EOFY 23-24 And Your SMSF – What You Need To Do Before June 30
With the end of the year fast approaching – it is now time to pause and review your SMSF to ensure that your trustee obligations have been met, that your annual ‘housekeeping’ tasks are in order, and that you have considered strategy opportunities.
Below, we provide some tips and information to help you with your EOFY preparations:
- Check your key SMSF obligations
- Review your contribution strategies
- Withdrawing your superannuation
- Appoint your fund’s auditor
- Other updates that may be relevant
- Total Superannuation Balance (TSB) key thresholds
Check your key SMSF obligations
- Check your investment strategy is up to date
As an SMSF trustee, one of your responsibilities is to formulate and implement an effective and proactive investment strategy for your fund.
Investment strategies remain a key focus of the ATO. Your fund’s auditor has an obligation to report to the ATO when there is a lack of evidence that you have met your responsibilities as a trustee. It is important that you review your investment strategy to ensure it covers all of the relevant areas before 30 June, which includes ensuring your asset ranges remain relevant to your investment objectives.
If your fund’s current investments are outside of the asset ranges in your strategy, it is important you acknowledge this in writing and document your intended action to address this (or update your strategy).
Your review should also entail checking that you have the appropriate insurance cover in place, and that any changes to your fund’s risk factor have been considered.
This webinar contains some tips to help you with this.
- Review asset values
Your SMSF requires all of the assets to be valued at market value at year-end, including investments in unlisted companies or unit trusts, cryptocurrency investments or collectible assets. This is particularly relevant in terms of market valuations of unlisted investments, which are a target area for the ATO.
If your SMSF holds property, either directly or indirectly via a private company or unit trust, trustees must consider:
- The market valuation evidence for 30 June 2024. Trustees need to review this every financial year and provide supporting evidence;
- Whether a current lease agreement is in place; and that the rent is being reviewed and increased per the agreement. Also that all rent is being received and/or outgoings are being recovered;
- That property related expenses are at market rate.
As an SMSF trustee you must be able to provide the auditor with evidence to support the valuations of all assets that are not listed. This may include independent appraisals from real estate agents showing recent comparable sales, a formal valuation, or your own research. The ATO valuation guidelines are here.
Many of the strategies, rules and concessions are linked to an individual’s Total Super Balance (TSB) so obtaining up-to-date valuations may open up opportunities that some members felt were closed to them.
Details regarding TSB thresholds are below.
If the members are in retirement phase and drawing a pension, the minimum pension drawdown rates are linked to the year-end balances. If the fund values are not up-to-date, you are at risk of breaching the pension rules (which may impact the fund’s tax-free earnings proportions).
- Have you documented all your trustee decisions?
Ensure all SMSF documentation is in place to record decisions and actions taken during the year, such as lump sum withdrawals, rent relief provided to your SMSF’s tenant, or strategies regarding temporary imbalances to your investment strategy.
Don’t forget:
- check all your SMSF investments are held in the name of the trustee;
- review your bank account for the year and make sure your SMSF has paid any SMSF related expenses;
- double-check that your SMSF had not paid any personal expenses – correct these now if you discover any;
- ensure each trustee reviews their enduring power of attorney to ensure it is still relevant. Contact your lawyer if you need to arrange one or make amendments. Incapacity issues are an important structuring consideration for fund. Please review this article and contact us with any queries.
- review your estate planning and binding death nominations and make sure they are still appropriate.
We have prepared an SMSF checklist to help you to confirm that your administration and obligations are covered.
Review contribution strategies
- Maximise tax-deductible contributions (concessional contributions)
Making tax-deductible contributions can be a tax-effective way to build your superannuation. The concessional cap for the 2024 financial year is $27,500.
Concessional contributions include:
- your employer’s superannuation contribution (the compulsory 11%);
- any salary sacrificed contributions; and
- any personal contributions you claim as a tax deduction.
Ensure these are all taken into account when determining how much space you have left in your concessional cap.
Ask your employer if they offer salary sacrifice. If they do, it can be a great way to help grow your super tax-effectively because the contributions are made from your pre-tax pay – before you get a chance to spend it on other things.
Remember, salary sacrifice contributions count towards your concessional contribution cap, along with any superannuation guarantee contributions from your employer and personal deductible contributions.
Double-check your salary sacrifice arrangement’s timing so you know when your fund will receive amounts yet to be paid. Note, contributions are deemed to be made in the year the fund receives and processes them. Importantly, also check that your fund did not receive any of last financial year’s contributions in this financial year.
- Personal super contributions
Most people (employees or self-employed) can make contributions to their super fund and claim a tax deduction in the current financial year. If you are an employee, making a personal contribution may save the hassle of arranging salary sacrificing with your payroll, and still result with the same tax benefits.
The contribution is generally taxed at 15% in the fund (or up to 30% if you earn $250,000 or more). Depending on your circumstances, this is potentially a lower rate than your marginal tax rate, which could be up to 47% (including the Medicare Levy) – which could save you up to 32%.
To do this, you need to allow enough time to ensure your superannuation fund has accepted and cleared the contribution by 30 June.
- Important points to consider:
To claim a tax deduction – you will need to complete and lodge a Notice of Intent to Claim the Deduction and have this notice acknowledged (in writing) before the date you lodge your tax return, or the end of the financial year following the year you made the contribution – whichever is earlier. The accepted ATO form is here. If the paperwork is not completed, you cannot claim the deduction! It is also important to receive the acknowledgement before rolling over your super to another fund or starting a pension. - If your income has dropped during the year, and you have already completed the paperwork to make a personal contribution, you can normally vary it before the due date by completing the variation section in the ATO form.
- Make sure your personal superannuation contributions don’t create a tax loss, as you will be unable to claim the deduction as a concessional contribution.
- If you are aged between 67 and 75, you must pass the work test during the financial year to be able to contribute to super. The work test is met by working a minimum of 40 hours paid gainful employment in a 30-day consecutive period during the financial year.
- Consider a “catch up” concessional contribution
While the concessional contribution cap is $27,500, you may be able to contribute more than that without penalty if you didn’t use the whole cap in the previous financial years (2018/19, 2019/20, 2020/21, 2021/22 and 2022/23) and are eligible to make ‘catch-up’ contributions.
To be eligible for this concession you need to ensure your Total Superannuation Balance (TSB) was less than $500,000 (across all funds) as at 30 June 2023.
This might be useful if you pay income tax at more than 32.5% and are wanting to build your super, if you have sold an asset this year and realised a capital gain, or have a spike in your income for any other reason.
TIP: Do your sums carefully to make sure you accurately calculate your unused cap balances!
- Consider after-tax (non-concessional) contributions
Another way to invest more in your super is with some of your after-tax income or savings, by making a personal non-concessional contribution.
While these contributions don’t reduce your taxable income for the year, you can still benefit from the low tax rate of up to 15% that’s paid in super on investment earnings. This tax rate may be lower than what you’d pay if you held the money in other investments outside super.
Note, the general non-concessional cap (NCC) for the 2024 financial year is $110,000. Eligibility to utilise the cap can depend on your total superannuation balance (TSB). Details regarding TSB thresholds are below.
If you were 74 years of age or younger on 1 July 2023, you may be able to bring forward three years of NCC, depending on your TSB. This enables up to $330,000 of NCC to be made in one year. If you turned 75 during the 2024 financial year, you must have made your NCC within 28 days after your birthday month.
The bring-forward rule is automatically triggered if you make an NCC of more than $110,000 before 30 June 2024. The total NCCs for the current year and for the next two years must be within the contribution cap of $330,000 total.
There are opportunities for after-tax contributions until you are 75 as well as strategies for estate planning if you are able to access your superannuation and still making contributions. Your TSB will be relevant in considering these strategies. The rules are complex and implications wide and varied, so please contact your Bentleys advisor to discuss.
- Downsizer contributions
The Downsizer contribution enables eligible members to contribute up to $300,000 to superannuation from the sale of their family home. This is regardless of their TSB.
Members must be 55 years or older at the time of contribution, and have owned the home for a minimum of ten years, and the proceeds need to be contributed to superannuation within 90 days of settlement. From 1 January 2023 the eligible age changed from 60 to 55. The fund must be provided with the ATO Downsizer form.
This personal contribution is not impacted by the concessional or NCC caps and is a once-only opportunity per member. The contribution does add to the TSB, which may need to be considered for other planned strategies.
Note, the home does not have to be your family home at the time of sale. Also, it does not have to have been the family home for the entire ten years – increasing the pool of properties that may be eligible for the contribution.
- Spouse contribution
If your spouse is not working or earns a low income, you may want to consider making an after-tax contribution into their super account. This strategy could potentially benefit you both: your spouse’s super account gets a boost and you may qualify for a tax offset of up to $540.
You may be able to get the full offset if you contribute $3,000 and your spouse earns $37,000 or less pa (including their assessable income, reportable fringe benefits and reportable employer super contributions). Your spouse must be under 74 to be eligible and have a TSB under $1.9m.
A lower tax offset may be available if you contribute less than $3,000, or your spouse earns between $37,000 and $40,000 pa.
- Split your concessional contributions with your spouse
You can allocate up to 85% of your 2024 FY concessional contributions before 30 June to your spouse’s super if your spouse is under preservation age or between preservation age and age 65 and not retired. This is an effective way of building super for your spouse and managing your TSB, which is relevant for the strategies outlined below.
You will need to check with your fund that it offers contribution splitting and find out their process. It usually involves an election to enable one split per financial year using the ATO form.
- Co-contributions
If you are under 71, earn less than $58,445 in the 2024 financial year, and at least 10% of your income is from your job or a business, you may want to consider making an after-tax super contribution. If you do, the Government may make a ‘co-contribution’ of up to $500 into your super account.
The maximum co-contribution is available if you contribute $1,000 and earn $43,445 pa or less. You may receive a lower amount if you contribute less than $1,000 and/or earn between $43,446 and $58,445 pa.
Be aware that earnings include assessable income, reportable fringe benefits and reportable employer super contributions. Other conditions also apply – contact us if you need help.
Withdrawing your superannuation
- Condition of release
Once you’ve put any money into your super fund, you won’t be able to access it until you reach preservation age and/or meet other ‘conditions of release’.
If you have met a condition of release during the year, consider whether commencing a pension could be beneficial. A condition of release includes reaching:
- 65 years of age;
- 60 years of age and retiring from a position of gainful employment.
Note: there are also some rules that allow access for financial, health or compassionate grounds. For more information, visit the ATO website.
- Drawing superannuation pensions
If you are in pension/retirement phase, you need to ensure the minimum pension has been paid to you in cash for this financial year.
It is important to note that as of 1 July 2023, the temporary 50% reduction to minimum draw-down rates that the government announced in response to COVID-19 were ceased.
| Age | Percentage Factor |
|---|---|
| Under 65 | 4% |
| 65-74 | 5% |
| 75-79 | 6% |
| 80-84 | 7% |
| 85-89 | 9% |
| 90-94 | 11% |
| 95 or more | 14% |
Contact your fund to ensure you have taken at least your minimum.
Appoint your fund’s auditor
SMSF trustees should ensure they have appointed an independent auditor before the end of the financial year. The new independence code made it clear that an SMSF auditor ordinarily cannot audit an SMSF where the SMSF trustees have engaged the same firm to prepared the financial statements and annual return.
Other updates that may be relevant
- Compulsory employer contributions
On 1 July 2024, the compulsory superannuation employer contribution will increase from 11% to 11.5%.
- Commonwealth Seniors Health Card (CSHC)
Recently there has been a significant increase to the income thresholds for CSHC to $95,400 per annum for single people and $152,640 for couples.
The income test for pensions is a deemed earning rate and not the actual pension withdrawal. CLICK HERE for more information, or alternatively seek financial advice from your licensed financial planner.
- Contribution caps
On 1 July 2024 the concessional contribution cap will increase to $30,000 and the general non-concessional cap will increase to $120,000. If you are planning on bringing forward three years of non-concessional contributions , contact your Bentleys advisor to discuss if you could benefit from delaying the trigger of your bring-forward rule until the new financial year.
Total Superannuation Balance (TSB) key thresholds
Many superannuation contribution strategies depend on your Total Superannuation Balance (TSB) at 30 June of the previous year.
Your TSB is a total of ALL superannuation balances held in ALL your superannuation funds.
Some of the key thresholds are:
| Threshold | Who is impacted |
|---|---|
| $500,000 | Impacts a member’s ability to utilise any unused catch-up concessional contributions. |
| $1,680,000 | Having a balance below this threshold allows a member (under 75 as at 1 July each year) to apply the three year bring forward rule for NCC.** |
| $1,790,000 | Having a balance below this threshold allows a member (under 75 as at 1 July each year) to apply the two year bring forward rule for NCC.** |
| $1,900,000 | Having a balance below this threshold allows a member to make up to $110,000 NCCs. At or above a balance of $1.9M, members are no longer eligible to make NCC, claim spouse contributions or be eligible for government co-contributions. |
| Transfer balance account reporting moved to quarterly for all SMSFs for transactions post 1 July 2023 | |
| **Contributions may be made up to 28 days following the end of the month where a member turns 75. | |
| Note: The general transfer balance cap indexed from $1.7 million to $1.9 million on 1 July 2023. | |
Find an experienced SMSF advisor you can trust
Get in touch with Bentleys today to find out how our expert SMSF advisors can help you get where you want to be.
Access our comprehensive EOFY guide to step through the different opportunities, how they should be implemented to deliver the best outcomes for you, and to navigate the future tax cashflow consequences from adopting these strategies.
Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.
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