for retirement planning strategies. Read more detail here
12. Check your documents on reversionary pensions
A reversionary pension to your spouse will provide them with up to 12 months to get their financial affairs organised before making a final decision on how to manage your death benefit. In NSW this may avoid issues with Binding Death Nominations and the Notional Estate (see Benz v Armstrong; Benz v Armstrong; Benz v Armstrong – 2022 NSWSC)
You should review your pension documentation and check if you have nominated a reversionary pension in the context of your family situation. This is especially important with blended families and children from previous marriages that may contest your current spouse’s rights to your assets. Also consider reversionary pensions for dependent disabled children.
The reversionary pension has become more important with the application of the $1.6-$2.1m million Transfer Balance Cap (TBC) limit to pension phase.
Tip:If you have opted for a nomination instead then check the existing Binding Death Benefit Nominations (many expire after 3 years in older deeds) and look to upgrade to a Non-Lapsing Binding Death Benefit Nomination. Check your Deed allows for this first.
Tip 2: Under Division 296Tax, the Reversionary Beneficiary’s Total Super Balance (TSB) increases immediately, potentially triggering a 15% tax if their TSB exceeds $3 million or up to 25% if above $10m at financial year-end. Beneficiaries must weigh the cost of this new tax against the benefits of tax-exempt pension income, while noting that converting to a non-reversionary pension requires careful review of the specific SMSF deed. Ultimately, this decision depends on the Reversionary Beneficiary’s individual financial position and broader estate planning goals.
13. Review Capital Gains Tax on each investment (For every one)
Review any capital gains made during the year and over the term you have held the asset and consider disposing of investments with unrealised losses to offset the gains made. If in pension phase, then consider triggering some capital gains regularly to avoid building up an unrealised gain that may be at risk to legislation changes.
Consider the Division 296 CGT cost base election for 30 June 2026
For SMSF trustees, the election to reset the cost base of assets to their 30 June 2026 market value is a critical one-time opportunity to shield pre-existing capital gains from the Division 296 tax.
Key Planning Considerations
“All-or-Nothing” Election:
The choice applies to every capital gains tax (CGT) asset held by the fund on 30 June 2026.
Trustees cannot pick and choose; they must reset all assets or none.
Irrevocability and Purpose:
The election is irrevocable once made.
This reset applies exclusively for Division 296 purposes. The fund’s standard CGT and income tax calculations still use the original acquisition cost.
Impact of Unrealised Losses:
If an asset’s market value on 30 June 2026 is lower than its original cost, resetting will lock in a lower cost base for Division 296 purposes.
This could result in a larger Division 296 capital gain in the future if the asset recovers and is later sold.
Read more about this option on our LinkedIn post here
14. Collate records of all asset movements and decisions
Ensure all the fund’s activities have been appropriately documented with minutes, and that all copies of all statements, valuations and schedules are on file for your accountant, administrator and auditor.
The ATO has now beefed up its requirements for what needs to be detailed in the SMSF Investment Strategy so review your investment strategy and ensure all investments have been made in accordance with it and the SMSF Trust Deed, including insurances for members. See my article on this subject here.
15. Arrange market valuations (beware of the proposed Div 296 Tax Sting)
Regulations now require assets to be valued at market value each year, including property and collectibles. For more information refer to ATO’s publication Valuation guidelines for SMSFs.
On collectibles, play by the new rules that came into place on 1 July 2016 or remove collectibles from your SMSF.
Tip:The ATO is targeting audit compliance this year on Property Valuations in SMSFs as we approach the implementation of the proposed Division 296 Tax from 1 July 2026.
Tip 2: It would be better to ensure your properties truly match the market value on 1 July 2026 than to have a large rise in value recorded in future years that will trigger higher Div 296 Tax.
Tip 3:Do a 3 year deal with your Valuer!! SMSF Auditors generally accept a full, independent property valuation every three years, provided that in the intervening years you can supply objective and supportable evidence to demonstrate that the property is still recorded at market value.
This evidence must be supplied to the auditor annually and can include:
Title Searches: An annual title search indicating no new charges or liens on the property
Comparable Sales: Evidence of recent sales for similar properties in the same area.
Independent Appraisals: A “kerbside” appraisal or market appraisal from a licensed real estate agent.
Rate Notices: Council or water rates notices (if consistent with other evidence).
Rental Statements: Agent reports showing rental income for the year, which can be used to justify market value through a rental yield analysis.
16. Check the ownership of all investments.
Make sure the assets of the fund are held in the name of the trustees (including a corporate trustee) on behalf of the fund. Carefully check any online accounts and ensure all SMSF assets are separate from your other assets.
We recommend a corporate trustee to all clients. This might be a good time to change, as explained in this article on Why SMSFs should have a corporate trustee. If you have previously moved to a Corporate Trustee then double check all accounts/investments were changed to the name of this trustee.
17. Review Estate Planning and loss of mental capacity strategies
Review any Binding Death Benefit Nominations (BDBN) to ensure they are valid, consider Non-Lapsing Nominations and check the wording matches that required by the Trust Deed. Ensure it still accords with your wishes.
Also ensure you have appropriate Enduring Powers of Attorney (EPOA) in place to allow someone to step into your place as trustee in the event of illness, mental incapacity or death. Ensure that your Power of Attorney is valid for the state you are in living in now if you have retired interstate. This article explains how it can all go wrong
Tip: Check your Trust Deed and the details of the rules. For example, did you know you cannot leave money to stepchildren via a BDBN if their birth-parent has pre-deceased you?
18. Review any SMSF loan arrangements
Have you provided special terms (low or no interest rates, capitalisation of interest etc) on a related party loan? Review your loan agreement and see if you need to amend your loan.
Have you made all the payments on your internal or third-party loans, have you looked at options on prepaying interest or fixing the rates while low?
Have you made sure all payments in regards to Limited Recourse Borrowing Arrangements (LRBA) for the year were made through the SMSF trustee? If you bought a property using borrowing, has the Holding Trust been stamped by your state’s Office of State Revenue? For Related Party LRBA’s the Variable interest rate is currently 8.95% (will be updated for 2027FY in late May)
19. Ensure SuperStream obligations are metand be ready for PayDay Super from 1 July 2026
For super funds that receive employer contributions, the ATO is now enforcing the use of SuperStream, a system whereby super contributions data is made electronically and from 1 July 2026 the Pay Day Super legislation will apply
Payday Super affects SMSFs as well. Is your SMSF Bank account NPP Enabled? Read more here
All funds should be able to receive the contributions same day using NPP and data electronically and you should obtain an Electronic Service Address (ESA) to receive contribution information.
If you change jobs your new employers may ask SMSF members for their ESA, ABN and bank account details.
20. Ensure you are meeting your Quarterly TBAR Reporting deadlines
IF you are in Pension Phase then you need to be checking in with your accountant/administrator Quarterly to ensure TBAR reporting is up to date.
All SMSFs are required to report quarterly. This means you must report the event that affects the members transfer balance within 28 days after the end of the quarter in which the event occurs.
Example: All unreported events that occurred between 1 April and 30 June 2026 must be reported by 28 October 2026. This means you cannot report at the same time as your SMSF annual return (SAR) for the 2023-24 income year. More info here
21. ASIC fee increased from 1 July 2026 and how to avoid the sting with a discount
ASIC is increasing fees by $2 for the annual review of a special purpose SMSF trustee company $65 to $67. The Government is moving gradually to a “user pays” model so expect increases to accelerate in future years. Before 30 June, for $457 you can pre-pay the company fees for 10 years and lock in current prices with a decent discount. There is a remittance form linked here.
Why would you do this? – THE PENALTIES IF YOU MISS RENEWAL!!!
On 6 December 2024, regulations were released to allow the commutation of legacy pensions for a limited 5-year period. There is considerable additional detail in this feature so consult an adviser if you are affected, especially to ensure you do not lose other entitlements such as the age pension.
The regulations allow a five-year timeframe for lifetime or life expectancy pensions and MLIS to be commuted.
You have the following options:
▪ withdraw the funds from superannuation (all these clients have previously met a condition of release) ▪ rollover the amount to accumulation phase, or
▪ use the funds to commence an account based pension (if transfer balance cap space is available).
Under this measure, if a lifetime or life expectancy pension is commuted, any reserve supporting that income stream is also added to the commutation value. However, no amount from the reserve is counted tow
OTHER ISSUES
23. HAS NOT PASSED: Relaxing residency requirements for SMSFs– Labor Government has failed to move on this issue.It appears lost in the ether!
SMSFs and small APRA funds still do not have relaxed residency requirements through the extension of the central management and control test safe harbour from two to five years as the LNP government failed to pass it before the last election and Labor have put it on the backburner. The active member test was also to be removed, allowing members who are temporarily absent to continue to contribute to their SMSF. So if you are heading overseas on an extended secondment or to live please review your options and here is a great guide to your options
24. Improved the Home Equity Access Scheme – Highlighting Social security benefits for you or your parents
Is your SMSF / Super balance getting low and you want to preserve as much as you can for later in your life?
The Home Equity Access Scheme formerly called The Pension Loan Scheme is now up and running. The Government introduced a No Negative Equity Guarantee for HEAS loans and allow people access to a capped advance lump sum payment.
No negative equity guarantee – Borrowers under the HEAS, or their estate, will not owe more than the market value of their property, in the rare circumstances where their accrued HEAS debt exceeds their property value. This brings the HEAS in line with private sector reverse mortgages.
Immediate access to lump sums under the HEAS – Eligible people will be able to access up to two lump sum advances in any 12-month period, up to a total value of 50% of the maximum annual rate of Age Pension Current Maximums (effective 20 March 2026):
Singles: $15,611.70 (based on a maximum annual pension rate of approximately $31,223.40).
Couples (Combined): $23,535.20 (based on a maximum annual pension rate of approximately $47,070.40).
25. Careful if replacing Income Protection or TPD Insurance (Total Permanent Disability)
Have you reviewed your insurances inside and outside of super? Don’t forget to check your current TPD policies owned by the fund with an own occupation definition as the rules changed a few years ago. So be careful about replacing an existing policy as you may not be able to obtain this same cover inside super again.
There were major changes to Income Protection insurance in 2021 so be very careful about switching insurer unless costs have blown out as new cover is often vastly inferior to current covers. Read more here before switching cover.
26. Large one-off Personal income or gain – Bring forward Concessional Contributions
For those who may have a large taxable income this year (large bonus or property sale) and are expecting a lower taxable next year you should consider a contribution allocation strategy to maximise deductions for the current financial year by bringing some or all of your 2026FY limit forward to this year. This strategy is also known as a “Contributions Reserving” strategy but the ATO are not fans of Reserves so best to avoid that wording! Just call is an Allocated Contributions Holding Account. See my article on this strategy here.
27. Providing Proof of Crypto Currency Holdings as of 30 Juneand now Exchanges must have AFSL
As of April 2026, cryptocurrency exchanges and custody platforms in Australia that meet specific asset thresholds are required to hold an Australian Financial Services Licence (AFSL) within 12 months. You should be using an exchange that is set up for SMSF accounts. They should provide a Tax Summary but it may cost extra. Some exchanges are now partnering with Specialised services that are experts in Australian to offer tax reports that meet Australian Audit requirements.
The auditor will also want to verify holdings by checking:
An exchange account is set up in the name of the fund
Wallet purchased using funds from the SMSFs cash account
Cold Wallet Audit management extra step: For annual audit purposes, take a screenshot of the assets held in your Ledger wallet (e.g. via the Ledger ‘Live’ App or similar) on 30 June 2025 and also on the day you submit your paperwork and email this to the tax agent at tax time.
29. NALE/NALI applies in the 2026FY (in the sense the ATO are going to enforce it) – please ensure that if members perform services for their SMSF which is their ‘day job’ (ie. Accounting work for Accountants, Building and repair work for tradies, etc) that these are charged at the appropriate commercial rate that they charge their clients. A good article explaining this in more detail here from ASF Audits
Don’t leave it until after 30 June, review your Self Managed Super Fund now and seek advice if in doubt about any matter.
Some ideas for 1 July 2026
28. Check your Salary Sacrifice or Personal Contributions as Concessional Cap rises to $32,500 and Non-Concessional Cap to $130,000
The superannuation guarantee (SG) rate will remain the same but the Concessional Cap will rise from $30,000 to $32,500. You’ll need to use the new rate to calculate how much of your $30,000 concessional cap will be available to salary sacrifice or make personal deductible contributions.
The annual non-concessional contribution (NCC) cap is set to rise to $130,000 (up from $120,000 in 2025–26) due to indexation. The three-year bring-forward cap will consequently increase to $390,000, allowing higher after-tax contributions depending on total super balance
29. Check your SMSF Trust Deed is current
If your SMSF’s trust deed was last updated before 2015, it may not support current pension strategies, contribution rules, or binding death benefit nomination formats. Legislative changes since then mean older deeds can inadvertently restrict what your fund can legally do. Consider an update every 3-5 years.
30. Check your Investment Strategy is ready for Audit and 2027FY
As mentioned earlier The ATO has now beefed up its requirements for what needs to be detailed in the SMSF Investment Strategy so review your investment strategy and ensure all investments have been made in accordance with it and the SMSF Trust Deed, including insurances for members. See my article on this subject here.
Warning: Don’t jump into the implementation of any strategy without checking your personal circumstances first.
Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact our team at our Castle Hill or Windsor office in Northwest Sydney to arrange a one-on-one consultation, just click the Schedule Now button up on the left to find the appointment options.
Please consider passing on this article to family or friends. Pay it forward!
Oh and please leave a comment or a “like” so I don’t feel I am talking in a vacuum!
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking into account your objectives, financial situation, or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation, and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
⚖️ General Advice Disclaimer This article is general information only and does not constitute personal financial, legal or tax advice. The rules governing SMSFs are complex and individual circumstances vary significantly. You should obtain advice from a licensed financial adviser before acting on anything in this article. The author holds AFSL authorisation through Sonas Wealth Pty Ltd, corporate authorised representative of Viridian Advisory 476223.
Hi, I’m Liam Shorte — better known as The SMSF Coach. As a Financial Planner and SMSF Specialist Advisor with over two decades helping families take control of their super, I’ve seen it all. We often see people, who jumped in to an SMSF before really understanding how it works and it can be a time consuming and an expensive mistake to unwind.
Introduction
An SMSF can be one of the most powerful retirement structures available to Australians — but it is not the right choice for everyone. With over 661,000 SMSFs now operating across Australia and record numbers being established each quarter, I want to make sure that enthusiasm doesn’t outpace understanding.
Before we help anyone establish a fund at Sonas Wealth, we work through a rigorous set of questions together. Some people come in certain an SMSF is what they need. Some leave the conversation feeling the same way. Others discover a better path. Either outcome is a good one — because the goal is never to set up a fund. The goal is to protect and grow your retirement.
This is always the first question. Setting up an SMSF because you’ve heard it’s a good idea, or because a colleague mentioned it over coffee, is not a strategy. I want to understand your short, medium and long-term goals — and whether an SMSF is genuinely the best vehicle to get you there.
Sometimes the answer is clearly yes. Often it opens a broader conversation about alternatives that may serve your true objectives just as well, or better. I’ll never hesitate to point you toward a different path. An SMSF is not the right answer for everyone, and I don’t believe in setting one up just because we can.
2. Is Locking Money Away the Right Move Right Now?
Superannuation is long-term money. For most people, it cannot be accessed until their preservation age — typically 60 — when they meet a condition of release. Before directing more wealth into super, we need to look honestly at your current financial commitments and what flexibility you might need in the next decade.
In many cases, redirecting surplus funds into debt reduction, a personal investment portfolio, or an insurance bond for tax-effective investing can deliver better outcomes while preserving access to capital. Super is a powerful tool — but it needs to be the right tool for the right job at the right time in your life.
💡 Worth Knowing: Carry-Forward Contributions
If your total super balance (TSB) is below $500,000, you may be eligible to use carry-forward concessional contributions — sweeping up unused cap room from the previous five financial years into a single large pre-tax contribution. This can be a powerful complement to an SMSF strategy, particularly when triggered by a significant asset sale or inheritance. Ask your adviser whether this applies to you before deciding how much to contribute and when.
3. Do You Have the Time, Knowledge and Discipline to Run a Fund?
This is the question that surprises people most. Running an SMSF is not passive. It requires you to understand your trustee obligations, review your investment strategy regularly, stay across legislative changes, and commit genuine time to governance — every year, not just at setup.
📖 From the Coaching Files
I’ve had to talk a number of busy executives and business owners out of SMSFs when they couldn’t find a single hour in their week for a meeting — yet expected to manage an $800,000 investment portfolio. I’ve also worked with a couple who considered themselves property experts because they owned four regional Queensland properties, none of which they had ever visited. When we analysed the numbers, the yields were poor, capital growth was flat, and deferred maintenance costs were substantial. Their existing diversified super fund was objectively the safer option until they genuinely developed their property knowledge.
4. What Do You Have to Roll Over — and Can You Actually Move It?
Not all superannuation balances can be rolled into an SMSF without careful consideration. Before making any decision, we need to confirm:
Access restrictions — Some government, military or defined benefit funds (MSBS, Local Government Super) cannot be accessed before a specific age or in certain circumstances.
Defined benefit value — In some cases, the guaranteed benefit from a defined benefit scheme is simply too valuable to walk away from. The certainty of income in retirement may outweigh the flexibility of an SMSF.
Exit costs and liquidity — High exit fees or illiquid underlying investments can make an immediate rollover costly.
Employer mandated funds — Some enterprise bargaining agreements require contributions to flow to a specific fund, which may limit your ability to redirect future Super Guarantee payments. Also some employers offer 1%+ extra to employees using their default fund…don’t lose out!
We work through exactly what you hold, what’s moveable, and what the true cost of moving is — before any action is taken.
5. Have Your Insurance Needs Been Properly Addressed?
Insurance inside superannuation is one of the most commonly overlooked elements of an SMSF transition. When you leave an APRA-regulated industry or retail fund, you typically lose group insurance cover — often cover that would be difficult or impossible to replace on the open market due to health changes since you first obtained it.
⚠️ Critical: Insurance Lost on Rollover Cannot Always Be Reinstated
Once you roll out of an industry or retail fund, group life, TPD and income protection cover is typically cancelled and cannot be reinstated. If your health has changed since that cover was granted, you may find individual cover is either unavailable or prohibitively expensive. Get a full needs analysis before you move a single dollar. Your SMSF trust deed must also document that insurance needs have been considered — it is a compliance requirement, not optional.
6. Are You Genuinely Clear on Your Trustee Responsibilities?
When you sign the Trustee Declaration, you are making a legal commitment that you understand the obligations of a trustee under superannuation law. Saying you didn’t understand those obligations after a compliance breach is not a defence.
As a trustee you are personally responsible for every compliance decision, every investment decision, all record-keeping obligations, and every reporting requirement the fund faces — even if you outsource administration to a professional. We will make sure you have a solid knowledge base before you commit. Your urgency to establish a fund doesn’t override our duty of care to you.
Fixed costs don’t scale down with a smaller balance. The maths needs to work in your favour before an SMSF makes financial sense compared to the APRA-regulated fund you’re currently in.
Cost Component
Typical Range (2025–26)
Setup costs (establishment + trust deed)
$1,500 – $3,000
Annual running costs
$2,000 – $5,000+ (You can find lower at a trade off)
Annual independent audit
$400 – $800
ATO supervisory levy
$259 per year
ASIC annual review fee – sole purpose trustee co.
$67 (look at paying 10 years upfront)
Fund Balance
Annual Cost ($3,500)
Effective Fee Rate
$150,000
$3,500
2.3% — hard to overcome
$200,000
$3,500
1.75% — borderline
$300,000
$3,500
1.1% — becoming viable
$500,000+
$3,500
0.7% or less — cost effective
You can run your SMSF for lower with some online providers but beware of limitations or deals with related parties where they get a cut of brokerage or mortgage commission or straight our referral fees that you ultimately pay.
$200,000–$250,000 in combined member balances is the minimum we normally use.
8. Do You Understand the Risks — Not Just the Benefits?
SMSFs offer genuine advantages: investment control, tax flexibility, estate planning sophistication, and the ability to hold assets such as direct property and business real property. These are real, and for the right person at the right balance, they are compelling.
✅ Potential Benefits
⚠️ Key Risks to Manage
Engagement: we find people who take an active interest in their super are more likely to contribute more, invest consistently and therefore benefit from compound growth
Not understanding how the SMSF works or losing interest.
Full control over investment decisions
Personal trustee liability for all compliance failures. Could mean you can no longer be a director of your own business!
Access to direct property, unlisted assets and collectibles
Concentration risk — especially in property-heavy funds
Economies of scale investing as a couple or family and one SMSF set of fees rather than paying for multiple accounts.
Disagreements on how fund should be managed like different risk tolerances or something more serious like divorce
Tax planning flexibility (timing of contributions and capital gains). Not having to move accounts when changing from accumulation to pension.
Liquidity problems in retirement if assets are illiquid
Superior estate planning via binding death benefit nominations
ATO audit risk if governance is poor
Business real property can be held and leased to related parties
Poor diversification if trustees lack investment expertise
Tax-free income in pension phase on eligible assets
Fines up to $18,000 per trustee for serious breaches
Agility and Transparency: Members have full transparency over their investments, fees, and tax positions. The fund can also react quickly to market changes or legislative updates.
Indecision – being reluctant or afraid to press “Buy” or more often reluctance to admit a wrong call and “Sell”
We’ll give you a balanced view, not a sales pitch in either direction. No reasonable investment reliably produces excessive returns over the long term — and any adviser suggesting otherwise should be a red flag.
9. Have You Thought Carefully About Your Investment Strategy?
Your investment strategy is not a formality — it is a legally required, living document that must genuinely reflect your objectives, risk tolerance, diversification approach, liquidity needs, and the insurance requirements of all members. The ATO expects it to guide every investment decision and to be reviewed regularly, particularly when member circumstances change.
A strategy that says “we will invest in whatever we feel like” is not compliant. We help you build something grounded in realistic expectations and genuine retirement planning — not just a document to tick a box.
10. If Borrowing Is Part of the Plan, Is It Genuinely Affordable?
Limited Recourse Borrowing Arrangements (LRBAs) can be a legitimate strategy inside an SMSF, particularly for acquiring commercial or business real property. But they add significant complexity, increase risk, and must be structured correctly from day one — a defect in the LRBA structure can invalidate the arrangement and create a compliance breach.
Before proceeding with any gearing strategy, we assess:
Whether borrowing is genuinely appropriate for your circumstances and risk profile
Whether the loan is serviceable from the fund’s income and contributions, without relying on member contributions to cover shortfalls indefinitely
Whether the long-term retirement outcome is improved — not just the short-term tax position
Whether the trust deed and LRBA documentation are correctly structured
We’ll walk you through the rules, the process, and the most common mistakes to avoid before you commit to anything.
In fact we have an Education section just on Property in an SMSF with over 17 articles to guide you on every aspect of the strategy. WE DO NOT SELL PROPERTY BUT WE DO CATER FOR YOUR INVESTMENT PREFERENCES
11. What Happens If Circumstances Change?
Life doesn’t stay still. Divorce, death, disability, loss of income, or a decision to move overseas can all complicate an SMSF significantly — and if you haven’t planned for these contingencies from the beginning, unravelling them can be expensive and stressful.
Death benefit nominations — Binding nominations direct the trustee how to distribute your super on death. Not all trust deeds allow binding nominations; check yours. Non-lapsing nominations provide greater certainty.
Incapacity — If a trustee loses capacity, the fund may be unable to operate without an enduring power of attorney in place. This is a commonly overlooked risk.
Relationship breakdown — Super splitting orders following a divorce can create significant complexity in an SMSF, particularly where illiquid assets are involved.
Moving overseas permanently — If all members relocate offshore, the fund may fail the Australian residency test and lose its concessional tax status. Seek advice well before any long-term departure.
Winding up — Once a fund is wound up, it cannot be reactivated. Ensure you have a clear exit strategy and understand the process before you need it. We have you covered How to Wind Up Your SMSF
My View as The SMSF Coach
I’ve spent my career helping trustees get more from their SMSF — but I’ve also spent a lot of time talking people out of one when the timing, balance, or circumstances weren’t right. Both conversations matter equally.
The SMSF sector is growing rapidly — over 661,000 funds, more than 1.2 million members, and record establishment numbers in recent quarters. Some of that growth reflects genuinely well-considered decisions by people who understand what they’re taking on. Some of it reflects enthusiasm running ahead of understanding.
An SMSF done well can be one of the most effective long-term wealth structures available to an Australian. An SMSF done poorly — or set up for the wrong reasons at the wrong time — can quietly erode the retirement security it was meant to protect. My job is to make sure you know which one you’re looking at before you commit.
If you’ve read this and still think an SMSF might be right for you, let’s have that conversation properly.
Pre-Decision Checklist
Before committing to establishing an SMSF, work through each of the following with your adviser:
#
Checklist Item
✅
1
Your goals and objectives genuinely align with what an SMSF can deliver
☐
2
Locking money in super is the right move given your current financial position and commitments
☐
3
You have the time, knowledge and discipline to fulfil trustee obligations year-on-year
☐
4
Your current fund balances can be rolled over — access restrictions and exit costs confirmed
☐
5
Your current fund balances can be rolled over — access restrictions and exit costs confirmed
☐
6
A full insurance needs analysis has been completed before any rollover
☐
7
You have read the Trustee Declaration and understand your legal obligations
☐
8
The cost-benefit analysis confirms an SMSF is cost-effective compared to your current fund
☐
9
You understand both the benefits AND the risks, including compliance penalties
☐
10
A compliant, meaningful investment strategy has been drafted and reviewed
☐
11
If borrowing is planned — LRBA affordability, structure and documentation confirmed
☐
12
Death benefit nominations, power of attorney and exit strategy have been considered
☐
13
Corporate trustee vs individual trustee decision made and reasons documented
☐
📌 Key Takeaways
✅ An SMSF can be a powerful retirement structure — but only when established for the right reasons, at the right balance, and by trustees who understand the obligations.
💰 The cost-effectiveness threshold is around $200,000–$250,000 in combined member balances. Below that, fixed running costs represent a significant fee drag on returns. The true cost depends on the mix of investments and services you engage.
⚠️ Insurance cover held inside an industry or retail fund is typically lost on rollover and may not be replaceable. Get a needs analysis before moving any funds.
📋 Signing the Trustee Declaration is a legal commitment. Not understanding your obligations is not a defence if something goes wrong.
🚫 ATO penalties for serious trustee breaches can reach $18,000 per trustee — and non-compliance can result in the fund being taxed at 45%.
🔑 Your investment strategy is a legal document, not a formality. It must genuinely reflect your objectives, diversification approach, liquidity needs and member insurance requirements.
💡 Always obtain personal advice from a licensed SMSF specialist before establishing a fund or making any rollover decision.
Thinking About an SMSF — or Want a Second Opinion? If you’d like a no-obligation conversation about whether an SMSF is right for your situation — or you want a straight-talking second opinion on an offer you’ve received — reach out. That’s what The SMSF Coach is here for. http://www.smsfcoach.com.au | Sonas Wealth, Sydney www.sonaswealth.com.au
Always make sure that you’re your strategy complies with relevant superannuation and tax regulations before implementation
Are you looking for advisors that will keep you up to date and provide guidance and tips like in this blog? then why not contact us at our Castle Hill or Windsor office in North West Sydney to arrange a one-on-one consultation, just click the Schedule Now button up on the left to find the appointment options.
Please consider passing on this article to family or friends. Pay it forward!
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking into account your objectives, financial situation, or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation, and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
⚖️ General Advice Disclaimer This article is general information only and does not constitute personal financial, legal or tax advice. The rules governing SMSFs are complex and individual circumstances vary significantly. You should obtain advice from a licensed financial adviser before acting on anything in this article. The author holds AFSL authorisation through Sonas Wealth Pty Ltd, corporate authorised representative of Viridian Advisory 476223.
Hi, I’m Liam Shorte — better known as The SMSF Coach. As a Financial Planner and SMSF Specialist Advisor with over two decades helping families take control of their super, I’ve seen it all. Every week I speak to people who’ve been approached about setting up a Self-Managed Super Fund (SMSF). Some of those approaches are genuine but many are not.
Too often, what looks like helpful advice is really a cleverly disguised sales pitch — designed to get you to move your super so the promoter can sell you their product, charge high fees, or worse, put your retirement savings at risk. The ATO is watching this space more closely than ever, and the consequences for getting it wrong as a trustee are serious and personal.
This is your no-nonsense guide before you sign anything.
1. How Are You Being Approached? Sales Pitch or Genuine Advice?
Legitimate SMSF advice starts with your situation — not the adviser’s product. A proper adviser asks about your retirement goals, risk tolerance, existing super balance, insurance needs, available time, and whether an SMSF even makes sense for your circumstances. Only then do they make a recommendation.
The product-led approach works the other way around. The SMSF is not the goal — it is the vehicle. Someone wants to sell you a property, a managed fund, an unlisted investment, or a crypto platform. The SMSF is simply how they access your superannuation balance.
Warning Signs in How You Were Approached
Unsolicited contact — cold calls, emails, social media ads, or “free seminars” promising to “unlock the power of your super”.
Pressure to act fast — “limited time offer”, “EOFY special”, or “get your money out before the rules change”.
Promises that sound too good to be true — guaranteed returns, easy access to your super before retirement, or “we’ll handle everything so you don’t have to lift a finger”.
Focus on a single product — a specific property deal, crypto scheme, or investment the promoter (or their related parties) controls.
A referral chain where the adviser, accountant, mortgage broker and property manager all recommend each other — and all earn from the same transaction.
If the conversation quickly moves to rolling your super into a new SMSF so they can “invest it for you” or “help you buy that investment property” — stop. That is usually the gateway to selling their product, not acting in your best interest.
💡 From The SMSF Coach Ask yourself one question before you go any further: is this person excited about my retirement goals, or excited about my super balance?
🚩 Red Flag 1: The Approach Starts With a Product, Not Your Situation You were contacted unsolicited — by phone, email, social media or a seminar. The pitch centres on a specific investment or property rather than a review of your financial situation. You feel pressured, rushed, or told there is a deadline you must meet. The adviser cannot clearly explain what they earn if you proceed — or refuses to tell you.
Quick Licence Check — Do This Before Anything Else
Anyone who recommends you set up an SMSF must hold an Australian Financial Services (AFS) licence, or be an authorised representative of a licensee. This is not optional — it is the law. Check them on:
The ASIC Financial Advisers Register (search at moneysmart.gov.au)
The Tax Practitioners Board register (if they are advising on tax matters)
No licence? Walk away immediately and consider reporting them to ASIC.
2. Do They Provide Genuine Education — or Just Hype?
Real SMSF education explains the responsibilities, not just the glamour. Any adviser worth trusting will make sure you understand what you are signing up for before you commit to anything.
What Proper Education Must Cover
The sole purpose test — your SMSF must exist solely to provide retirement benefits to members. No personal benefit, no holidays, no business bailouts.
Arm’s length rules — every transaction must be done on commercial terms, as if with an unrelated third party.
Your annual audit obligation — an independent approved auditor must review your fund every single year.
Investment strategy requirements — you must have a written, current strategy that actually reflects how your fund is invested.
Record-keeping and valuation duties — all assets must be valued at market value at 30 June each year, with supporting evidence.
Your personal liability as trustee — you are personally responsible for compliance. Administrative penalties cannot be paid from fund assets.
Red flag material is all glossy brochures and “success stories” with no mention of the paperwork, record-keeping, or what happens if you get it wrong. If they say “we’ll do it all for you” and gloss over your ongoing trustee duties, they are not educating you — they are disarming you.
💡 From The SMSF Coach An SMSF puts you in the driver’s seat, but you still have to steer. If the promoter doesn’t equip you to understand the road rules, they’re not coaching — they’re selling.
🚩 Red Flag 2: No Meaningful Education Is Being Provided The conversation focuses on the benefits of an SMSF but skips the responsibilities, compliance obligations and time commitment.You have not been told that as trustee you are personally responsible for every investment decision, every lodgement, and every breach — even accidental ones.There is no discussion of your existing insurance or how it may be affected when you roll your balance into a new fund.There is no Statement of Advice (SOA) documenting why an SMSF is specifically recommended for your situation.
3. The True Costs of Running an SMSF
Here is the reality the glossy flyers rarely show. The cost of running an SMSF is one of the most consistently misrepresented aspects of the whole conversation — and for many people at lower balances, it is the deciding factor.
What You Should Expect to Pay
Setup costs: Expect $1,400–$2,000 for a proper trust deed, corporate trustee structure, ATO registration, and an initial investment strategy. Cheap setups often cut corners on documentation you will regret later.
Ongoing costs: Based on the latest ATO statistical data, median annual operating expenses run to approximately $4,139–$4,628 per year. This includes auditor fees, accounting, administration, and the supervisory levy.
Many people are shocked to learn the real annual cost often lands between $3,500 and $6,000 once everything is factored in — before investment fees, platform costs, or adviser fees.
Cost Item
Typical Range
Notes
Trust deed & company setup
$500 – $1,500
Higher for corporate trustee structure
Accounting & tax return
$1,200 – $3,000+
Increases with complexity
Independent audit
$300 – $900
Mandatory every year
ATO supervisory levy
$259
Netted in annual return
Financial advice fees
$2,000 – $5,000+
If you engage an adviser
ASIC company annual fee
$67 / year
Corporate trustee only
LRBA / bare trust setup
$1,500 – $3,000+
Required if borrowing for property
Actuarial certificate
$300 – $600
If fund has pension-phase members
Investment & platform costs
Varies widely
Brokerage, managed fund fees, platform access
Insurance review
Varies
Critical — existing cover is often lost on rollover
The old ASIC figure of $13,900 per year was significantly overstated, but the ATO’s median numbers are the ones you should use as your benchmark. If your balance is under $500,000–$750,000, those fixed costs can seriously erode your returns when expressed as a percentage of your balance.
🔑 Before You Proceed: Demand Written Fee Disclosure Total fees expressed in dollars AND as a percentage of your fund balanceA side-by-side comparison between the SMSF and your current super fund, after all fees and taxFull disclosure of any referral fees, commissions or benefits the adviser or their network receivesConfirmation that ATO administrative penalties are your personal liability — not payable from fund assets
🚩 Red Flag 3: Costs Have Not Been Fully and Transparently Disclosed You have only been quoted setup costs, not ongoing annual running costs.No comparison has been provided between the SMSF and your current fund as a percentage of your balance.No one has mentioned that ATO administrative penalties are personally payable by trustees — not from the fund.Insurance implications of rolling out of your current fund have not been raised.
4. The Most Common Mistakes — and What the ATO Does About Them
The ATO regulates more than 630,000 SMSFs and its compliance data makes uncomfortable reading: contraventions increased by 10% in the 2024 income year, and by a further 13% in the first half of the following year. Here are the traps that catch trustees out most often.
Mistakes I See Every Year
🚨 Illegal early access — setting up an SMSF specifically to withdraw funds before you meet a condition of release (generally age 60 with retirement, or age 65 regardless). This is the ATO’s single biggest compliance focus.
Lending to yourself or related parties — or using SMSF assets to support a struggling business. The ATO’s estimate of prohibited loans this year is $231.7 million.
In-house asset breaches — investing more than 5% of the fund’s assets in related-party assets or loans.
Poor record-keeping and valuations — no market-value asset valuations at 30 June, missing trustee minutes, or unsigned trustee declarations.
No investment strategy — or a strategy that does not match your actual investments.
Mixing personal and fund money — paying private bills from the SMSF bank account, or depositing SMSF income into a personal account.
Contribution cap breaches and NALI — non-arm’s length transactions that trigger punitive tax at the highest marginal rate.
Ignoring ATO authority notices — including excess contribution determinations and commutation authorities. Not responding does not make them disappear.
Non-lodgement of annual returns — approximately 85,000 SMSFs had not lodged their 2023 return as at early 2025. Non-lodgement removes your complying status from Super Fund Lookup, cutting off employer contributions and rollovers.
🚩 The Cost of Getting It Wrong Administrative penalties can reach 60 penalty units — currently around $18,780 per breach, per trustee. Loss of complying fund status means the fund’s income is taxed at 45% instead of 15%. Trustee disqualification goes on the public record and applies to all future SMSF roles. These penalties are paid personally by trustees — not from the fund.
Real ATO Cases That Should Make You Think Twice
The ATO does not just issue warnings — it acts. The following court and tribunal decisions illustrate what happens when things go wrong.
📋 ATO Case: NSW Promoter — Federal Court PenaltyOne of the most striking enforcement actions involved a NSW promoter who set up (or attempted to set up) 35 SMSFs for 68 individuals. She charged fees to help people who were not eligible to access their super to roll it into a new SMSF and withdraw it immediately — often the same day — for home renovations, stamp duty and personal expenses.The Federal Court imposed a $220,000 penalty and banned her from setting up SMSFs for seven years. The individuals involved were also exposed to back-taxes, penalties and trustee disqualification.
📋 ATO Case: Ryan v Deputy Commissioner of Taxation [2015] FCA 1037The Ryans withdrew nearly $210,000 from their SMSF in 68 transactions over three years, leaving a minimal balance. Withdrawals were treated as loans but were completely undocumented, unsecured, interest-free and had no repayment date.The Federal Court found breaches of the sole purpose test, the prohibition on member loans, and the arm’s length requirement. Each trustee was fined $20,000 ($40,000 combined), disqualified as trustees, and had their remaining benefits rolled into a public fund. They were ordered to pay the ATO’s costs.
📋 ATO Case: Fitzmaurice and Commissioner of Taxation [2019] AATA 2217The Administrative Appeals Tribunal upheld the disqualification of a trustee following cumulative breaches: lending to a member, sole purpose test violation, illegal early release, missing annual returns, investments not at arm’s length, failure to maintain current asset valuations, and record-keeping failures.Critically, the Tribunal held that vague verbal advice from the fund’s accountant was not a valid defence. Primary responsibility for compliance rests with the trustee — not the adviser.
Other Schemes the ATO Has Shut Down
Property “rebate” arrangements where part of the purchase price is secretly returned to the member personally.
Contrived property development joint ventures that use related parties to divert profits into the SMSF at non-commercial rates, triggering non-arm’s length income (NALI) rules.
High-return crypto or offshore investment apps pushed after an SMSF is established, using the fund balance as the entry ticket.
📊 ATO Enforcement in Numbers — 2024-25 Over 660 SMSF trustees disqualified in 2023-24, largely due to illegal early accessMore than $7 million in administrative penalties and $16 million in additional tax raised$481.8 million estimated in illegal early access and prohibited loans in the most recent year10% increase in contraventions in 2024 income year, with a further 13% rise in early 2025Most common contraventions: member loans (19%), in-house assets (16%), asset separation (13%)
5. My Final Coaching Advice
An SMSF is a genuinely powerful tool — I’ve helped hundreds of families use them successfully for direct property, shares, and real retirement control. But only when it is the right fit and set up properly. The key question is always: who is this arrangement actually serving?
✅ Before You Say Yes: Your Pre-Commitment Checklist Ask yourself honestly: is this person acting in my best interest, or theirs?Demand clear, written disclosure of all fees and ongoing costs — in dollars, not just percentages.Insist on a Statement of Advice (SOA) that documents why an SMSF is recommended for your specific situation.Insist on proper education about your trustee responsibilities before you sign anything.Check every licence on the ASIC Financial Advisers Register and the Tax Practitioners Board.Get a second opinion from an independent SMSF Specialist Adviser who has no connection to the product being recommended.Confirm your existing insurance coverage position before rolling out of your current fund.If anyone promises access to your super now for a non-retirement purpose — stop. That is illegal, and the ATO will find you.
💡 From The SMSF Coach An SMSF done right is one of the best structures available for building retirement wealth. An SMSF done wrong — for the wrong reasons, promoted by the wrong people — can cost you your retirement savings, your trustee status, and years of financial recovery.
📌 Key Takeaways ✅ An SMSF is right for the right person — but the approach, the advice, and the cost disclosure must all check out first.🚨 If someone approached you unsolicited and led with a product, the starting position is one of conflict of interest.💰 Understand the full annual cost (typically $3,500–$6,000+) and compare it to your current fund before deciding.⚠️ The most common contraventions are member loans, in-house asset breaches and non-lodgement — all carry personal penalties.🔑 Always verify licences, demand a written SOA, and get an independent second opinion.📋 The ATO will find non-compliance. Trustees cannot hide behind their accountant or adviser.
Thinking About an SMSF — or Want a Second Opinion? If you’d like a no-obligation conversation about whether an SMSF is right for your situation — or you want a straight-talking second opinion on an offer you’ve received — reach out. That’s what The SMSF Coach is here for. http://www.smsfcoach.com.au | Sonas Wealth, Sydney www.sonaswealth.com.au
Always make sure that you’re your strategy complies with relevant superannuation and tax regulations before implementation
Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why not contact us at our Castle Hill or Windsor office in North West Sydney to arrange a one-on-one consultation, just click the Schedule Now button up on the left to find the appointment options.
Please consider passing on this article to family or friends. Pay it forward!
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking into account your objectives, financial situation, or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation, and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
Failure to pay minimum pensions just got a lot more costly
You may need to ensure your accountant, financial planner and your fellow trustees is up to date with the latest rule changes affecting the start and ending of an SMSF pension which mostly affect those that fail to take the minimum pension amounts in a financial year.
SMSF trustees, accountants and financial advisers should take note of significant changes to pension commencement rules that came into effect on 1 July 2025. These changes impact how pensions are treated for tax purposes if a minimum pension is missed and could have serious implications for retirement planning strategies.
What’s Changed?
The Australian Taxation Office (ATO) has revised Tax Ruling 2013/5 (TR 2013/5), which governs when a pension starts and ceases.
Previously, the rules provided some flexibility with minimal adverse consequences. However, the ATO has now taken a stricter stance, which may have major implications not only for the current and the previous year’s, tax position but also on strategies designed to quarantine pensions with high tax free components from ones with mixed components.
Key Implications of the Changes
1. Pension Failures Confirmed to Take Effect at the Start of the Financial Year
Under the new rules, if a pension fails to pay the minimum pension, it is treated as ceasing at the beginning of the financial year rather than the end. This means:
The pension account converts to an accumulation account immediately at 1 July of the relevant tax year.
If an existing accumulation balance exists, the two amounts will merge for tax purposes, potentially disrupting carefully planned tax strategies. These strategies often revolve around blended families.
2. Transfer Balance Cap Complications
If a pension fails at the start of the year, the transfer balance cap debit must be applied at the 30 June in the year the pension ceased. Ref: ITAA97 Section 294-80(1) item 6. NOTE: In the earlier version of this article we wrongly advised it was a credit to the TBA and immediate when in fact it is a debit and occurs 30 June at end of financial year the pension ceased. Thank you to Mark Ellen of Accurium for picking up on our error.
The pension can only restart once the member rectifies any errors (e.g., failing to meet minimum pension draw down requirements), which may take 13 to 22 months from the date the pension has to be commuted under the enforced rules. Why? Because for many people the first they realise that they have not paid the full minimum pension payment is when their accountant or administrator drafts the financial which is often 9 months after the end of the financial year. e.g., 20 June 2025 financials not completed until March 2026 and that’s when mistake found. But then the Pension is deemed to have been commuted on 01 July 2024!
During this gap, market growth could lock a portion of the funds out of pension phase due to the Transfer Balance Cap issues, limiting tax efficiency and spoiling estate planning strategies.
3. Investment Market Risks
If markets rise while a pension is inactive, the increased account balance may exceed the available transfer balance cap. This means:
Some funds could remain stuck in accumulation phase, missing out on tax-free pension earnings.
Members may not be able to restore their pension to its original value, reducing retirement income benefits.
What Should SMSF Trustees, Accountants and Advisers Do?
Given these changes, it’s crucial to: ✔ Review pension compliance to avoid accidental failures. Request a Minimum Pensions Report from your Accountant/Adviser.
✔ Do not just rely on the last 30 June Financials as you need to ensure you include any new pensions that began in the current financial year
✔ Monitor minimum drawdowns before 30 June each year to prevent unintended cessations. Have someone cross check the payments for you.
✔ Beware that Market Linked and Term Allocated Income Streams have different minimum drawdowns
✔ Plan for tax implications if pensions lapse and merge with accumulation accounts. ✔ Consider timing and market risks when restarting pensions.
Final Thoughts
The ATO’s stricter interpretation of pension rules means SMSF trustees, accountants and advisers must be more vigilant than ever to avoid costly tax, estate planning and transfer balance cap issues. Proactive planning can help mitigate risks and ensure retirees maximise their superannuation benefits.
Stay informed,seek advice and adjust strategies accordingly!
Warning before you jump into implementation of any strategy without checking your personal circumstances.
Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one-on-one consultation, just click the Schedule Now button up on the left to find the appointment options.
Please consider passing on this article to family or friends. Pay it forward!
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking into account your objectives, financial situation, or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation, and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
Here we go again. We have only a short time left to the end of the 2025 financial year to get our SMSF in order and ensure we are making the most of the strategies available to us. Here is a checklist of the most important issues that you should address with your advisers before the year-end.
It’s been another busy year and I have not had as much time to put this together so if you find an error or have a strategy to add then please let me know. Links were working at the time of writing.
Warning before we begin,
You need to check your personal super balances, contribution limits, caps and tax position before implementing any of these strategies as your own particular circumstances may warrant alternative options.
It’s all about timing
If you are making a contribution, the funds must hit the super fund’s bank account by the close of business on 30 June. Some clearing houses hold on to money for up to 14 days before presenting them to the super fund. Some Retail and Industry funds are asking for funds at least to be contributed by the 18th-20th June!
In addition, pension payments must leave the account by the close of business unless paid by cheque in which case the cheques must be presented within a few days of the EOFY. There must have been sufficient funds in the bank account to support the payment of the cheques on 30 June but a cheque should only be your very last-minute option! You can also ask your adviser or administrator about a Promissory Note if time is against you but funds are ready.
So, for SMSFs get your payments in the fund by Monday 23rd June or earlier to be sure (yes I’m Irish) as the 30th is a Monday this year. This is even more important if using a clearing house for contributions.
Review your Concessional Contributions (CC) options including Unused Carry Forward Limits
The government changed the contribution cap from 1 July 2024 to $30,000 and remember that you have the ability to make concessional contributions up to age 67 even if not working and to 75 if you meet the Work Test . This is important for those who have retired but may have sold a property or shares and triggered a large capital gain during the year. Do not not exceed your limit unless you have Unused Carried Forward Concessional limits and Total Super Balance under $500K as of last 01 July 2024.
Check employer contributions on normal pay and bonuses, salary sacrifice and premiums for insurance in super paid by employers, as they are all included in the limit.
This current 5 year period for Unused Concessional Contributions applies from 2019-20 so effectively, this means an individual can make up to $162,500 of CCs in a single financial year by utilising unapplied unused CC caps since 1 July 2019 and this years limit. Guidance on how to check your Unused Carried Forward Concessional limits via MyGov records available here. ..
This is the last year to use the 2019/20 unused Carried Forward Concessional Caps as they fall outside the 5 year rolling period from 30 June 2025.
Beware that once your Income including Salary, Investment income, Employer SGC, Personal Concessional Contributions goes over $250,000 you will be subject to Div 293 Tax
From 1 July 2025 the Super Guarantee also rises to 12%. Re-evaluate your contribution plans for 2025-26
Review plans for Non-Concessional Contributions (NCC) options
From 1 July 2022 the NCC contribution rules changed and currently the age limit of 75 (28 days after the end of the month your turn 75) applies to NCCs (that is, from after-tax money) without meeting the work test. Check out ATO superannuation contribution guidance.
NCCs are an opportunity to move investments into super and out of a personal, company or trust names.
For those couples where one has a higher balance that may be affected by the proposed Division 296 Tax, it is important to review you option to even-up spouse balances and maximise super in pension phase up to age 75. For couples where one spouse has exhausted their transfer balance cap and has excess amounts in accumulation or above $3m, they are able to withdraw from the higher balance and recontribute to the other spouse who has transfer balance cap space available to commence a retirement phase income stream. This can increase the tax efficiency of the couple’s retirement assets as more of their savings are in the tax-free pension phase environment and may help minimise Div 296 Tax.
If you have considerable additional funds to add to contribution then maybe contribute up to $120,000 before June 30 and then you may be able to contribute up to $360,000 after 1 July to maximise contributions.
From 1 July 2024 the Non-Concessional Cap rose to $120,000 per year or $360,000 under the 3 Year Bring Forward Rule.
RECONTRIBUTION STRATEGIES
Consider doing the drawdown before 30 June 2025 so that your Transfer Balance Cap and Total Super Balance on 1 July 2025 gets some additional space with the rise in the TBAR and TSB full limits to $1.2m. Note that if you had and existing pension(s) at 30 June 2024 your current limit will be anywhere between $1.6m and $2M after 1 July (Frustrating for Advisers!)
You can also make your tax components more tax free by using recontribution strategies. SMSF members can cash out their existing super and re-contribute (subject to their contribution caps) them back in to the fund to help reduce tax payable from any super death benefits left to non-tax dependants. From 1 July 2022 you can do this until they turn age 75 (contribution to be made with 28 days after the end of the month you turn 75).
Downsizer contributions
If you have sold your home in the last year and you are over 55, consider eligibility for downsizer contributions of up to $300,000 for each member.
From 1 jan 2023, the eligibility age to make downsizer contributions into superannuation was reduced from 60 to 55 years of age. All other eligibility criteria remain unchanged, allowing individuals to make a one-off, post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. These contributions will continue not to count towards non-concessional contribution caps.
The $300,000 downsizer limit (or $600,000 for a couple) and the $360,000 bring forward NCC cap allow up to $660,000 in one year contributions for a single person and $1,320,000 for a couple subject to their contributions caps.
PLEASE BE CAREFUL AS THE DOWNSIZER IS A ONCE ONLY STRATEGY AND IF YOU WOULD BENEFIT MORE IN OLDER YEARS USING THE STRATEGY THEN MAXIMISE NCCs FIRST.
Calculate co-contributions
Check your eligibility for the co-contribution, it’s a good way to boost your super. The amounts differ based on your income and personal super contributions, so use the super co-contribution calculator.
Examine spouse contributions
If your spouse has assessable income plus reportable fringe benefits totalling less than $37,000 for the full $540 tax offset or up to $40,000 for a partial offset, then consider making a spouse contribution. Check out the ATO guidance here.
You can implement this strategy up to age 75 as a Spouse Contribution is treated as a NCC in their account (and therefore counted towards your spouse’s NCC cap).
Give notice of intent to claim a deduction for contributions
A notice must be made before you commence the pension. Many people like to start pension in June and avoid having to take a minimum pension in that financial year but make sure you have claimed your tax deduction first. The same notice requirement applies if you plan to take a lump sum withdrawal from your fund.
Consider contributions splitting to your spouse
Consider splitting contributions with your spouse, especially if:
your family has one main income earner with a substantially higher balance or
if there is an age difference where you can get funds into pension phase earlier or
if you can improve your eligibility for concession cards or age pension by retaining funds in superannuation in the younger spouse’s name.
This is a simple no-cost strategy I recommend for everyone here.
Remember, any spouse contribution is counted towards your spouse’s NCC cap.
Act early on off-market share transfers
If you want to move any personal shareholdings into super (as a contribution) you should act early. The contract is only valid once the broker receives a fully-valid transfer form so timing in June is critical. There are likely to be brokerage costs involved.
Review options on pension payments
Ensure you take the standard minimum pension at your age-based rate. If a pension member has already taken pension payments of equal to or greater than the the minimum amount, they are not required to take any further pension payments before 30 June 2025. For transition to retirement pensions, ensure you have not taken more than 10% of your opening account balance this financial year.
Minimum annual payments for pensions for 2024/25 financial year onwards.
Age at 1 July
2024 – Standard Minimum % withdrawal
Under 65
4%
65–74
5%
75–79
6%
80–84
7%
85–89
9%
90–94
11%
95 or older
14%
If a pension member has already taken a minimum pension for the year, they cannot change the payment but they can get organised for 2025/26. No, you can’t sneak a payment back into the SMSF bank account unless you treat to as a new contribution!
If you need more than the minimum pension payments for living expenses then it may be a good strategy for amounts above the minimum to be treated as either:
a partial lump commutation sum rather than as a pension payment. This would create a debit against the pension member’s Transfer Balance Account (TBA). Please discuss this with your accountant and adviser first as all funds now have to report these quarterly to the ATO.
for those with both pension and accumulation accounts, take the excess as a lump sum from the accumulation account to preserve as much in tax-exempt pension phase as possible.
Check your documents on reversionary pensions
A reversionary pension to your spouse will provide them with up to 12 months to get their financial affairs organised before making a final decision on how to manage your death benefit. In NSW this may avoid issues with Binding Death Nominations and the Notional Estate (see Benz v Armstrong; Benz v Armstrong; Benz v Armstrong – 2022 NSWSC)
You should review your pension documentation and check if you have nominated a reversionary pension in the context of your family situation. This is especially important with blended families and children from previous marriages that may contest your current spouse’s rights to your assets. Also consider reversionary pensions for dependent disabled children.
The reversionary pension has become more important with the application of the $1.6-$2m million Transfer Balance Cap (TBC) limit to pension phase.
Tip:If you have opted for a nomination instead then check the existing Binding Death Benefit Nominations (many expire after 3 years in older deeds) and look to upgrade to a Non-Lapsing Binding Death Benefit Nomination. Check your Deed allows for this first.
Review Capital Gains Tax on each investment
Review any capital gains made during the year and over the term you have held the asset and consider disposing of investments with unrealised losses to offset the gains made. If in pension phase, then consider triggering some capital gains regularly to avoid building up an unrealised gain that may be at risk to legislation changes.
Collate records of all asset movements and decisions
Ensure all the fund’s activities have been appropriately documented with minutes, and that all copies of all statements, valuations and schedules are on file for your accountant, administrator and auditor.
The ATO has now beefed up its requirements for what needs to be detailed in the SMSF Investment Strategy so review your investment strategy and ensure all investments have been made in accordance with it and the SMSF Trust Deed, including insurances for members. See my article on this subject here.
Arrange market valuations (beware of the proposed Div 296 Tax Sting)
Regulations now require assets to be valued at market value each year, including property and collectibles. For more information refer to ATO’s publication Valuation guidelines for SMSFs.
On collectibles, play by the new rules that came into place on 1 July 2016 or remove collectibles from your SMSF.
Tip:The ATO is targeting audit compliance this year on Property Valuations in SMSFs as we approach the implementation of the proposed Division 296 Tax from 1 July 2025.
Tip 2: It would be better to ensure your properties truly match the market value on 1 July 2025 than to have a large rise in value recorded in future years that will trigger higher Div 296 Tax.
Check the ownership of all investments.
Make sure the assets of the fund are held in the name of the trustees (including a corporate trustee) on behalf of the fund. Carefully check any online accounts and ensure all SMSF assets are separate from your other assets.
We recommend a corporate trustee to all clients. This might be a good time to change, as explained in this article on Why SMSFs should have a corporate trustee. If you have previously moved to a Corporate Trustee ten double check all accounts/investments were changed to the name of this trustee.
Review Estate Planning and loss of mental capacity strategies
Review any Binding Death Benefit Nominations (BDBN) to ensure they are valid, consider Non-Lapsing Nominations and check the wording matches that required by the Trust Deed. Ensure it still accords with your wishes.
Also ensure you have appropriate Enduring Powers of Attorney (EPOA) in place to allow someone to step into your place as trustee in the event of illness, mental incapacity or death.
Check your Trust Deed and the details of the rules. For example, did you know you cannot leave money to stepchildren via a BDBN if their birth-parent has pre-deceased you?
Review any SMSF loan arrangements
Have you provided special terms (low or no interest rates, capitalisation of interest etc) on a related party loan? Review your loan agreement and see if you need to amend your loan.
Have you made all the payments on your internal or third-party loans, have you looked at options on prepaying interest or fixing the rates while low?
Have you made sure all payments in regards to Limited Recourse Borrowing Arrangements (LRBA) for the year were made through the SMSF trustee? If you bought a property using borrowing, has the Holding Trust been stamped by your state’s Office of State Revenue? For Related Party LRBA’s the Variable interest rate is currently 9.35% (will be updated for 2026FY in late May)
Ensure SuperStream obligations are met
For super funds that receive employer contributions, the ATO is gradually introducing SuperStream, a system whereby super contributions data is made electronically.
All funds should be able to receive contributions electronically and you should obtain an Electronic Service Address (ESA) to receive contribution information.
All funds should be able to receive contributions electronically and you should obtain an Electronic Service Address (ESA) to receive contribution information.
If you change jobs your new employers may ask SMSF members for their ESA, ABN and bank account details.
Ensure you are meeting your Quarterly TBAR Reporting deadlines
From 1 July 2023 you need to be checking in with your accountant/administrator Quarterly
All SMSFs are required to report quarterly, even if the members total super balance is less than $1 million. This means you must report the event that affects the members transfer balance within 28 days after the end of the quarter in which the event occurs.
Example: All unreported events that occurred between 1 April and 30 June 2024 must be reported by 28 October 2023. This means you cannot report at the same time as your SMSF annual return (SAR) for the 2023-24 income year. More info here
ASIC fee increased from 1 July 2023
ASIC is increasing fees by $2 for the annual review of a special purpose SMSF trustee company $63 to $65. The Government is moving gradually to a “user pays” model so expect increases to accelerate in future years. Before 30 June, for $452 you can pre-pay the company fees for 10 years and lock in current prices with a decent discount. There is a remittance form linked here.
On 6 December 2024, regulations were released to allow the commutation of legacy pensions for a limited 5-year period. There is considerable additional detail in this feature so consult an adviser if you are affected, especially to ensure you do not lose other entitlements such as the age pension.
The regulations allow a five-year timeframe for lifetime or life expectancy pensions and MLIS to be commuted.
You have the following options:
▪ withdraw the funds from superannuation (all these clients have previously met a condition of release) ▪ rollover the amount to accumulation phase, or
▪ use the funds to commence an account based pension (if transfer balance cap space is available).
Under this measure, if a lifetime or life expectancy pension is commuted, any reserve supporting that income stream is also added to the commutation value. However, no amount from the reserve is counted tow
HAS NOT PASSED: Relaxing residency requirements for SMSFs– Labor Government has failed to move on this issue.
SMSFs and small APRA funds still do not have relaxed residency requirements through the extension of the central management and control test safe harbour from two to five years as the LNP government failed to pass it before the last election and Labor have put it on the backburner. The active member test was also to be removed, allowing members who are temporarily absent to continue to contribute to their SMSF.
Improving the Home Equity Access Scheme – Social security benefits for you or your mum and/or dad
The Home Equity Access Scheme formerly called The Pension Loan Scheme is now up and running. The Government introduced a No Negative Equity Guarantee for HEAS loans and allow people access to a capped advance lump sum payment.
No negative equity guarantee – Borrowers under the HEAS, or their estate, will not owe more than the market value of their property, in the rare circumstances where their accrued HEAS debt exceeds their property value. This brings the HEAS in line with private sector reverse mortgages.
Immediate access to lump sums under the HEAS – Eligible people will be able to access up to two lump sum advances in any 12-month period, up to a total value of 50% of the maximum annual rate of Age Pension (currently maximums are $14,937 for singles and $22,518.60 for couples).
Careful if replacing Income Protection or TPD Insurance (Total Permanent Disability)
Have you reviewed your insurances inside and outside of super? Don’t forget to check your current TPD policies owned by the fund with an own occupation definition as the rules changed a few years ago. So be careful about replacing an existing policy as you may not be able to obtain this same cover inside super again.
There were major changes to Income Protection insurance in 2021 so be very careful about switching insurer unless costs have blown out as new cover is often vastly inferior to current covers. Read more here before switching cover.
Large one-off Personal income or gain – Bring forward Concessional Contributions
For those who may have a large taxable income this year (large bonus or property sale) and are expecting a lower taxable next year you should consider a contribution allocation strategy to maximise deductions for the current financial year by bringing some or all of your 2026FY limit forward to this year. This strategy is also known as a “Contributions Reserving” strategy but the ATO are not fans of Reserves so best to avoid that wording! Just call is an Allocated Contributions Holding Account. See my article on this strategy here.
Providing Proof of Crypto Currency Holdings as of 30 June.
You should be using an exchange that is set up for SMSF accounts. They should provide a Tax Summary but it may cost extra. Some exchanges are now partnering with Specialised services that are experts in Australian to offer tax reports that meet Australian Audit requirements.
The auditor will also want to verify holdings by checking:
An exchange account is set up in the name of the fund
Wallet purchased using funds from the SMSFs cash account
Cold Wallet Audit management extra step: For annual audit purposes, take a screenshot of the assets held in your Ledger wallet (e.g. via the Ledger ‘Live’ App or similar) on 30 June 2023 and also on the day you submit your paperwork and email this to the tax agent at tax time.
29. NALE/NALI applies in the 2025 year (in the sense the ATO are going to enforce it) – please ensure that if members perform services for their SMSF which is their ‘day job’ (ie. Accounting work for Accountants, Building and repair work for tradies, etc) that these are charged at the appropriate commercial rate that they charge their clients. A good article explaining this in more detail here from ASF Audits
Don’t leave it until after 30 June, review your Self Managed Super Fund now and seek advice if in doubt about any matter.
Some for 1 July 2025
Check your Salary Sacrifice or Concessional Contributions as SG rises to 12%
The superannuation guarantee (SG) rate will increase from 11% to 11.5% on 1 July 2024. You’ll need to use the new rate to calculate how much of your $30,000 concessional cap will be available to salary sacrifice or make personal deductible contributions.
Div 296 Tax – valuations of all assets on 1 July 2025 will be crucial.
For those with balances over or close to $3m and used to using low end of property valuations for your asset value, you may need to rethink this strategy as you do not want a large increase in value in future years or it will be caught under the “unrealised gains” sting in the proposed Division 296 Tax.
Warning before you jump into implementation of any strategy without checking your personal circumstances.
Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one-on-one consultation, just click the Schedule Now button up on the left to find the appointment options.
Please consider passing on this article to family or friends. Pay it forward!
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking into account your objectives, financial situation, or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation, and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
OK, yet again we have only a short time left to the end of the 2024 financial year to get our SMSF in order and ensure we are making the most of the strategies available to us. Here is a checklist of the most important issues that you should address with your advisers before the year-end.
It’s been another busy year and I have not had as much time to put this together so if you find an error or have a strategy to add then please let me know. Links were working at the time of writing.
Warning before we begin,
Before we start, just a warning as in the rush to take advantage of new strategies you may have forgotten about how good you have it already Be careful not to allow your accountant, administrator or financial planner to reset any pension that has been grandfathered under the pension deeming rules that came in on Jan 1st 2015 without getting advice on the current and possible future consequences resulting in the pension being subject to current deeming rates if you lose the grandfathering. Point them to this document
It’s all about timing
If you are making a contribution, the funds must hit the super fund’s bank account by the close of business on 30 June. Some clearing houses hold on to money for up to 14 days before presenting them to the super fund. Some Retail and Industry funds are asking for funds at least 7 days before the end of the financial year!
In addition, pension payments must leave the account by the close of business unless paid by cheque in which case the cheques must be presented within a few days of the EOFY. There must have been sufficient funds in the bank account to support the payment of the cheques on 30 June but a cheque should only be your very last-minute option! You can also ask your adviser or administrator about a Promissory Note if time is against you but funds are ready.
So, for SMSFs get your payments in the fund by Monday 24th June or earlier to be sure (yes I’m Irish) as the 30th is a Sunday this year. This is even more important if using a clearing house for contributions.
Review your Concessional Contributions (CC) options and new rules
The government changed the contribution rules from 1 July 2020 to extend the ability to make contributions from age 65 up to age 67. Read more here. Maximise contributions up to CC cap of $27,500 but do not exceed your limit unless you have Unused Carried Forward Concessional limits and Total Super Balance under $500K as of last 01 July 2022. Guidance on how to check your Unused Carried Forward Concessional limits via MyGov records available here
Some of the sting has been taken out of excess contributions tax but you really don’t need the additional paperwork to sort out the problem. Check employer contributions on normal pay and bonuses, salary sacrifice and premiums for insurance in super as they may all be included in the limit.
Consider using the ‘Unused Carry Forward Concessional Contribution” limits
Broadly, the carry forward rule allows individuals to make additional CC in a financial year by utilising unused CC cap amounts from up to five previous financial years. Eligibility requires a total superannuation balance just before the start of that financial year of less than $500,000 (across all your super accounts).
This measure applies from 2018-19 so effectively, this means an individual can make up to $132,500 of CCs in a single financial year by utilising unapplied unused CC caps since 1 July 2018. Guidance on how to check your Unused Carried Forward Concessional limits via MyGov records available here
This is the last year to use the 2018/19 unused Carried Forward Concessional Caps as they fall outside the 5 year rolling period from 30 June 2024.
Beware that once your Income including Salary, Investment income, Employer SGC, Personal Concessional Contributions goes over $250,000 you will be subject to Div 293 Tax
From 1 July 2024 the Concessional Cap rises to $30,000 per year. Super Guarnatee also rises to 11.5%. Re-evaluate your contribution plans for 2024-25
Review plans for Non-Concessional Contributions (NCC) options
From 1 July 2022 the NCC contribution rules changed and currently the age limit of 75 (28 days after the end of the month your turn 75) applies to NCCs (that is, from after-tax money) without meeting the work test. Check out ATO superannuation contribution guidance.
NCCs are an opportunity to move investments into super and out of a personal, company or trust names.
Even-up spouse balances and maximise super in pension phase up to age 75. For couples where one spouse has exhausted their transfer balance cap and has excess amounts in accumulation are able to withdraw from the higher balance and recontribute to the other spouse who has transfer balance cap space available to commence a retirement phase income stream. This can increase the tax efficiency of the couple’s retirement assets as more of their savings are in the tax-free pension phase environment.
Make your tax components more tax free by using recontribution strategies. SMSF members can cash out their existing super and re-contribute (subject to their contribution caps) them back in to the fund to help reduce tax payable from any super death benefits left to non-tax dependants. From 1 July 2022 you can do this until they turn age 75 (contribution to be made with 28 days after the end of the month you turn 75).
From 1 July 2024 the Non-Concessional Cap rises to $120,000 per year or $360,000 under the 3 Year Bring Forward Rule. Re-evaluate your contribution plans for 2024-25
RECONTRIBUTION STRATEGIES
Consider doing the drawdown before 30 June 2023 so that your Transfer Balance Cap and Total Super Balance on 1 July 2024 gets some additional space with the rise in the TBAR and TSB full limits to $1.9m. Note that if you had and existing pension(s) at 30 June 2023 your current limit will be anywhere between $1.6m and $1.9M (Frustrating for Advisers!)
If you have additional funds to add to the withdrawal then maybe take up to $330,000 before June 30 and then you may be able to contribute up to $360,000 using the new Non-Concessional Cap.
Downsizer contributions
If you have sold your home in the last year and you are over 55, consider eligibility for downsizer contributions of up to $300,000 for each member.
From 1 jan 2023, the eligibility age to make downsizer contributions into superannuation was reduced from 60 to 65 years of age. All other eligibility criteria remain unchanged, allowing individuals to make a one-off, post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. These contributions will continue not to count towards non-concessional contribution caps.
The $300,000 downsizer limit (or $600,000 for a couple) and the $330,000 bring forward NCC cap allow up to $630,000 in one year contributions for a single person and $1,260,000 for a couple subject to their contributions caps. That rises on 1 July 2024 to $660,000 for a single person and $1,320,000 for a couple subject to their contributions caps
PLEASE BE CAREFUL AS THIS IS A ONCE ONLY STRATEGY AND IF YOU WOULD BENEFIT MORE IN OLDER YEARS USING THE STRATEGT THE MAXIMISE NCCs FIRST.
Calculate co-contributions
Check your eligibility for the co-contribution, it’s a good way to boost your super. The amounts differ based on your income and personal super contributions, so use the super co-contribution calculator.
Examine spouse contributions
If your spouse has assessable income plus reportable fringe benefits totalling less than $37,000 for the full $540 tax offset or up to $40,000 for a partial offset, then consider making a spouse contribution. Check out the ATO guidance here.
You can implement this strategy up to age 75 as a Spouse Contribution is treated as a NCC in their account (and therefore counted towards your spouse’s NCC cap).
Give notice of intent to claim a deduction for contributions
A notice must be made before you commence the pension. Many people like to start pension in June and avoid having to take a minimum pension in that financial year but make sure you have claimed your tax deduction first. The same notice requirement applies if you plan to take a lump sum withdrawal from your fund.
Consider contributions splitting to your spouse
Consider splitting contributions with your spouse, especially if:
your family has one main income earner with a substantially higher balance or
if there is an age difference where you can get funds into pension phase earlier or
if you can improve your eligibility for concession cards or age pension by retaining funds in superannuation in the younger spouse’s name.
This is a simple no-cost strategy I recommend for everyone here. Remember, any spouse contribution is counted towards your spouse’s NCC cap.
Act early on off-market share transfers
If you want to move any personal shareholdings into super (as a contribution) you should act early. The contract is only valid once the broker receives a fully-valid transfer form so timing in June is critical. There are likely to be brokerage costs involved.
Review options on pension payments
The government has not extended the Temporary Reduction in Minimum Pensions as part of the COVID-19 response. Ensure you take the standard minimum pension at your age-based rate. If a pension member has already taken pension payments of equal to or greater than the the minimum amount, they are not required to take any further pension payments before 30 June 2024. For transition to retirement pensions, ensure you have not taken more than 10% of your opening account balance this financial year.
Minimum annual payments for pensions for 2023/24 financial year onwards.
OK we are back to normal rates from 01/07/2023, no more COVID reductions.
Age at 1 July
2023-24 Back to Standard Minimum % withdrawal
Under 65
4%
65–74
5%
75–79
6%
80–84
7%
85–89
9%
90–94
11%
95 or older
14%
Minimum Pension Standards
If a pension member has already taken a minimum pension for the year, they cannot change the payment but they can get organised for 2024/-25. So, no you can’t sneak a payment back into the SMSF bank account!
If you need more than the minimum pension payments for living expenses then it may be a good strategy for amounts above the minimum to be treated as either:
a partial lump commutation sum rather than as a pension payment. This would create a debit against the pension member’s Transfer Balance Account (TBA). Please discuss this with your accountant and adviser first as all funds now have to report this quarterly to the ATO.
for those with both pension and accumulation accounts, take the excess as a lump sum from the accumulation account to preserve as much in tax-exempt pension phase as possible.
Check your documents on reversionary pensions
A reversionary pension to your spouse will provide them with up to 12 months to get their financial affairs organised before making a final decision on how to manage your death benefit. In NSW this may avoid issues with Binding Death Nominations and the Notional Estate (see Benz v Armstrong; Benz v Armstrong; Benz v Armstrong – 2022 NSWSC)
You should review your pension documentation and check if you have nominated a reversionary pension in the context of your family situation. This is especially important with blended families and children from previous marriages that may contest your current spouse’s rights to your assets. Also consider reversionary pensions for dependent disabled children.
The reversionary pension has become more important with the application of the $1.6-$1.9 million Transfer Balance Cap (TBC) limit to pension phase from 01/07/2023.
Tip:If you have opted for a nomination instead then check the existing Binding Death Benefit Nominations (many expire after 3 years) and look to upgrade to a Non-Lapsing Binding Death Benefit Nomination. Check your Deed allows for this first.
Review Capital Gains Tax on each investment
Review any capital gains made during the year and over the term you have held the asset and consider disposing of investments with unrealised losses to offset the gains made. If in pension phase, then consider triggering some capital gains regularly to avoid building up an unrealised gain that may be at risk to legislation changes.
Collate records of all asset movements and decisions
Ensure all the fund’s activities have been appropriately documented with minutes, and that all copies of all statements, valuations and schedules are on file for your accountant, administrator and auditor.
The ATO has now beefed up its requirements for what needs to be detailed in the SMSF Investment Strategy so review your investment strategy and ensure all investments have been made in accordance with it and the SMSF Trust Deed, including insurances for members. See my article on this subject here.
Arrange market valuations
Regulations now require assets to be valued at market value each year, including property and collectibles. For more information refer to ATO’s publication Valuation guidelines for SMSFs.
On collectibles, play by the new rules that came into place on 1 July 2016 or remove collectibles from your SMSF.
Tip:The ATO is targeting audit compliance this year on Property Valuations in SMSFs as we approach the implementation of the Division 293 Tax from 1 July 2025.
Check the ownership of all investments.
Make sure the assets of the fund are held in the name of the trustees (including a corporate trustee) on behalf of the fund. Carefully check any online accounts and ensure all SMSF assets are separate from your other assets.
Review Estate Planning and loss of mental capacity strategies
Review any Binding Death Benefit Nominations (BDBN) to ensure they are valid, and check the wording matches that required by the Trust Deed. Ensure it still accords with your wishes.
Also ensure you have appropriate Enduring Powers of Attorney (EPOA) in place to allow someone to step into your place as trustee in the event of illness, mental incapacity or death.
Check your Trust Deed and the details of the rules. For example, did you know you cannot leave money to stepchildren via a BDBN if their birth-parent has pre-deceased you?
Review any SMSF loan arrangements
Have you provided special terms (low or no interest rates, capitalisation of interest etc) on a related party loan? Review your loan agreement and see if you need to amend your loan.
Have you made all the payments on your internal or third-party loans, have you looked at options on prepaying interest or fixing the rates while low?
Have you made sure all payments in regards to Limited Recourse Borrowing Arrangements (LRBA) for the year were made through the SMSF trustee? If you bought a property using borrowing, has the Holding Trust been stamped by your state’s Office of State Revenue? For Related Party LRBA’s the Variable interest rate is currently 8.85%
Ensure SuperStream obligations are met
For super funds that receive employer contributions, the ATO is gradually introducing SuperStream, a system whereby super contributions data is made electronically.
All funds should be able to receive contributions electronically and you should obtain an Electronic Service Address (ESA) to receive contribution information.
All funds should be able to receive contributions electronically and you should obtain an Electronic Service Address (ESA) to receive contribution information.
If you change jobs your new employers may ask SMSF members for their ESA, ABN and bank account details.
Ensure you are meeting your Quarterly TBAR Reporting deadlines
From 1 July 2023 you need tio be checking in with your accountant/administrator Quarterly
All SMSFs are required to report quarterly, even if the members total super balance is less than $1 million. This means you must report the event that affects the members transfer balance within 28 days after the end of the quarter in which the event occurs.
Example: All unreported events that occurred between 1 April and 30 June 2024 must be reported by 28 October 2023. This means you cannot report at the same time as your SMSF annual return (SAR) for the 2023-24 income year. More info here
ASIC fee increased from 1 July 2023
ASIC is increasing fees by $4 for the annual review of a special purpose SMSF trustee company $59 to $63. The Government is moving gradually to a “user pays” model so expect increases to accelerate in future years. Before 30 June, for $407 you can pre-pay the company fees for 10 years and lock in current prices with a decent discount. There is a remittance form linked here.
HAS NOT PASSED: Relaxing residency requirements for SMSFs– Labor Government has failed to move on this issue.
SMSFs and small APRA funds still do not have relaxed residency requirements through the extension of the central management and control test safe harbour from two to five years as the LNP government failed to pass it before the last election and Labor have put it on the backburner. The active member test was also to be removed, allowing members who are temporarily absent to continue to contribute to their SMSF.
HAS NOT PASSED: Legacy retirement product conversions (Under Review STILL by Government)
Individuals were to be able to exit a specified range of legacy retirement products, together with any associated reserves over a two-year period but the legislation was not passed and is now to be reviewed by the new Government. The specified range of legacy retirement products includes market-linked, life expectancy and lifetime products, but not flexi-pension products or a lifetime product in a large APRA-regulated or public sector defined benefit scheme.
Currently, these products can only be converted into another like product and limits apply to the allocation of any associated reserves without counting towards an individual’s contribution cap.
There is considerable additional detail in this feature so consult an adviser if you are affected, especially to ensure you do not lose other entitlements such as the age pension.
Improving the Home Equity Access Scheme – Social security benefits for you or your mum and/or dad
The Home Equity Access Scheme formerly called The Pension Loan Scheme is now up and running. The Government introduced a No Negative Equity Guarantee for HEAS loans and allow people access to a capped advance lump sum payment.
No negative equity guarantee – Borrowers under the HEAS, or their estate, will not owe more than the market value of their property, in the rare circumstances where their accrued HEAS debt exceeds their property value. This brings the HEAS in line with private sector reverse mortgages.
Immediate access to lump sums under the HEAS – Eligible people will be able to access up to two lump sum advances in any 12-month period, up to a total value of 50% of the maximum annual rate of Age Pension (currently $14,511.90 for singles and $21,876.40 for couples).
Careful if replacing Income Protection or TPD Insurance (Total Permanent Disability)
Have you reviewed your insurances inside and outside of super? Don’t forget to check your current TPD policies owned by the fund with an own occupation definition as the rules changed a few years ago so be careful about replacing an existing policy as you may not be able to obtain this same cover inside super again.
There were major changes to Income Protection insurance in 2021 so be very careful about switching insurer unless costs have blown out as new cover is often vastly inferior to current covers. Read more here before switching cover.
Large one-off Personal income or gain – Bring forward Concessional Contributions
For those who may have a large taxable income this year (large bonus or property sale) and are expecting a lower taxable next year you should consider a contribution allocation strategy to maximise deductions for the current financial year. This strategy is also known as a “Contributions Reserving” strategy but the ATO are not fans of Reserves so best to avoid that wording! Just call is an Allocated Contributions Holding Account. See my article on this strategy here.
Providing Proof of Crypto Currency Holdings as of 30 June.
You should be using an exchange that is set up for SMSF accounts. They should provide a Tax Summary but it may cost extra. Independent Reserve provides one audited by KPMG for $50. COINSPOT also offer tax reports that meet Australian Audit requirements.
The auditor will also want to verify holdings by checking:
An exchange account is set up in the name of the fund
Wallet purchased using funds from the SMSFs cash account
Cold Wallet Audit management extra step: For annual audit purposes, take a screenshot of the assets held in your Ledger wallet (e.g. via the Ledger ‘Live’ App or similar) on 30 June 2023 and also on the day you submit your paperwork and email this to the tax agent at tax time.
29. NALE/NALI applies in the 2024 year (in the sense the ATO are going to enforce it) – please ensure that if members perform services for their SMSF which is their ‘day job’ (ie. Accounting work for Accountants, Building and repair work for tradies, etc) that these are charged at the appropriate commercial rate that they charge their clients. A good article explaining this in more detail here from ASF Audits
Don’t leave it until after 30 June, review your Self Managed Super Fund now and seek advice if in doubt about any matter.
One for I July 2024 Check your Salary Sacrifice or Concessional Contributions as SG rises to 11.5%
So busy, I forgot the superannuation guarantee (SG) rate will increase from 11% to 11.5% on 1 July 2024. You’ll need to use the new rate to calculate how much of your new indexed limit of $30,000 concessional cap will be available to salary sacrifice or make personal deductible contributions.
Warning before you jump into implementation of any strategy without checking your personal circumstances.
Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one-on-one consultation, just click the Schedule Now button up on the left to find the appointment options.
Please consider passing on this article to family or friends. Pay it forward!
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking into account your objectives, financial situation, or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation, and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
OK, yet again we are with only a few weeks left to the end of the financial year to get our SMSF in order and ensure we are making the most of the strategies available to us. Here is a checklist of the most important issues that you should address with your advisers before the year-end.
It’s been another busy year and I have not had as much time to put this together so if you find an error or have a strategy to add then please let me know. Links were working at the time of writing.
Warning before we begin,
Before we start, just a warning as in the rush to take advantage of new strategies you may have forgotten about how good you have it already Be careful not to allow your accountant, administrator or financial planner to reset any pension that has been grandfathered under the pension deeming rules that came in on Jan 1st 2015 without getting advice on the current and possible future consequences resulting in the pension being subject to current deeming rates if you lose the grandfathering. Point them to thisdocument
It’s all about timing
If you are making a contribution, the funds must hit the super fund’s bank account by the close of business on 30 June. Some clearing houses hold on to money before presenting them to the super fund.
In addition, pension payments must leave the account by the close of business unless paid by cheque in which case the cheques must be presented within a few days of the EOFY. There must have been sufficient funds in the bank account to support the payment of the cheques on 30 June but a cheque should be your very last-minute preference!
Get your payments in by Friday 23rd June or earlier to be sure (yes I’m Irish). This is even more important if using a clearing house for contributions.
Review your Concessional Contributions (CC) options and new rules
The government changed the contribution rules from 1 July 2020 to extend the ability to make contributions from age 65 up to age 67. Read more here. Maximise contributions up to CC cap of $27,500 but do not exceed your limit unless you have Unused Carried Forward Concessional limits and Total Super Balance under $500K as of last 01 July 2022. Guidance on how to check your Unused Carried Forward Concessional limits via MyGov records available here
Some of the sting has been taken out of excess contributions tax but you really don’t need the additional paperwork to sort out the problem. Check employer contributions on normal pay and bonuses, salary sacrifice and premiums for insurance in super as they may all be included in the limit.
Consider using the ‘Unsed Carry Forward Concessional Contribution” limits
Broadly, the carry forward rule allows individuals to make additional CC in a financial year by utilising unused CC cap amounts from up to five previous financial years. Eligibility requires a total superannuation balance just before the start of that financial year of less than $500,000 (across all your super accounts).
This measure applies from 2018-19 so effectively, this means an individual can make up to $130,000 of CCs in a single financial year by utilising unapplied unused CC caps since 1 July 2018. Guidance on how to check your Unused Carried Forward Concessional limits via MyGov records available here
Beware that once your Income including Salary, Investment income, Employer SGC, Personal Concessional Contributions goes over $250,000 you will be subject to Div 293 Tax
Review plans for Non-Concessional Contributions (NCC) options
From 1 July 2022 the NCC contribution rules changed and currently the age limit of 75 (28 days after the end of the month your turn 75) applies to NCCs (that is, from after-tax money) without meeting the work test. Check out ATO superannuation contribution guidance.
NCCs are an opportunity to move investments into super and out of a personal, company or trust names.
Even-up spouse balances and maximise super in pension phase up to age 75. For couples where one spouse has exhausted their transfer balance cap and has excess amounts in accumulation are able to withdraw from the higher balance and recontribute to the other spouse who has transfer balance cap space available to commence a retirement phase income stream. This can increase the tax efficiency of the couple’s retirement assets as more of their savings are in the tax-free pension phase environment.
Make your tax components more tax free by using recontribution strategies. SMSF members can cash out their existing super and re-contribute (subject to their contribution caps) them back in to the fund to help reduce tax payable from any super death benefits left to non-tax dependants. From 1 July 2022 you can do this until they turn age 75 (contribution to be made within 28 days after the end of the month you turn 75).
The Bring Forward Rule for 2022-23 compared to after 1 July 2023
Maximum NCC cap
Current
From 1 July 2023
$330,000
< $1.48M
< $1.68M
$220,000
$1.48 – $1.59M
$1.68 – $1.79M
$110,000
$1.59 – $1.7M
$1.79 – $1.9M
NIL
> $1.7M
> $1.9M
Bring Forward Limits affected by TSB
RECONTRIBUTION STRATEGIES
Consider doing the drawdown before 30 June 2023 so that your Transfer Balance Cap and Total Super Balance on 1 July 2023 gets some additional space with the rise in the TBAR and TSB full limits to $1.9m. Note that if you have existing pensions you new limit will be anywhere between $1.6m and $1.9M (Frustrating for Advisers!)
Downsizer contributions
If you have sold your home in the last year and you are over 55, consider eligibility for downsizer contributions of up to $300,000 for each member.
From 1 jan 2023, the eligibility age to make downsizer contributions into superannuation will be reduced from 60 to 55 years of age. All other eligibility criteria remain unchanged, allowing individuals to make a one-off, post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. These contributions will continue not to count towards non-concessional contribution caps.
The $300,000 downsizer limit (or $600,000 for a couple) and the $330,000 bring forward NCC cap allow up to $630,000 in one year contributions for a single person and $1,260,000 for a couple subject to their contributions caps.
PLEASE BE CAREFUL AS THIS IS A ONCE ONLY STRATEGY AND IF YOU WOULD BENEFIT MORE IN LATER YEARS USING THE STRATEGY THEN MAXIMISE NCCs FIRST.
Calculate co-contributions
Check your eligibility for the co-contribution, it’s a good way to boost your super. The amounts differ based on your income and personal super contributions, so use the super co-contribution calculator.
Examine spouse contributions
If your spouse has assessable income plus reportable fringe benefits totalling less than $37,000 for the full $540 tax offset or up to $40,000 for a partial offset, then consider making a spouse contribution. Check out the ATO guidance here.
From 1 July 2022 you can implement this strategy up to age 75 as a Spouse Contribution is treated as a NCC in their account (and therefore counted towards your spouse’s NCC cap).
Give notice of intent to claim a deduction for contributions
A notice must be made before you commence the pension. Many people like to start pension in June and avoid having to take a minimum pension in that financial year but make sure you have claimed your tax deduction first. The same notice requirement applies if you plan to take a lump sum withdrawal from your fund.
Consider contributions splitting to your spouse
Consider splitting contributions with your spouse, especially if:
your family has one main income earner with a substantially higher balance or
if there is an age difference where you can get funds into pension phase earlier or
if you can improve your eligibility for concession cards or age pension by retaining funds in superannuation in the younger spouse’s name.
This is a simple no-cost strategy I recommend for everyone here. Remember, any spouse contribution is counted towards your spouse’s NCC cap.
Act early on off-market share transfers
If you want to move any personal shareholdings into super (as a contribution) you should act early. The contract is only valid once the broker receives a fully-valid transfer form so timing in June is critical. There are likely to be brokerage costs involved.
Review options on pension payments
The government has extended the Temporary Reduction in Minimum Pensions as part of the COVID-19 response. Ensure you take the new minimum pension of at least 50% of your age-based rate below. If a pension member has already taken pension payments of equal to or greater than the 50% reduced minimum amount, they are not required to take any further pension payments before 30 June 2023. For transition to retirement pensions, ensure you have not taken more than 10% of your opening account balance this financial year.
Minimum annual payments for pensions for 2022/23 and 2023/24 financial years.
OK we are back to normal rates from 01/07/2023
Age at 1 July
2023-24 Back to Standard
Minimum % withdrawal
2022-23 50% reduced
minimum pension
Under 65
4%
2%
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 older
14%
7%
If a pension member has already taken a minimum pension for the year, they cannot change the payment but they can get organised for 2023/24. So, no, you can’t sneak a payment back into the SMSF bank account!
If you still need pension payments for living expenses but have already taken the 50% minimum then it may be a good strategy for amounts above the 50% reduced minimum to be treated as either:
a partial lump commutation sum rather than as a pension payment. This would create a debit against the pension members transfer balance account (TBA). Please discuss this with your accountant and adviser asap as some funds will have to report this quarterly and others on an annual basis.
for those with both pension and accumulation accounts, take the excess as a lump sum from the accumulation account to preserve as much in tax-exempt pension phase as possible.
Check your documents on reversionary pensions
A reversionary pension to your spouse will provide them with up to 12 months to get their financial affairs organised before making a final decision on how to manage your death benefit. In NSW this may avoid issues with Binding Death Nominations and the Notional Estate (see Benz v Armstrong; Benz v Armstrong – 2022 NSWSC)
You should review your pension documentation and check if you have nominated a reversionary pension in the context of your family situation. This is especially important with blended families and children from previous marriages that may contest your current spouse’s rights to your assets. Also consider reversionary pensions for dependent disabled children.
The reversionary pension has become more important with the application of the $1.6-$1.9 million Transfer Balance Cap (TBC) limit to pension phase from 01/07/2023.
Tip: If you have opted for a nomination instead then check the existing Binding Death Benefit Nominations (many expire after 3 years) and look to upgrade to a Non-Lapsing Binding Death Benefit Nomination. Check your Deed allows for this first.
Review Capital Gains Tax on each investment
Review any capital gains made during the year and over the term you have held the asset and consider disposing of investments with unrealised losses to offset the gains made. If in pension phase, then consider triggering some capital gains regularly to avoid building up an unrealised gain that may be at risk to legislation changes.
Collate records of all asset movements and decisions
Ensure all the fund’s activities have been appropriately documented with minutes, and that all copies of all statements and schedules are on file for your accountant, administrator and auditor.
The ATO has now beefed up its requirements for what needs to be detailed in the SMSF Investment Strategy so review your investment strategy and ensure all investments have been made in accordance with it and the SMSF Trust Deed, including insurances for members. See my article on this subject here.
Arrange market valuations
Regulations now require assets to be valued at market value each year, including property and collectibles. For more information refer to ATO’s publication Valuation guidelines for SMSFs.
On collectibles, play by the new rules that came into place on 1 July 2016 or remove collectibles from your SMSF.
Check the ownership of all investments
Make sure the assets of the fund are held in the name of the trustees (including a corporate trustee) on behalf of the fund. Check carefully any online accounts and ensure all SMSF assets are separate from your other assets.
Review Estate Planning and loss of mental capacity strategies
Review any Binding Death Benefit Nominations (BDBN) to ensure they are valid, and check the wording matches that required by the Trust Deed. Ensure it still accords with your wishes.
Also ensure you have appropriate Enduring Powers of Attorney (EPOA) in place to allow someone to step into your place as trustee in the event of illness, mental incapacity or death.
Check your Trust Deed and the details of the rules. For example, did you know you cannot leave money to stepchildren via a BDBN if their birth-parent has pre-deceased you?
Review any SMSF loan arrangements
Have you provided special terms (low or no interest rates, capitalisation of interest etc) on a related party loan? Review your loan agreement and see if you need to amend your loan.
Have you made all the payments on your internal or third-party loans, have you looked at options on prepaying interest or fixing the rates while low? Have you made sure all payments in regards to Limited Recourse Borrowing Arrangements (LRBA) for the year were made through the SMSF trustee? If you bought a property using borrowing, has the Holding Trust been stamped by your state’s Office of State Revenue.
Ensure SuperStream obligations are met
For super funds that receive employer contributions, the ATO is gradually introducing SuperStream, a system whereby super contributions data is made electronically.
All funds should be able to receive contributions electronically and you should obtain an Electronic Service Address (ESA) to receive contribution information.
All funds should be able to receive contributions electronically and you should obtain an Electronic Service Address (ESA) to receive contribution information.
If you change jobs your new employers may ask SMSF members for their ESA, ABN and bank account details.
Ensure you are ready for Quarterly TBAR Reporting
From 1 July 2023
All SMSFs will be required to report quarterly, even if the members total super balance is less than $1 million. This means you must report the event that affects the members transfer balance within 28 days after the end of the quarter in which the event occurs.
All unreported events that occurred before 30 September 2023 must be reported by 28 October 2023. This means you cannot report at the same time as your SMSF annual return (SAR) for the 2022–23 income year. More info here
ASIC fee increases from 1 July 2021
ASIC is increasing fees by $4 for the annual review of a special purpose SMSF trustee company $59 to $63. The Government is moving gradually to a “user pays” model so expect increases to accelerate in future years. Before 30 June for $407 you can pre-pay the company fees for 10 years and lock in current prices with a decent discount. There is a remittance form linked here.
HAS NOT PASSED: Relaxing residency requirements for SMSFs– new Government to review.
SMSFs and small APRA funds still do not have relaxed residency requirements through the extension of the central management and control test safe harbour from two to five years as the LNP government failed to pass it before the election. The active member test was also to be removed, allowing members who are temporarily absent to continue to contribute to their SMSF.
HAS NOT PASSED: Legacy retirement product conversions (Under Review By New Government)
Individuals were to be able to exit a specified range of legacy retirement products, together with any associated reserves over a two-year period but the legislation was not passed and is now to be reviewed by the new Government. The specified range of legacy retirement products includes market-linked, life expectancy and lifetime products, but not flexi-pension products or a lifetime product in a large APRA-regulated or public sector defined benefit scheme.
Currently, these products can only be converted into another like product and limits apply to the allocation of any associated reserves without counting towards an individual’s contribution cap.
There is considerable additional detail in this feature so consult an adviser if you are affected, especially to ensure you do not lose other entitlements such as the age pension.
Improving the Home Equity Access Scheme – Social security benefits for you or your mum and/or dad
The Home Equity Access Scheme formerly called The Pension Loan Scheme is now up and running. The Government introduced a No Negative Equity Guarantee for HEAS loans and allow people access to a capped advance lump sum payment.
No negative equity guarantee – Borrowers under the HEAS, or their estate, will not owe more than the market value of their property, in the rare circumstances where their accrued HEAS debt exceeds their property value. This brings the HEAS in line with private sector reverse mortgages.
Immediate access to lump sums under the HEAS – Eligible people will be able to access up to two lump sum advances in any 12-month period, up to a total value of 50% of the maximum annual rate of Age Pension (currently $13,882 for singles and $20,852 for couples).
Careful if replacing Income Protection or TPD Insurance (Total Permanent Disability)
Have you reviewed your insurances inside and outside of super? Don’t forget to check your current TPD policies owned by the fund with an own occupation definition as the rules changed a few years ago so be careful about replacing an existing policy as you may not be able to obtain this same cover inside super again.
There were major changes to Income Protection insurance in 2021 so be very careful about switching insurer unless costs have blown out as new cover is often vastly inferior to current covers. Read more here before switching cover.
Large one-off Personal income or gain – Bring forward Concessional Contributions
For those who may have a large taxable income this year (large bonus or property sale) and are expecting a lower taxable next year you should consider a contribution allocation strategy to maximise deductions for the current financial year. This strategy is also known as a “Contributions Reserving” strategy but the ATO are not fans of Reserves so best to avoid that wording! Just call it an Allocated Contributions Holding Account. See my article on this strategy here.
Providing Proof of Crypto Currency Holdings as of 30 June.
You should be using an exchange that is set up for SMSF accounts. They should provide a Tax Summary but it may cost extra. Independent Reserve provides one audited by KPMG for $50. COINSPOT also offer tax reports that meet Australian Audit requirements.
The auditor will also want to verify holdings by checking:
An exchange account is set up in the name of the fund
Wallet purchased using funds from the SMSFs cash account
Cold Wallet Audit management extra step: For annual audit purposes, take a screenshot of the assets held in your Ledger wallet (e.g.via the Ledger ‘Live’ App or similar) on 30 June 2023 and also on the day you submit your paperwork and email this to the tax agent at tax time.
Don’t leave it until after 30 June, review your Self Managed Super Fund now and seek advice if in doubt about any matter.
One for 1 July 2023 Check your Salary Sacrifice or Concessional Contributions as SG rises to 11%
So busy, I forgot the superannuation guarantee (SG) rate will increase from 10.5% to 11% on 1 July 2023. You’ll need to use the new rate to calculate how much of your $27,500 concessional limit will be available to salary sacrifice or make personal deductible contributions.
Warning before you jump into implementation of any strategy without checking your personal circumstances.
Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then, why not contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one-on-one consultation (after 1 February 2023 due to our waiting list). Just click the Schedule Now button up on the left to find the appointment options.
Please consider passing on this article to family or friends. Pay it forward!
Liam Shorte B.Bus SSA™ AFP
Financial Planner & SMSF Specialist Advisor™
Tel: 02 9899 3693, Mobile: 0413 936 299
PO Box 6002 NORWEST NSW 2153
Suite 40, 8 Victoria Ave, Castle Hill NSW 2154
Suite 4, 1 Dight St., Windsor NSW 2756
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking into account your objectives, financial situation, or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation, and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
Previously, the government has announced the revised changes to the age limits for Non-Concessional Contributions from 1 July 2022, allowing them to age 75 without having to meet the work test. Now to explore in more detail the actual workings of the new Non-Concessional contributions rules and the “Bring Forward Rule” which allows lump sums to be contributed by bringing forward 2 future years of the non-concessional contribution cap to the current year.
So this year, if you are under 75, you can still use the bring-forward rule to contribute the full $360,000. Note that you may also have already triggered that rule in one of the 2 previous financial years and be wondering how much of the cap you have remaining.
So for example;
If an SMSF member triggered the Non-Concessional Cap bring forward rule last financial year 2023-24 with a $200,000 non-concessional contribution, they could only contribute a maximum of $130,000 as a non-concessional contribution across the 2024-25 or 2025-26 financial years. This is because you triggered the bring-forward arrangement when the limit was was $110,000 per year or $330,000 using the bring-forward rule.
So for example;
If an SMSF member triggers the Non-Concessional Cap bring forward rule this financial year 2024-25 with a $200,000 non-concessional contribution, they could contribute a maximum of $160,000 as a non-concessional contribution across the 2025-26 or 2026-27 financial years. This is because you are triggering the bring-forward arrangement when the limit has increased to $120,000 per year or $360,000 using the bring-forward rule.
$1.9 million eligibility threshold and how it affects the 3 bring forward rule for contributions
From 1 July 2017 another rule has applied that affects NCC contributions. Individuals are unable to make further NCCs where their, now indexed, Total Superannuation Balance (TSB) is $2 million or more (tested at 30 June of the previous financial year) across all Superannuation accounts not just their SMSF. Where an individual’s balance is close to $2 million, they can only make a contribution or use the bring forward to take their balance to $2 million but not beyond.
TSB on 30 June of prior financial year
Contribution and bring-forward available
Less than $1.76m
3 years ($360,000)
$1.76m to < $1.88m
2 years ($240,000)
$1.88m to < $12m
1 year ($120,000, no bring-forward available)
$2m and above
Ni
What should you do now
If you are considering making a contribution this year then I strongly recommend that you track your previous 2 years’ contributions by checking your eligibility via your MyGov App -> ATO service -> Super Tab -> Information -> Bring Forward Arrangement and using the above tables to assess how much you have contributed and how much you can now still contribute under the new rules.
I hope this guidance has been helpful and please take the time to comment. Feedback always appreciated. Please reblog, retweet, like on Facebook etc to make sure we get the news out there. As always please contact me if you want to look at your own options. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or via Skype. Just click the Schedule Now button up on the left to find the appointment options.
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
OK, so here we are with only a few weeks left to the end of the financial year to get our SMSF in order and ensure we are making the most of the strategies available to us. Here is a checklist of the most important issues that you should address with your advisers before the year-end.
It’s been a busy year and I have not had as much time to put this together so if you find an error or have a strategy to add then please let me know. Links were working at the time of writing.
Warning before we begin,
Before we start, just a warning as in the rush to take advantage of new strategies you may have forgotten about how good you have it already Be careful not to allow your accountant, administrator or financial planner to reset any pension that has been grandfathered under the pension deeming rules that came in on Jan 1st 2015 without getting advice on the current and possible future consequences resulting in the pension being subject to current deeming rates if you lose the grandfathering. Point them to thisdocument
It’s all about timing
If you are making a contribution, the funds must hit the super fund’s bank account by the close of business on 30 June. Some clearing houses hold on to money before presenting them to the super fund.
In addition, pension payments must leave the account by the close of business unless paid by cheque in which case the cheques must be presented within a few days of the EOFY. There must have been sufficient funds in the bank account to support the payment of the cheques on 30 June but a cheque should be your very last-minute preference!
Get your payments in by Friday 24th June or earlier to be sure (yes I’m Irish). This is even more important if using a clearing house for contributions.
Review your Concessional Contributions (CC) options and new rules
The government changed the contribution rules from 1 July 2020 to extend the ability to make contributions from age 65 up to age 67. Read more here. Maximise contributions up to CC cap of $27,500 but do not exceed your limit unless you have Carried Forward Concessional limits and Total Super Balance under $500K as of last 01 July 2021.
The sting has been taken out of excess contributions tax but you don’t need additional paperwork to sort out the problem. Check employer contributions on normal pay and bonuses, salary sacrifice and premiums for insurance in super as they may all be included in the limit.
Consider using the ‘carry forward’ CC cap
Broadly, the carry forward rule allows individuals to make additional CC in a financial year by utilising unused CC cap amounts from up to five previous financial years. Eligibility requires a total superannuation balance just before the start of that financial year of less than $500,000 (across all your super accounts).
This measure applies from 2018-19 so effectively, this means an individual can make up to $75,000 of CC in a single financial year by utilising unapplied unused CC caps since 1 July 2018.
Review plans for Non-Concessional Contributions (NCC) options
From 1 July 2022 the NCC contribution rules change but currently the age limit of 67 applies to NCCs (that is, from after-tax money) without meeting the work test (increasing to age 74 from 1 July 2022). You have the option of making $110,000 NCCs per year up to 67 (or 74 from 1 July 2022). Check out ATO superannuation contribution guidance.
NCCs are an opportunity to move investments into super and out of a personal, company or trust names.
Even-up spouse balances and maximise super in pension phase up to age 74. For couples where one spouse has exhausted their transfer balance cap and has excess amounts in accumulation are able to withdraw from the higher balance and recontribute to the other spouse who has transfer balance cap space available to commence a retirement phase income stream. This can increase the tax efficiency of the couple’s retirement assets as more of their savings are in the tax-free pension phase environment.
Make your tax components more tax free by using recontribution strategies. SMSF members can cash out their existing super and re-contribute (subject to their contribution caps) them back in to the fund to help reduce tax payable from any super death benefits left to non-tax dependants. From 1 July 2022 you can do this until they turn age 75 and 28 days.
Downsizer contributions
If you have sold your home in the last year and you are over 65, consider eligibility for downsizer contributions of up to $300,000 for each member.
From 1 July 2022, the eligibility age to make downsizer contributions into superannuation will be reduced from 65 to 60 years of age. All other eligibility criteria remain unchanged, allowing individuals to make a one-off, post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. These contributions will continue not to count towards non-concessional contribution caps.
The $300,000 downsizer limit (or $600,000 for a couple) and the $330,000 bring forward NCC cap allow up to $630,000 in one year contributions for a single person and $1,260,000 for a couple subject to their contributions caps.
Calculate co-contributions
Check your eligibility for the co-contribution, it’s a good way to boost your super. The amounts differ based on your income and personal super contributions, so use the super co-contribution calculator.
Examine spouse contributions
If your spouse has assessable income plus reportable fringe benefits totalling less than $37,000 for the full $540 tax offset or up to $40,000 for a partial offset, then consider making a spouse contribution. Check out the ATO guidance here.
From 1 July 2022 you may also be able to implement this strategy up to age 75 as a Spouse Contribution is treated as a NCC in their account (and therefore counted towards your spouse’s NCC cap).
Give notice of intent to claim a deduction for contributions
A notice must be made before you commence the pension. Many people like to start pension in June and avoid having to take a minimum pension in that financial year but make sure you have claimed your tax deduction first. The same notice requirement applies if you plan to take a lump sum withdrawal from your fund.
Consider contributions splitting to your spouse
Consider splitting contributions with your spouse, especially if:
your family has one main income earner with a substantially higher balance or
if there is an age difference where you can get funds into pension phase earlier or
if you can improve your eligibility for concession cards or age pension by retaining funds in superannuation in the younger spouse’s name.
This is a simple no-cost strategy I recommend for everyone here. Remember, any spouse contribution is counted towards your spouse’s NCC cap.
Act early on off-market share transfers
If you want to move any personal shareholdings into super (as a contribution) you should act early. The contract is only valid once the broker receives a fully-valid transfer form so timing in June is critical. There are likely to be brokerage costs involved.
Review options on pension payments
The government has extended the Temporary Reduction in Minimum Pensions as part of the COVID-19 response. Ensure you take the new minimum pension of at least 50% of your age-based rate below. If a pension member has already taken pension payments of equal to or greater than the 50% reduced minimum amount, they are not required to take any further pension payments before 30 June 2022. For transition to retirement pensions, ensure you have not taken more than 10% of your opening account balance this financial year.
Minimum annual payments for pensions for 2021/22 and 2022/23 financial years.
Age at 1 July
Standard
Minimum % withdrawal
50% reduced
minimum pension
Under 65
4%
2%
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 older
14%
7%
If a pension member has already taken a minimum pension for the year, they cannot change the payment but they can get organised for 2022/23. So, no, you can’t sneak a payment back into the SMSF bank account!
If you still need pension payments for living expenses but have already taken the 50% minimum then it may be a good strategy for amounts above the 50% reduced minimum to be treated as either:
a partial lump commutation sum rather than as a pension payment. This would create a debit against the pension members transfer balance account (TBA). Please discuss this with your accountant and adviser asap as some funds will have to report this quarterly and others on an annual basis.
for those with both pension and accumulation accounts, take the excess as a lump sum from the accumulation account to preserve as much in tax-exempt pension phase as possible.
Check your documents on reversionary pensions
A reversionary pension to your spouse will provide them with up to 12 months to get their financial affairs organised before making a final decision on how to manage your death benefit. In NSW this may avoid issues with Binding Death Nominations and the Notional Estate (see Benz v Armstrong; Benz v Armstrong; Benz v Armstrong – 2022 NSWSC)
You should review your pension documentation and check if you have nominated a reversionary pension in the context of your family situation. This is especially important with blended families and children from previous marriages that may contest your current spouse’s rights to your assets. Also consider reversionary pensions for dependent disabled children.
The reversionary pension has become more important with the application of the $1.6-$1.7 million Transfer Balance Cap (TBC) limit to pension phase.
Tip: If you have opted for a nomination instead then check the existing Binding Death Benefit Nominations (many expire after 3 years) and look to upgrade to a Non-Lapsing Binding Death Benefit Nomination. Check your Deed allows for this first.
Review Capital Gains Tax on each investment
Review any capital gains made during the year and over the term you have held the asset and consider disposing of investments with unrealised losses to offset the gains made. If in pension phase, then consider triggering some capital gains regularly to avoid building up an unrealised gain that may be at risk to legislation changes.
Collate records of all asset movements and decisions
Ensure all the fund’s activities have been appropriately documented with minutes, and that all copies of all statements and schedules are on file for your accountant, administrator and auditor.
The ATO has now beefed up its requirements for what needs to be detailed in the SMSF Investment Strategy so review your investment strategy and ensure all investments have been made in accordance with it and the SMSF Trust Deed, including insurances for members. See my article on this subject here.
Arrange market valuations
Regulations now require assets to be valued at market value each year, including property and collectibles. For more information refer to ATO’s publication Valuation guidelines for SMSFs.
On collectibles, play by the new rules that came into place on 1 July 2016 or remove collectibles from your SMSF.
Understand COVID relief on in-house assets
If your fund has any investments in ‘in-house assets’ you must make sure that at all times the market value of these investments is less than 5% of the value of the fund. Do not take this rule lightly as the current SMSF penalty powers make it easier for the ATO to apply administrative penalties (fines) for smaller misdemeanours ranging from $820 to $10,200 per breach per trustee.
Due to COVID, the ATO will not take action against SMSFs where:
at 30 June 2021 the market value of an SMSF’s in-house assets is over 5% because of the downturn in the share market
the trustee of the SMSF prepares a rectification plan
by 30 June 2022, the rectification plan either cannot be effectively implemented because of market conditions or does not need to be implemented because the market recovers and the 5% test is again satisfied at 30 June 2022.
Get your Director’s ID sorted now!
The deadline for applying for a DIN depends on when you were appointed as a director: If you are already a director on or by 31 October 2021, you must apply by 30 November 2022. If you become a director between 1 November 2021 and 4 April 2022, you must apply within 28 days of your appointment. See my article here for guidance on the process
Check the ownership of all investments
Make sure the assets of the fund are held in the name of the trustees (including a corporate trustee) on behalf of the fund. Check carefully any online accounts and ensure all SMSF assets are separate from your other assets.
Review Estate Planning and loss of mental capacity strategies
Review any Binding Death Benefit Nominations (BDBN) to ensure they are valid, and check the wording matches that required by the Trust Deed. Ensure it still accords with your wishes.
Also ensure you have appropriate Enduring Powers of Attorney (EPOA) in place to allow someone to step into your place as trustee in the event of illness, mental incapacity or death.
Check your Trust Deed and the details of the rules. For example, did you know you cannot leave money to stepchildren via a BDBN if their birth-parent has pre-deceased you?
Review any SMSF loan arrangements
Have you provided special terms (low or no interest rates, capitalisation of interest etc) on a related party loan? Review your loan agreement and see if you need to amend your loan.
Have you made all the payments on your internal or third-party loans, have you looked at options on prepaying interest or fixing the rates while low? Have you made sure all payments in regards to Limited Recourse Borrowing Arrangements (LRBA) for the year were made through the SMSF trustee? If you bought a property using borrowing, has the Holding Trust been stamped by your state’s Office of State Revenue.
Ensure SuperStream obligations are met
For super funds that receive employer contributions, the ATO is gradually introducing SuperStream, a system whereby super contributions data is made electronically.
All funds should be able to receive contributions electronically and you should obtain an Electronic Service Address (ESA) to receive contribution information.
If you change jobs your new employers may ask SMSF members for their ESA, ABN and bank account details.
ASIC fee increases from 1 July 2021
ASIC is increasing fees by $3 for the annual review of a special purpose SMSF trustee company $56 to $59. The Government is moving gradually to a “user pays” model so expect increases to accelerate in future years. Before 30 June for $387 you can pre-pay the company fees for 10 years and lock in current prices with a decent discount. There is a remittance form linked here.
HAS NOT PASSED: Relaxing residency requirements for SMSFs– new Government to review.
SMSFs and small APRA funds still do not have relaxed residency requirements through the extension of the central management and control test safe harbour from two to five years as the LNP government failed to pass it before the election. The active member test was also to be removed, allowing members who are temporarily absent to continue to contribute to their SMSF.
HAS NOT PASSED: Legacy retirement product conversions (Under Review By New Government)
Individuals were to be able to exit a specified range of legacy retirement products, together with any associated reserves over a two-year period but the legislation was not passed and is now to be reviewed by the new Government. The specified range of legacy retirement products includes market-linked, life expectancy and lifetime products, but not flexi-pension products or a lifetime product in a large APRA-regulated or public sector defined benefit scheme.
Currently, these products can only be converted into another like product and limits apply to the allocation of any associated reserves without counting towards an individual’s contribution cap.
There is considerable additional detail in this feature so consult an adviser if you are affected, especially to ensure you do not lose other entitlements such as the age pension.
Improving the Home Equity Access Scheme – Social security benefits for you or your mum and/or dad
Proposed: The Home Equity Access Scheme formerly called The Pension Loan Scheme will apply from 1 July 2022. the Government will introduce a No Negative Equity Guarantee for PLS loans and allow people access to a capped advance lump sum payment.
No negative equity guarantee – Borrowers under the PLS, or their estate, will not owe more than the market value of their property, in the rare circumstances where their accrued PLS debt exceeds their property value. This brings the PLS in line with private sector reverse mortgages.
Immediate access to lump sums under the PLS – Eligible people will be able to access up to two lump sum advances in any 12-month period, up to a total value of 50% of the maximum annual rate of Age Pension (currently $12,385 for singles and $18,670 for couples).
Careful if replacing Income Protection or TPD Insurance (Total Permanent Disability)
Have you reviewed your insurances inside and outside of super? Don’t forget to check your current TPD policies owned by the fund with an own occupation definition as the rules changed a few years ago so be careful about replacing an existing policy as you may not be able to obtain this same cover inside super again.
There were major changes to Income Protection insurance in 2021 so be very careful about switching insurer unless costs have blown out as new cover is often vastly inferior to current covers. Read more here before switching cover.
Large one-off Personal income or gain – Bring forward Concessional Contributions
For those who may have a large taxable income this year (large bonus or property sale) and are expecting a lower taxable next year you should consider a contribution allocation strategy to maximise deductions for the current financial year. This strategy is also known as a “Contributions Reserving” strategy but the ATO are not fans of Reserves so best to avoid that wording! Just call is an Allocated Contributions Holding Account. See my article on this strategy here.
28. Providing Proof of Crypto Currency Holdings as of 30 June.
You should be using an exchange that is set up for SMSF accounts. They should provide a Tax Summary but it may cost extra. Independent Reserve provides one audited by KPMG for $50.
The auditor will also want to verify holdings by checking:
An exchange account is set up in the name of the fund
Wallet purchased using funds from the SMSFs cash account
Cold Wallet Audit management extra step: For annual audit purposes, take a screenshot of the assets held in your Ledger wallet (e.g.via the Ledger ‘Live’ App or similar) on 30 June 2022 and also on the day you submit your paperwork and email this to the tax agent at tax time.
Don’t leave it until after 30 June, review your Self Managed Super Fund now and seek advice if in doubt about any matter.
One for I July 2022 Check your Salary Sacrifice or Concessional Contributions as SG rises to 10.5%
So busy, I forgot the superannuation guarantee (SG) rate will increase from 10% to 10.5% on 1 July 2022. You’ll need to use the new rate to calculate how much of your $27,500 concessional limit will be available to salary sacrifice or make personal deductible contributions.
Warning before you jump into implementation of any strategy without checking your personal circumsatances.
Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one-on-one consultation (after 1 August 2022). Just click the Schedule Now button up on the left to find the appointment options.
Please consider passing on this article to family or friends. Pay it forward!
Liam Shorte B.Bus SSA™ AFP
Financial Planner & SMSF Specialist Advisor™
Tel: 02 9894 1844, Mobile: 0413 936 299
PO Box 6002 NORWEST NSW 2153
5/15 Terminus St. Castle Hill NSW 2154
Suite 40, 8 Victoria Ave, Castle Hill NSW 2154
Suite 4, 1 Dight St., Windsor NSW 2756
Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking into account your objectives, financial situation, or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation, and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
OK, so here we are with only a few weeks left to the end of the financial year to get our SMSF in order and ensure we are making the most of the strategies available to us. Here is a checklist of the most important issues that you should address with your advisers before the year-end.
Its been a busy year and I have not had as much time as usual to put this together so if you find an error or have a strategy to add then please let me know. Links were working at the time of writing.
Warning before we begin,
Before we start, just a warning as in the rush to take advantage of new strategies you may have forgotten about how good you have it already Be careful not to allow your accountant, administrator or financial planner to reset any pension that has been grandfathered under the pension deeming rules that came in on Jan 1st 2015 without getting advice on the current and possible future consequences resulting in the pension being subject to current deeming rates if you lose the grandfathering. Point them to thisdocument
It’s all about timing!
If you are making a contribution the funds must hit the Superfund’s bank account by the close of business on the 30th June. Careful of making contributions through Clearing houses as they often hold on to funds before presenting them to the individual’s superannuation fund for 7-30 days and it’s when the fund receives the payment that the contribution is counted except if paid via the government’s Small Business Clearing House. Pension payments must leave the account by the close of business unless paid by cheque in which case the cheques must be presented within a few days of the EOFY and there must have been sufficient funds in the bank account to support the payment of the cheques on June 30th. Get you payments in by Friday 25th or earlier to be sure (yes I’m Irish).
Review Your Concessional Contributions options – $25,000 per year up to 67 and $27,500 from 1 July 2021
The government changed the contribution rules from 1 July 2020 to extend the ability to make contributions from age 65 up to age 67. Read more here. Maximise contributions up to concessional contribution cap but do not exceed your Concession Limit. The sting has been taken out of Excess contributions tax but you don’t need additional paperwork to sort out the problem. So check employer contributions on normal pay and bonuses, salary sacrifice and premiums for insurance in super as they may all be included in the limit.
3. If your Super balance on 1 July 2020 was under $500,000 Review your previous Concessional Contributions (CC) and consider using the ‘Carry forward’ concessional contributions cap
Broadly, the carry forward rule allows individuals to make additional CC in a financial year by utilising unused CC cap amounts from up to five previous financial years, providing their total superannuation balance just before the start of that financial year was less than $500,000.
This measure applies from 2018-19 so effectively, this means an individual can already make up to $75,000 of CC (less any Employer or Personal deductible contributons in those years) in a single financial year by utilising unapplied unused CC caps since 1 July 2018 and going forward from up to five previous financial years.
Prior to these amendments, if an individual did not fully utilise their annual CC cap in a financial year, they could not carry forward the unused cap to a later year. But please note the balance refers to $500,000 across all of your Superannuation accounts.
Review plans for Non-Concessional Contributions (NCC) options
From 1 July 2020 the new age limit of 67 applied to Non-Concessional Contributions (NCC) without meeting the work test so you have the option of making $100,000 NCC per year up to turning 67.
Hopefully this month (tabled for June 2020 sitting) the Senate will also pass the long delayed legislation allowing you to also use the “3 year bring forward rule” up to age 67 this year (currently still not legislated).
So people who turned 64 or 65 this year and who planned to use the “3 year bring forward rule” may want to review that strategy as it will have to be a last minute transfer once the legislation passes. But don’t fret! another solution awaits
From 1 July 2022 the new age limit of 74 will apply to Non-Concessional Contributions (NCC) without meeting the work test so you have the option of making $100,000 NCC per year up to age 74 (specifically turning 75 and 28 Days.)
Current Option if turned 65 in 2020-21 FY: NCC of $100,000 or $300,000
Have you considered making non-concessional contributions to move investments in to super and out of your personal, company or trust name. Maybe you have proceeds from and inheritance or sale of a property sitting in cash.
Opportunity to even up spouse balances and maximise superannuation in pension phase up to age 74 – Couples where one spouse has exhausted their transfer balance cap and has excess amounts in accumulation are able to withdraw and recontribute to the other spouse who has transfer balance cap space available to commence a retirement phase income stream. This can increase the tax efficiency of the couple’s retirement assets as more of their savings are in the tax-free pension phase environment.
Make your tax components more tax free by using recontribution strategies – SMSF members can cash out their existing super and re-contribute (subject to their contribution caps) them back in to the fund to help reduce tax payable from any super death benefits left to non-tax dependants. They can now do this until they turn age 75 and 28 days.
Co-Contribution
Check your eligibility for the co-contribution and if you are eligible take advantage. Note that the limits have changed and it is “free incentive money to save for your retirement” – grab it if you are eligible.
To calculate the super co-contribution you could be eligible to receive based on your income and personal super contributions, use the Super co-contribution calculator.
Spouse Contribution
If your spouse has assessable income plus reportable fringe benefits and reportable employer super contributions totalling less than $37,000 for the full $540 tax offset and up to $40,000 for a partial offset, then consider making a spouse contribution. Check out the ATO guidance here
From 1 July 2022 you may also be able to implement this strategy up to age 75 as Spouse Contribution treated as a NCC in their account.
Trap: Any spouse contribution is counted towards your spouse’s NCC cap
Over 67? Do you meet the work test? (The 40 hours in any 30 days rule)
You should review your ability to make contributions as if you if you have reached age 67 you must pass the work test of 40 hours in any 30 day period during the financial year, in order to continue to make concessional contributions to super. Check out ATO superannuation contribution guidance . Again if budget measures pass then from 1 July 2022 you can continue to make salary sacrifice contributions up to age 75 but you will still need to meet the work test to make Personal Deductible contributions.
Check any payments you may have made on behalf of the fund.
It is important that you check for amounts that may form a superannuation contribution in accordance with TR 2010/1 (ask your advisor), such as expenses paid for on behalf of the fund, debt forgiveness or in-specie contributions, insurance premiums for cover via super paid from outside the fund.
Notice of intent to claim a deduction for contributions
If you intend to start a pension this notice must be made before you commence the pension. Many like to start pension in June and avoid having to take a minimum pension but make sure you have claimed your tax deduction first. The same applies if you plan to take a lump sum withdrawal from your fund. GET THE NOTICE OF INTENT IN FIRST
Contributions Splitting to your spouse allowed for longer
Consider splitting contributions with your spouse , especially if:
your family has one main income earner with a substantially higher balance or
• if there is an age difference where you can get funds into pension phase earlier or
• If you can improve your eligibility for concession cards or age pension by retaining funds in superannuation in the younger spouse’s name.
This is a simple no-cost strategy I recommend everyone look at. See my blog about this strategy here.
Trap: Any spouse contribution is counted towards your spouse’s NCC cap
Off Market Share Transfers (selling shares from your own name to your fund)
If you want to move any personal shareholdings into super you should act early. The contract is only valid once the broker receives a fully valid transfer form not before so timing in June is critical.
Pension Payments – so many more options this year 2020-2021 and 2021-2022
If you are in pension phase, the government have extended the Temporary Reduction in Minimum Pensions as part of the Covid-19 response. So please ensure you take the new minimum pension of at least 50% of your age-based rate below. For transition to retirement pensions, ensure you have not taken more than 10% of your opening account balance this financial year.
The following table shows the minimum percentage factor (indicative only) for each age group.
Minimum annual payments for super income streams for 2020/21 and 2021/22 Financial years.
Age at 1 July
Standard
Minimum % withdrawal
50% reduced
minimum pension
Under 65
4%
2%
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 older
14%
7%
FINER DETAILS with TIPS and TRAPS
Here is some of the finer detail on how these measures will work, along with some tips and traps to consider when taking withdrawals for the rest of this financial year and the full 2020-21 financial year:
The measures are forward looking so if a pension member has already taken your minimum pension for the year then they cannot change the payment for this year but they can get organised for 2021/22. So, no you can’t try to sneak a payment back in to the SMSF bank account!
If a pension member has already taken pensions payments of equal to or greater than the 50% reduced minimum amount, they are not required to take any further pension payments before 30 June 2021. For example, many would have taken quarterly or half yearly payments. If they add up to the 50% reduced minimum then you do not need to take anymore payments this financial year.
If you still need your pension payments for living expenses but have already taken the 50% reduced minimum then, it may be a good strategy for amounts above the 50% reduced minimum to be treated as either:
for those with both pension and accumulation accounts to take the excess as a lump sum from the accumulation account balance to preserve as much in tax exempt pension phase as possible going forward to future years.
a partial lump commutation sum rather than as a pension payment. This would create a debit against the pension members transfer balance account (TBA). Please discuss this with your accountant and adviser asap as some funds will have to report this quarterly and others on an annual basis. OR
Think about having a sacrificial lamb, a second lower value pension that can sacrificed if minimum not taken. In this way if you pay only a small amount less than the minimum you only have to lose the smaller pensions concession rather than the concession on your full balance. When combined with the ATO relief discussed in the following article “What-happens-if-i-don’t-take-the-minimum-pension” you will have a buffer for mistakes.
Before reading the above: Be careful not to reset a pension that has been grandfathered under the new deeming of pension rules that came in on Jan 1st 2015 without getting advice.
Reversionary Pension is often the preferred option to pass funds to a spouse or dependent child. Review your options
A reversionary pension to you spouse will provide them with up to 12 months to get their financials affairs organised before having to make a final decision on how to manage your death benefit.
You should review your pension documentation and check if you have nominated a reversionary pension. If not, consider your family situation and options to have a reversionary pension.
This is especially important with blended families and children from previous marriages that may contest your current spouse’s rights to your assets. Also consider reversionary pensions for dependent disabled children. T
The reversionary pension has become more important with the application of the $1.6m Transfer Balance Cap limit to pension phase.
Tip: If you have opted for a nomination instead then check existing Binding Death Benefit Nominations (many expire after 3 years) and look to upgrade to a Non-Lapsing Binding Death Benefit Nomination. Check you Deed allows for this first
Review Capital Gains Tax Position of each investment
If you have some funds in accumulation then review any capital gains made during the year and over the term you have held the asset and consider disposing of investments with unrealised losses to offset any gains made in this tax year. If in pension phase then consider triggering some capital gains regularly to avoid building up an unrealised gain that may be at risk to government changes in legislation like those proposed this year.
Review and Update the Investment Strategy not forgetting to include Insurance of Members
The ATO has now beefed up its requirements for what needs to be detailed in the SMSF Investment Strategy so review your investment strategy and ensure all areas are covered and all investments have been made in accordance with it, and the SMSF trust deed. Also, make sure your investment strategy has been updated to include consideration of insurances for members. See my article of this subject here. You should also visit the ATO’s webpage on the topic here which is very educational Don’t know what to do…..call us.
Collate and Document records of all asset movements and decisions
Ensure all the funds activities have been appropriately documented with minutes, and that all copies of all statements and schedules are on file for your accountant/administrator and auditor.
Double Dipping! June Contributions Deductible this year but can be allocated across 2 years.
For those who may have a large taxable income this year (large bonus or property sale) and are expecting a lower taxable next year you should consider a contribution allocation strategy to maximise deductions for the current financial year. This strategy is also known as a “Contributions Reserving” strategy but the ATO are not fans of Reserves so best to avoid that wording! Just call is an Allocated Contributions Holding Account. Note that as the Concessional Limit is moving to $27,500 on 1 July 2021 you can make a total of up to $52,500 using this strategy this year.
Market Valuations – Now required annually
Regulations now require assets to be valued at market value each year, ensure that you have re-valued assets such as property and collectibles. Here is my article on valuations of SMSF investments in Private Trusts and Private Companies. For more information refer to ATO’s publication Valuation guidelines for SMSFs.
In-House Assets
If your fund has any investments in in-house assets you must make sure that at all times the market value of these investments is less than 5% of the value of the fund. Do not take this rule lightly as the new SMSF penalty powers will make it easier for the ATO to apply administrative penalties (fines) for smaller misdemeanours ranging from $820 to $10,200 per breach pere trustee.
Covid-Relief – The ATO has responded to current market conditions, and has announced it will not take compliance action against SMSFs where:
at 30 June 2021 the market value of an SMSF’s in-house assets is over 5% because of the downturn in the share market
the trustee of the SMSF prepares a rectification plan
by 30 June 2022, the rectification plan either:
cannot be effectively implemented because of market conditions
does not need to be implemented because the market recovers and the 5% test is again satisfied at 30 June 2022.
Is your fund providing Covid-19 Rent Relief to a property tenant whether a related party or not? Get your documentation in place.
If you have provided Rent Relief to a tenant, related or not, then get it documented now before June 30 that you have considered, managed and documented the request, the reasoning behind the Trustee’s decision and the details of the relief provided
The ATO have thankfully provided a non-binding practical approach of broadly not applying resources to this issue for FY2021. However, this announcement, while positive, should not be relied on given the considerable downside risks.
Careful if replacing TPD Insurance (Total Permanent Disability – basically “never work again” insurance)
Have you reviewed your insurances inside and outside of super? Don’t forget to check your current TPD policies owned by the fund with an own occupation definition as the rules changed a few years ago so be careful about replacing an existing policy as you may not be able to obtain this same cover inside super again.
Check the ownership details of all SMSF Investments
Make sure the assets of the fund are held in the name of the trustees on behalf of the fund and that means all of them. Check carefully any online accounts you may have set up without checking the exact ownership details. You have to ensure all SMSF assets are kept separate from your other assets.
Review Estate Planning and Loss of Mental Capacity Strategies.
Review any Binding Death Benefit Nominations (BDBN) to ensure they are valid (check the wording matches that required by the Trust Deed) and still in accordance with your wishes. Also ensure you have appropriate Enduring Power of Attorney’s (EPOA) in place allow someone to step in to your place as Trustee in the event of illness, mental incapacity or death. Do you know what your Deed says on the subject? Did you know you cannot leave money to Step-Children via a BDBN if their birth-parent has pre-deceased you?
Review any SMSF Loans
Have you provided special terms (low or no interest rates , capitalisation of interest etc.) on a related party loan? Then you need to review your loan agreement and get advice to see if you need to amend your loan. Have you made all the payments on your internal or third-party loans, have you looked at options on prepaying interest or fixing the rates while low. Have you made sure all payments in regards to Limited Recourse Borrowing Arrangements (LRBA) for the year were made through the SMSF Trustee? If you bought a property using borrowing, has the Holding Trust been stamped by your state’s Office of State Revenue. Please review my blog on the ATO’s Safe Harbour rules for Related Party Loans here
Still have Collectibles in your fund?
Play by the new rules that came into place on the 1st of July 2016 or get them out of your SMSF.
SuperStream obligations must be met
For super funds that receive employer contributions it’s important to take note that since 2014 the ATO has been gradually introducing SuperStream, a system whereby super contributions data is received and made electronically.
All funds should be able to receive contributions electronically and you should obtain an Electronic Service Address (ESA) to receive contribution information. If you are not sure if your fund has an ESA, contact your fund’s administrator, accountant or your bank for assistance.
If you change jobs your new employers may ask SMSF members for their ESA, ABN and bank account details. Some employers may also ask for your Unique Superfund Identifier (USI) – for SMSFs this is the ABN of the fund.
30. ASIC Fees – Increases from 1 July 2021
As expected, ASIC is increasing fees by $1 for the annual review of a special purpose SMSF trustee company $55 > $56. The Government is moving gradually to a “user pays” model so expect increases to accelerate in future years.
For $387 you can pre-pay the company fees for 10 years and lock in current prices with a decent discount. There is a remittance form here:
31. Reducing the eligibility age for downsizer contributions from 1 July 2022The eligibility age to make downsizer contributions into superannuation will be reduced from 65 to 60 years of age. All other eligibility criteria remain unchanged, allowing individuals to make a one-off, post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. These contributions will continue not to count towards non-concessional contribution caps.
The $300,000 downsizer limit (or $600,000 for a couple) and the $330,000 bring forward NCC cap allow up to $630,000 in one year contributions for a single person and $1,260,000 for a couple subject to their contributions caps.
Tip: Great for people who have smaller super balances and invested in their business or property to now switch to tax-effective pensions. You don’t need to have funds available from the sale of your home, that is just the trigger to allow the downsizer contribution and you can use other funds to make the contribution even if you have upsized!.
32. Relaxing residency requirements for SMSFs from 1 July 2022
SMSFs and small APRA funds will have relaxed residency requirements through the extension of the central management and control test safe harbour from two to five years. The active member test will also be removed, allowing members who are temporarily absent to continue to contribute to their SMSF. The Government expects this measure will have effect from 1 July 2022.
Tip: Probably useful post-COVID for those working or travelling to stay with family or get away from them for extended periods overseas.
33 . Legacy retirement product conversions (probably from 1 July 2022)
Individuals will be able to exit a specified range of legacy retirement products, together with any associated reserves over a two-year period. The specified range of legacy retirement products includes market-linked, life expectancy and lifetime products, but not flexi-pension products or a lifetime product in a large APRA-regulated or public sector defined benefit scheme.
Currently, these products can only be converted into another like product and limits apply to the allocation of any associated reserves without counting towards an individual’s contribution cap.
There is considerable additional detail in this feature so consult an adviser if you are affected, especially to ensure you do not lose other entitlements such as the age pension.
This measure will take effect from the first financial year after the date of Royal Assent of the enabling legislation.
34. Improving the Pension Loan Scheme – Social security benefits for you or you mum and/or dad
Current
The Pension Loan Scheme (PLS) allows a fortnightly loan of up to 150% of the maximum rate of Age Pension to help boost a person’s retirement income by unlocking capital in their real estate assets. It can be available for self-funded retirees who are Age Pension age but do not receive a social security pension. Interest is compounded fortnightly at 4.50% p.a., and any debt under the scheme is paid back when the property is sold or the person dies.
Proposal
From 1 July 2022, the Government will introduce a No Negative Equity Guarantee for PLS loans and allow people access to a capped advance lump sum payment.
► No negative equity guarantee
Borrowers under the PLS, or their estate, will not owe more than the market value of their property, in the rare circumstances where their accrued PLS debt exceeds their property value. This brings the PLS in line with private sector reverse mortgages.
► Immediate access to lump sums under the PLS
Eligible people will be able to access up to two lump sum advances in any 12-month period, up to a total value of 50% of the maximum annual rate of Age Pension (currently $12,385 for singles and $18,670 for couples).
Don’t leave it until after 30 June, review your Self Managed Super Fund now and seek advice if in doubt about any matter.
Warning before you jump in to implementation of any strategy,
Before we start, just a warning as in the rush to take advantage of new strategies you may have forgotten about how good you have it already. Be careful not to allow your accountant, administrator or financial planner to reset an account based pension or exit a legacy pension that has been grandfathered under the pension deeming rules that came in on Jan 1st 2015 without getting advice on the current and possible future consequences resulting in the pension being subject to current deeming rates if you lose the grandfathering.
Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.
Please consider passing on this article to family or friends. Pay it forward!
Liam Shorte B.Bus SSA™ AFP
Financial Planner & SMSF Specialist Advisor™
Tel: 02 98941844, Mobile: 0413 936 299
PO Box 6002 BHBC, Baulkham Hills NSW 2153
5/15 Terminus St. Castle Hill NSW 2154
Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572
This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
OK, so here we are with only a few weeks left to the end of the financial year to get our SMSF in order and ensure we are making the most of the strategies available to us. Here is a checklist of the most important issues that you should address with your advisers before the year-end.
Its been a busy year and I have not had as much time as usual to put this together so if you find an error or have a strategy to add then please let me know. Links were working at the time of writing.
Warning before we begin,
Before we start, just a warning as in the rush to take advantage of new strategies you may have forgotten about how good you have it already Be careful not to allow your accountant, administrator or financial planner to reset any pension that has been grandfathered under the pension deeming rules that came in on Jan 1st 2015 without getting advice on the current and possible future consequences resulting in the pension being subject to current deeming rates if you lose the grandfathering. Point them to this document
It’s all about timing!
If you are making a contribution the funds must hit the Superfund’s bank account by the close of business on the 30th June. Careful of making contributions through Clearing houses as they often hold on to funds before presenting them to the individual’s superannuation fund for 7-30 days and it’s when the fund receives the payment that the contribution is counted except if paid via the government’s Small Business Clearing House. Pension payments must leave the account by the close of business unless paid by cheque in which case the cheques must be presented within a few days of the EOFY and there must have been sufficient funds in the bank account to support the payment of the cheques on June 30th. Get you payments in by Friday 26th or earlier to be sure (yes I’m Irish).
Review Your Concessional Contributions options – 25K per year up to 65 this year but work test from 1 July 2020 will apply to 67.
The big news is the government have changed the contribution rules from 1 July 2020 to extend the ability to make contributions from age 65 up to age 67. Read more here. Maximise contributions up to concessional contribution cap but do not exceed your Concession Limit. The sting has been taken out of Excess contributions tax but you don’t need additional paperwork to sort out the problem. So check employer contributions on normal pay and bonuses, salary sacrifice and premiums for insurance in super as they may all be included in the limit.
3. If your Super balance on 1 July 2019 was under $500,000 Review your previous Concessional Contributions (CC) and consider using the ‘Carry forward’ concessional contributions cap
Broadly, the carry forward rule allows individuals to make additional CC in a financial year by utilising unused CC cap amounts from up to five previous financial years, providing their total superannuation balance just before the start of that financial year was less than $500,000.
This measure applies from 2018-19 so effectively, this means an individual can make up to $50,000 of CC in a single financial year by utilising unapplied unused CC caps since 1 July 2018 and going forward from up to five previous financial years.
Prior to these amendments, if an individual did not fully utilise their annual CC cap in a financial year, they could not carry forward the unused cap to a later year. But please note the balance refers to $500,000 across all of your Superannuation accounts.
Review plans for Non-Concessional Contributions (NCC) options
From 1 July 2020 the new age limit of 67 will apply to Non-Concessional Contributions (NCC) without meeting the work test so you have the option of making $100,000 NCC per year up to turning 67.
Hopefully this month (tabled for 18th June 2020 sitting) the Parliament will also pass legislation allowing you to also use the “3 year bring forward rule” up to age 67.
So people who turned 64 0r 65 this year and who planned to use the “3 year bring forward rule” may want to review that strategy if they wish to get more money in to super
Current Option if turned 65 in 2019-20 FY: NCC of $100,000 or $300,000
Have you considered making non-concessional contributions to move investments in to super and out of your personal, company or trust name. Maybe you have proceeds from and inheritance or sale of a property sitting in cash.
As shares and cash have been hit by the Covod-19 crisis value you may find that it is opportune for personal tax reasons to take this time to move some assets to super may help control your tax bill.
Co-Contribution
Check your eligibility for the co-contribution and if you are eligible take advantage. Note that the limits have changed and it is “free incentive money to save for your retirement” – grab it if you are eligible.
To calculate the super co-contribution you could be eligible to receive based on your income and personal super contributions, use the Super co-contribution calculator.
Spouse Contribution
If your spouse has assessable income plus reportable fringe benefits totalling less than $37,000 for the full $540 tax offset and up to $40,000 for a partial offset, then consider making a spouse contribution. Check out the ATO guidance here
Over 65 and soon up to 67? Do you meet the work test? (The 40 hours in any 30 days rule)
You should review your ability to make contributions as if you if you have reached age 65 you must pass the work test of 40 hours in any 30 day period during the financial year, in order to continue to make contributions to super. Check out ATO superannuation contribution guidance . Keep an eye later this month for new of the age limit rising form 65 to 67 before needing to meet the work test from 1 July 2020.
Check any payments you may have made on behalf of the fund.
It is important that you check for amounts that may form a superannuation contribution in accordance with TR 2010/1 (ask your advisor), such as expenses paid for on behalf of the fund, debt forgiveness or in-specie contributions, insurance premiums for cover via super paid from outside the fund.
Notice of intent to claim a deduction for contributions
If you intend to start a pension this notice must be made before you commence the pension. Many like to start pension in June and avoid having to take a minimum pension but make sure you have claimed your tax deduction first. The same applies if you plan to take a lump sum withdrawal from your fund. GET THE NOTICE OF INTENT IN FIRST
Contributions Splitting to your spouse
Consider splitting contributions with your spouse, especially if:
your family has one main income earner with a substantially higher balance or
• if there is an age difference where you can get funds into pension phase earlier or
• If you can improve your eligibility for concession cards or age pension by retaining funds in superannuation in the younger spouse’s name.
This is a simple no-cost strategy I recommend everyone look at. See my blog about this strategy here.
Off Market Share Transfers (selling shares from your own name to your fund)
If you want to move any personal shareholdings into super you should act early. The contract is only valid once the broker receives a fully valid transfer form not before so timing in June is critical.
Pension Payments – so many more options this year 2019-2020 and in 2020-2021
If you are in pension phase, the government have brought in the Temporary Reduction in Minimum Pensions as part of the Covid-19 response. So please ensure you take the new minimum pension of at least 50% of your age-based rate below. For transition to retirement pensions, ensure you have not taken more than 10% of your opening account balance this financial year.
The following table shows the minimum percentage factor (indicative only) for each age group.
Minimum annual payments for super income streams for 2019/20 and 2020/21 Financial years.
Age at 1 July
Standard
Minimum % withdrawal
50% reduced
minimum pension
Under 65
4%
2%
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 older
14%
7%
FINER DETAILS with TIPS and TRAPS
Here is some of the finer detail on how these measures will work, along with some tips and traps to consider when taking withdrawals for the rest of this financial year and the full 2020-21 financial year:
The measures are forward looking so if a pension member has already taken your minimum pension for the year then they cannot change the payment for this year but they can get organised for 2020/21. So, no you can’t try to sneak a payment back in to the SMSF bank account!
If a pension member has already taken pensions payments of equal to or greater than the 50% reduced minimum amount, they are not required to take any further pension payments before 30 June 2020. For example, many would have taken quarterly or half yearly payments. If they add up to the 50% reduced minimum then you do not need to take anymore payments this financial year.
If you still need your pension payments for living expenses but have already taken the 50% reduced minimum then, it may be a good strategy for amounts above the 50% reduced minimum to be treated as either:
a partial lump commutation sum rather than as a pension payment. This would create a debit against the pension members transfer balance account (TBA). Please discuss this with your accountant and adviser asap as some funds will have to report this quarterly and others on an annual basis. OR
for those with both pension and accumulation accounts to take the excess as a lump sum from the accumulation account balance to preserve as much in tax exempt pension phase as possible going forward to future years.
Think about having a sacrificial lamb, a second lower value pension that can sacrificed if minimum not taken. In this way if you pay only a small amount less than the minimum you only have to lose the smaller pensions concession rather than the concession on your full balance. When combined with the ATO relief discussed in the following article “What-happens-if-i-don’t-take-the-minimum-pension” you will have a buffer for mistakes.
Before reading the above: Be careful not to reset a pension that has been grandfathered under the new deeming of pension rules that came in on Jan 1st 2015 without getting advice.
Reversionary Pension is often the preferred option to pass funds to a spouse or dependent child. Review your options
A reversionary pension to you spouse will provide them with up to 12 months to get their financials affairs organised before having to make a final decision on how to manage your death benefit.
You should review your pension documentation and check if you have nominated a reversionary pension. If not, consider your family situation and options to have a reversionary pension.
This is especially important with blended families and children from previous marriages that may contest your current spouse’s rights to your assets. Also consider reversionary pensions for dependent disabled children. T
The reversionary pension has become more important with the application of the $1.6m Transfer Balance Cap limit to pension phase.
Review Capital Gains Tax Position of each investment
Review any capital gains made during the year and over the term you have held the asset and consider disposing of investments with unrealised losses to offset the gains made. If in pension phase then consider triggering some capital gains regularly to avoid building up an unrealised gain that may be at risk to government changes in legislation like those proposed this year.
Review and Update the Investment Strategy not forgetting to include Insurance of Members
Review your investment strategy and ensure all investments have been made in accordance with it, and the SMSF trust deed. Also, make sure your investment strategy has been updated to include consideration of insurances for members. See my article of this subject here. Don’t know what to do…..call us.
Collate and Document records of all asset movements and decisions
Ensure all the funds activities have been appropriately documented with minutes, and that all copies of all statements and schedules are on file for your accountant/administrator and auditor.
Double Dipping! June Contributions Deductible this year but can be allocated across 2 years.
For those who may have a large taxable income this year (large bonus or property sale) and are expecting a lower taxable next year you should consider a contribution allocation strategy to maximise deductions for the current financial year. This strategy is also known as a “Contributions Reserving” strategy but the ATO are not fans of Reserves so best to avoid that wording! Just call is an Allocated Contributions Holding Account.
Market Valuations – Now required annually
Regulations now require assets to be valued at market value each year, ensure that you have re-valued assets such as property and collectibles. Here is my article on valuations of SMSF investments in Private Trusts and Private Companies. For more information refer to ATO’s publication Valuation guidelines for SMSFs.
In-House Assets
If your fund has any investments in in-house assets you must make sure that at all times the market value of these investments is less than 5% of the value of the fund. Do not take this rule lightly as the new SMSF penalty powers will make it easier for the ATO to apply administrative penalties (fines) for smaller misdemeanours ranging from $820 to $10,200 per breach pere trustee.
Covid-Relief – The ATO has responded to current market conditions, and has announced it will not take compliance action against SMSFs where:
at 30 June 2020 the market value of an SMSF’s in-house assets is over 5% because of the downturn in the share market
the trustee of the SMSF prepares a rectification plan
by 30 June 2021, the rectification plan either:
cannot be effectively implemented because of market conditions
does not need to be implemented because the market recovers and the 5% test is again satisfied at 30 June 2021.
Is your fund providing Covid-19 Rent Relief to a property tenant whether a related party or not? Get your documentation in place.
If you have provided Rent Relief to a tenant, related or not, then get it documented now before June 30 that you have considered, managed and documented the request, the reasoning behind the Trustee’s decision and the details of the relief provided
The ATO have thankfully provided a non-binding practical approach of broadly not applying resources to this issue for FY2020 and FY2021. However, this announcement, while positive, should not be relied on given the considerable downside risks.
Careful if replacing TPD Insurance (Total Permanent Disability – basically “never work again” insurance)
Have you reviewed your insurances inside and outside of super? Don’t forget to check your current TPD policies owned by the fund with an own occupation definition as the rules changed a few years ago so be careful about replacing an existing policy as you may not be able to obtain this same cover inside super again.
Check the ownership details of all SMSF Investments
Make sure the assets of the fund are held in the name of the trustees on behalf of the fund and that means all of them. Check carefully any online accounts you may have set up without checking the exact ownership details. You have to ensure all SMSF assets are kept separate from your other assets.
Review Estate Planning and Loss of Mental Capacity Strategies.
Review any Binding Death Benefit Nominations (BDBN) to ensure they are valid (check the wording matches that required by the Trust Deed) and still in accordance with your wishes. Also ensure you have appropriate Enduring Power of Attorney’s (EPOA) in place allow someone to step in to your place as Trustee in the event of illness, mental incapacity or death. Do you know what your Deed says on the subject? Did you know you cannot leave money to Step-Children via a BDBN if their birth-parent has pre-deceased you?
Review any SMSF Loans
Have you provided special terms (low or no interest rates , capitalisation of interest etc.) on a related party loan? Then you need to review your loan agreement and get advice to see if you need to amend your loan. Have you made all the payments on your internal or third-party loans, have you looked at options on prepaying interest or fixing the rates while low. Have you made sure all payments in regards to Limited Recourse Borrowing Arrangements (LRBA) for the year were made through the SMSF Trustee? If you bought a property using borrowing, has the Holding Trust been stamped by your state’s Office of State Revenue. Please review my blog on the ATO’s Safe Harbour rules for Related Party Loans here
Still have Collectibles in your fund?
Play by the new rules that came into place on the 1st of July 2016 or get them out of your SMSF. More on these rules and what you must do in a good blog from SuperFund Partners here.
SuperStream obligations must be met
For super funds that receive employer contributions it’s important to take note that since 2014 the ATO has been gradually introducing SuperStream, a system whereby super contributions data is received and made electronically.
All funds should be able to receive contributions electronically and you should obtain an Electronic Service Address (ESA) to receive contribution information. If you are not sure if your fund has an ESA, contact your fund’s administrator, accountant or your bank for assistance.
If you change jobs your new employers may ask SMSF members for their ESA, ABN and bank account details. Some employers may also ask for your Unique Superfund Identifier (USI) – for SMSFs this is the ABN of the fund.
Don’t leave it until after 30 June, review your Self Managed Super Fund now and seek advice if in doubt about any matter.
Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.
Please consider passing on this article to family or friends. Pay it forward!
Liam Shorte B.Bus SSA™ AFP
Financial Planner & SMSF Specialist Advisor™
Tel: 02 98941844, Mobile: 0413 936 299
PO Box 6002 BHBC, Baulkham Hills NSW 2153
5/15 Terminus St. Castle Hill NSW 2154
Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572
This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
I recently did a co-presentation with Louise Biti from Aged Care Steps for the Self Managed Superannuation Fund Association on how SMSF Trustees can plan for incapacity or just that time when they no longer wish to run their fund. The response was great and the questions from the floor really brought it home to us that people are very concerned about how they pass control of their wealth and well-being to others. A copy of the presentation slides are available here . As part of my preparation I developed a simple checklist of issues that SMSF trustees should use when they consider their options. This list is not exhaustive so please add your own tips or suggestions in the comments section below.
When planning for the management of your funds in your SMSF you must first read the Deed!
You do have an Original copy of the Deed or a Certified copy don’t you?
Who do you want to manage your fund if you die or are incapacitated?
On death for Corporate Trustees you leave the shares in the trustee company via your will to the person(s) so they have a right to be a director of the trustee company.
For incapacity you provide an Enduring Power of Attorney (EPOA) and when required you resign as a director and they are appointed in your place. If it is your spouse and they are the only other member then they become Sole Director.
On death for Individual Trustees your Executor will usually have a right to be a trustee of the fund.
For incapacity you provide an Enduring Power of Attorney and when required you resign as a trustee and they are appointed in your place. If it is your spouse and they are the only other member then they need to find a second person to act as a trustee or move to a sole director company trustee.
What to consider in the choice of an EPOA/Executor
Are they good with money and making decisions?
Will they be willing to seek advice from specialists if necessary?
Will there be conflict between beneficiaries – Sibling rivalry? Blended families?
Should you consider 2 or more EPOAs/Executors for safety or support
a power of attorney (or POA) can either become effective immediately, or upon the occurrence of a future event (such as your mental incapacity).
A power of attorney can have specific clauses with instructions for the operation of the power.
If you have a spouse or dependant you may want to include Dependants Clauses to ensure your funds can be used for their needs.
You may want to consider a Conflict of Interest clause to allow a EPOA to make decisions that may suit them as well as you but to the detriment of other possible beneficiaries.
Who do you want to receive your SMSF account balance?
For Spouse / Dependants you should consider using a Reversionary Pension election or Non-Lapsing Binding Death Benefit Nomination direct to beneficiaries or via your will using Non-lapsing Binding Death Nomination to your Legal Personal Representative with option in your will to set up a Testamentary Trust. Normal BDBNs lapse after 3 years.
For Adult children you can use Non-Lapsing Binding Death Benefit Nomination direct to beneficiary or via your will using non-lapsing binding nomination to Legal Personal Representative with option in your will to set up a Testamentary Trust
For your parents, your siblings or non-family via your will using Non-lapsing Binding Death Benefit Nomination to your Legal Personal Representative with option in your will to set up a Testamentary Trust
Do any of the beneficiaries in your Will have special needs? For disabled beneficiaries consider a Special Disability Trust. For those poor with money or in a highly litigious career or in possible bankruptcy then a Testamentary Trust should be considered.
Who do you want to manage your care options if you are incapacitated?
Ensure you have an Enduring Power of Guardianship in place so that your lifestyle and medical treatment decisions can be made by a trusted family member or friend in the event that you become mentally incapable?
Do you have an Advanced Healthcare Directive in place in the event that you become terminally ill and are unable to articulate your wishes?
Have you spoken to your chosen Enduring Guardian so they are clear on your wishes and preferences, explained why you have made those decisions so that they can discuss these with any family members who have cause to question your wishes.
What to consider in the choice of an Enduring Guardian
Are they good with making personal decisions under pressure?
Will there be conflict with other family that they can handle– Sibling rivalry? Blended families?
Should you consider 2 or more EGs for safety or support
Information your Attorneys/Executors will need
Bank Accounts and Investments:
The BSB and account numbers for any accounts or credit cards you have.
The HIN, SRN of any Personal or SMSF shareholdings and
Account IDs for Share Brokers, Online Banking and Managed Fund holdings
Location of property deeds and contact details for Property manager
Insurance:
Details of policies such as the policy number and type of insurance.
Life and TPD cover, Motor vehicles, House Insurance, Private Medical Insurance and Funeral Plans
Advisers:
If you have an accountant, financial planner, lawyer or other professional advisor include their contact details.
Business Records:
If you have a business include details of where the company records are kept and the computer the ASIC Corporate Key is on.
Your secret place:
If important documents such as certificates of property title, jewellery and other valuables or personal items are being held in safe custody elsewhere or stashed in the attic then you should identify the location.
Your digital life:
Include all your email login in details and loyalty scheme account details. This includes your membership to social media and cloud data sites so your executors and family may be able to access your on-line data, including books or music files.
Appoint a Legacy Contact if you use Facebook.
Instructions on what is and isn’t to be shared with family
Direct Debits:
If you have any direct debits in place you should include details so that they can be cancelled pending a grant of probate.
Superannuation:
Do you have other superannuation accounts. Your most recent superannuation statement(s) should also be included. If it is self-managed super the financial statements should be included.
IMPORTANT POINT: Talk regularly to your Executors and Powers of Attorney and Enduring Guardian
Discuss your wishes in terms of lifestyle, healthcare and treatment options with your chosen Attorney and Guardian and if possible with the broader family and make sure that they understand your wishes. Australian’s are very reluctant to talk about illness or death but it is essential to ensure your wishes are followed and to avoid family conflict.
As I mentioned at the start this list is not exhaustive so please add your own tips or suggestions in the comments section below.
I hope this guidance has been helpful and please take the time to comment. Feedback always appreciated. Please reblog, retweet, like on Facebook etc to make sure we get the news out there. As always please contact me if you want to look at your own options. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or via Skype. Just click the Schedule Now button up on the left to find the appointment options.
Liam Shorte B.Bus SSA™ AFP
Financial Planner & SMSF Specialist Advisor™
Tel: 02 98941844, Mobile: 0413 936 299
PO Box 6002 BHBC, Baulkham Hills NSW 2153
5/15 Terminus St. Castle Hill NSW 2154
Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572
This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
Most people who have not sat with a planner or read in detail the newsletters from their superannuation funds would believe that they can only access their superannuation when they actually retire and stop working. But there are so many other circumstances that could trigger an all-important “Condition of Release” and make your retirement funds available to you. In this guide for SMSF trustees I will concentrate on meeting the Retirement Condition of Release but you can find out about the other conditions of release here (click it later).
Acknowledgement: I have relied on the excellent guidance of the AMP TAPin team for the majority of the content in this article. They write great technical articles for advisors and I try and make them SMSF trustee friendly.
What is the Retirement condition of release
The retirement condition of release is often subject to complexity and doubt. However, understanding the rules became even more important after 1 July 2017 resulting from the 2016 Budget measures. The tax exemption on investment earnings supporting a Transition to Retirement Income Stream- Accumulation Phase (TRIS – Accumulation) is no longer available. However, a TRIS will regain its tax exempt status once the ‘retirement’ condition of release is satisfied and it becomes a Transition to Retirement Income Stream- Retirement Phase (TRIS – Retirement Phase). Therefore, understanding what constitutes ‘retirement’ for an SMSF member in a TRIS is critical, to achieve that holy grail of a tax-free retirement pension.
Conditions of release – overview
Death is the only condition of release that requires compulsory cashing of benefits. There is no requirement under any other condition of release to either cash out a benefit or commence an income stream from your SMSF, and member accounts can remain in accumulation phase indefinitely.
If you do leave your member account in accumulation phase, it will be subject to an income tax rate of up to 15% instead of a 0% tax rate for investments backing a pension income stream. There is also now a $1.9m limit on how much can be transferred into an income stream with people who already had some money in pension phase having as pro-rata limit of between $1.6m and $1.9m. You can Check on MyGov.> ATO service> Super Tab> Information to see your limit.
The most common conditions of release to access your account are:
Reaching preservation age of 60 and retiring.
Transitioning to retirement (after attaining preservation age): SMSF members who are under 65 and have reached preservation age, but remain gainfully employed on a full-time or part-time basis, may access their benefits as a non-commutable income stream called a Transition to Retirement Income Stream- Accumulation Phase (TRIS – Accumulation Phase) . However from 1 July 2017 that income stream will not be tax exempt until you meet a further Retirement Condition of Release.
Reaching age 65: a Member who is 65 years old may access their benefits anytime without restrictions.
Retirement condition of release
For superannuation purposes, a member’s retirement depends on their age and future employment intentions. A person cannot access superannuation benefits under the retirement condition of release until they reach preservation age. Once you reach your preservation age, the definition of retirement depends on whether the person has reached age 60.
If a person has never been gainfully employed in their life, they cannot use the retirement condition of release to access their Preserved Benefits. Such a person would need to satisfy another condition of release to access their benefits (eg reaching age 65, invalidity, terminal illness, severe financial hardship).
Age 60 but less than 65
When a person has reached age 60, retirement occurs when an arrangement under which the person was gainfully employed has ceased on or after the person reached age 60. It does not matter that the person may intend to return to the workforce. This condition presents an opportunity for many people to move a taxed pension to tax exempt phase earlier.
Example: Reaching age 60
Michelle has worked as a nurse for many years. She resigns from this employment on her 61st birthday. Three months later, Michelle takes up a 3 day position as a grief counsellor. Because Michelle has ceased employment as a nurse after her 60th birthday, she can access all her superannuation accumulated up until that point.
Situations sometimes arise where a person, aged 60 or over, is in two or more employment arrangements at the same time. According to APRA Prudential Practice Guide SPG 280, the cessation of one of the employment arrangements is the condition of release in respect of all preserved benefits accumulated up until that time. The occurrence of the ‘retirement’ condition of release in these circumstances will not enable the cashing of any benefits which accrue after the condition of release has occurred. A person will not be able to cash those benefits until another condition of release occurs (eg,s he also leaves her second employer).
Example: Two employment arrangements
Frank (age 63) works part-time as a school janitor. During the school holidays, he had a short-term six-week contract to work as a Census form collector. The contract finished in September 2021.
Because Frank has ceased one of his employment arrangements, he can access all his superannuation up until that point. However, any later contributions made (employer and personal contributions) and earnings will be preserved.
Director and Employee of own company
Sometimes a person is both an employee and director of their own company. They may wish to cease their employment duties with the company, but retain their directorship. The question arises as to whether such a person (age 60 – 64) can access their preserved superannuation benefits.
If a person is engaged in more than one arrangement of employment, the person can cease any arrangement of employment to meet the ‘age 60’ definition of retirement.
Therefore, as long as a person’s two roles are separate and they terminate in their capacity as an employee of the company, then even though they are still employed in the capacity as director, that person can access their preserved superannuation entitlements.
Note that there must be a distinct termination, ie cessation of all duties as an employee, and the person should now only operate in the capacity as a director for the company.
We see this lot where often a spouse had helped out for years but as the children join the business or the business matures, the requirement for the spouse to continue turning up day-to-day reduces. They can step away from the duties as an employee but they may still handle the liaison with the tax agent on the financials, ASIC re company registration and the ATO to pay tax instalments, which are more akin to Directors Duties.
When is a person gainfully employed?
Someone is said to be ‘gainfully employed’, for superannuation purposes, where they are employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation, or employment.
Gainful employment can either be on a part-time or full time basis.
Part-time means at least 10 hours per week and less than 30 hours per week.
Full time means at least 30 hours per week.
The definition of gainful employment involves two clear components:
Employment or self-employment, and
Gain or reward.
The term employee is not specifically defined in the SIS Act for this purpose; its common law meaning must be considered. One definition of employee is ‘a person in a service of
another under any contract of hire (whether the contract was expressed or implied, oral or written), where the employer has the power or right to control and direct the employee in the material details of how the work is to be performed’.
In contrast, self-employed people work for themselves instead of an employer, drawing an income from a trade, profession, or business that they operate personally. It would be expected that someone who claims to be self-employed would be running their own business (e.g. have a business plan, financial records, an ABN, a regular and frequent level of activity in the business, advertising etc).
The superannuation legislation provides no guidance as to what ‘running a business’ is. However, taxation law does. In particular, paragraph 13 of Tax ruling 97/11 outlines relevant indicators of running a business:
whether the activity has a significant commercial purpose or character;
whether the taxpayer has more than just an intention to engage in business;
whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity;
whether there is repetition and regularity of the activity;
whether the activity is of the same kind and carried on in a similar manner to that of the ordinary trade in that line of business;
whether the activity is planned, organised and carried on in a business-like manner such that it is directed at making a profit;
the size, scale and permanency of the activity; and
whether the activity is better described as a hobby, a form of recreation, or a sporting activity.
Gain or reward is not defined in the superannuation legislation and therefore takes its ordinary meaning. The Macquarie Dictionary defines gain as ‘to get an increase, addition or profit’. Reward is defined as ‘something given or received in return for service, merit, hardship, etc’.
In the context of satisfying the gainful employment definition, it follows that the service, merit, or hardship must be completed with some expectation of an increase, addition, or profit. That is, there must be a direct link (or nexus) between the activity undertaken and the reward provided for the activity. The actual level or amount of gain or reward does not necessarily have to be commensurate with the level of effort or activity undertaken. So, the level of reward could be relatively small yet still suffice – as long as there is a direct link to the activity being performed. Further, the reward doesn’t necessarily have to be received as cash, but could be received as services, fringe benefits, or other valuable consideration.
The gain or reward element is typically difficult to satisfy in the case of charity or volunteer work. Non-paid work for a charity, for example, would clearly not qualify as gainful employment. Mere reimbursement of expenses would not seem to constitute gain or reward.
Also, as discussed earlier, gainful employment for superannuation purposes requires an individual to be either employed or self-employed. Most charities or volunteer organisations will not consider their charity or volunteer workers to be employees.
Transition to retirement pensions – impacts of meeting retirement condition of release
Transition to Retirement Income Stream (TRIS) condition of release allows a member to access their superannuation as a non-commutable income stream once they have reached preservation age called a Transition to Retirement Income Stream- Accumulation Phase (TRIS – Accumulation Phase) . A non-commutable income stream for TRIS purposes is subject to a maximum annual draw down of 10% per annum. Preserved Benefits cannot be accessed through a TRIS as a lump sum until it meets the new “Pension phase” position.
From 1 July 2017 the tax exemption on investment earnings supporting a TRIS – Accumulation Phase is no longer available. The actual income stream (pension payments) will still be tax free after 60. However, a TRIS will regain its tax exempt status once the ‘retirement’ condition of release is subsequently satisfied, for example, where the individual terminates employment at any stage on or after age 60. Its a fairly simple process to confirm to your Pension provider that you have met that further condition of release and they may authomatically move you to Transition to Retirement Income Stream- Retirement Phase (TRIS – Retirement Phase) at 65 anyway, but its worth confirming with them in writing.
It will be vital for SMSF trustees to immediately contact their Accountant/Administrator should the member retire permanently from the workforce, or terminate employment on or after age 60. When the administrator is notified that a no cashing restriction condition of release occurs (eg retirement), the balance of the TRIS account (at that stage) will be converted to a Retirement phase account-based pension (ABP), and the tax exemption on earnings will apply. However, it will then also count towards the individual’s $1.6 – $1.9m million pension transfer balance cap and needs to be reported to the ATO within the new reporting guidelines
Reaching age 65 will automatically result in a TRIS pension becoming a Transition to Retirement Income Stream- Retirement Phase (TRIS – Retirement Phase) and obtaining tax exemption on earnings, if within the individual’s $1.6-$1.9 million pension transfer balance cap.
Evidencing cessation of gainful employment
The cessation must be genuine. Genuine terminations of employment will typically involve the payment of accrued benefits, such as annual and long service leave. SMSF trustees should retain written evidence of the member’s cessation of gainful employment on file and copy to the administrator so the fund auditor has access.
Penalties apply to members, trustees and those who promote ‘illegal early access schemes’ to improperly access superannuation prior to meeting a condition of release.
I hope this guidance has been helpful and please take the time to comment. Feedback always appreciated. Please reblog, retweet, like on Facebook etc to make sure we get the news out there. As always please contact me if you want to look at your own options. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or via Teams or Zoom. Just click the Schedule Now button up on the left to find the appointment options.
Liam Shorte B.Bus FSSA™ AFP
Financial Planner & SMSF Specialist Advisor™
Tel: 02 9899 3693, Mobile: 0413 936 299
PO Box 6002 NORWEST NSW 2153
40/8 Victoria Ave, Castle Hill NSW 2154
Corporate Authorised Representative of Viridian Select Pty Ltd ABN 34 605 438 042, AFSL 476223
This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
The changes to the superannuation system, announced by the Australian Government in the 2016–17 Budget, have now received royal assent and the finer details of how to implement them have been released. While the government claim these changes were designed to improve the sustainability, flexibility and integrity of Australia’s superannuation system, they did not work with industry or the ATO before announcing them and as such it has been a nightmare to try to get your head around what the actual changes are and how strategies need to be implemented to manage them.
As a result we are getting last-minute guidance from the ATO and software providers as well as SMSF, Industry and Retail Super providers. The government have back-flipped on some measures, amended others because of collateral damage and tightened other measures for obscure reasons. With most of these changes commencing from 1 July 2017 I have tried to put some useful links together.
A short video overview of the changes is provided below. I have provided more detailed information links and will update these as they are progressively published to help you understand the changes, how they may affect you, and what you may need to know and do now, or in the future as a trustee of a self-managed super fund (SMSF). Even more detailed information is available to help you understand the changes, including for some topics, law companion guidelines (see below) to provide certainty about how the changes will be administered.
For those who wish to dive in to the detail please view the Law Companion Guides below. A law companion guideline is a type of public ruling. It gives the ATO view on how recently enacted law applies. It is usually developed at the same time as the drafting of the Bill.
The ATO normally release a law companion guideline in draft form for comment when the Bill is introduced into Parliament. It is finalised after the Bill receives Royal Assent. It provides early certainty in the application of the new law. Please make sure to look for updates before relying on this information.
The ATO have also released access to answers to some frequently asked questions and they can be found in this document Super Changes Q & As
Example: Q. How are my pensions and annuities valued for transfer balance cap purposes?
ANSWER : You need to contact your fund about the value of your pensions and annuities.
The value of your pension or annuity will generally be the value of your pension account for an account-based pension.
Special rules apply to calculate the value of: • lifetime pensions • lifetime annuities that existed on 30 June 2017, and • life expectancy and market linked pensions and annuities where the income stream existed on 30 June 2017
Lifetime pension and annuities These are valued by multiplying the annual entitlement by a factor of 16.This provides a simple valuation rule based on general actuarial considerations. Your annual entitlement to a superannuation income stream is worked out by reference to the first payment entitlement for the year. The first payment is annualised based on the number of days in the period to which the payment refers. (I.e. the first payment divided by the number of days the payment relates to multiplied by 365).
This means that a lifetime pension that pays $100,000 per annum will have a special value of $1.6 million which counts towards your transfer balance cap in the 2017-18 financial year.
For a lifetime pension or annuity already being paid on 1 July 2017, the special value will be based on annualising the first payment in the 2017-18 financial year. This may include indexation, so may be slightly higher than your current annual lifetime pension payments.
Life expectancy and market linked pensions and annuities being paid on or before 30 June 2017 are valued by multiplying the annual entitlement by the number of years remaining on the term of the product (rounded up to the nearest year).
I hope this guidance has been helpful and please take the time to comment. Feedback always appreciated. Please reblog, retweet, like on Facebook etc to make sure we get the news out there. As always please contact me if you want to look at your own options. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or via Skype. Just click the Schedule Now button up on the left to find the appointment options.
Liam Shorte B.Bus SSA™ AFP
Financial Planner & SMSF Specialist Advisor™
Tel: 02 98941844, Mobile: 0413 936 299
PO Box 6002 BHBC, Baulkham Hills NSW 2153
5/15 Terminus St. Castle Hill NSW 2154
Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572
This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
The SMSF Coach 