The COVID-19 pandemic has affected everyone’s lives, and Self-Managed Super Fund (SMSF) trustees are no exception.
While the worst of the pandemic is (hopefully) behind us, trustees still have difficult questions to ponder as they focus. How best to position their Self-Managed Super Fund (SMSF) in the 2020-21 financial year.
Meeting new pension requirements
To help manage the economic impact of COVID-19, the Government has reduced the minimum drawdown requirements by half on common pensions, such as account-based pensions and market-linked pensions, for 2019-20 and 2020-21. This also occurred after the GFC in 2008, and you will need to consider and amend your pension strategies for 2020-2021 financial year.
This includes ensuring that the minimum pension has been paid for this financial year. Where this requirement is not met, SMSFs will be subject to 15% tax on pension investments instead of being tax free.
It is important to amend your pension strategies for 2020-21 to reflect the “new” minimum pension standards. Where you have been receiving regular pension payments, it is likely you may want to withdraw more than the 50% of the required minimum payment for this year. Specialist SMSF advice should be sought to help you determine the most tax effective way to structure benefit payments, please get in contact with us to discuss this further.
For 2021 financial year, you should review your contribution strategies to ensure you can contribute in the most effective way and ensure you are below the contribution caps.
Non-concessional (after-tax) contributions are limited to $100,000 for the 2021 financial year and concessional (before-tax) contributions are limited to $25,000. There are strategies might be available to increase the concessional and/or non-concessional contributions depending on the personal circumstances.
SMSF trustees should be aware of the legislation that is slated to pass before the end of the financial year. If passed it will allow people aged between 65 and 66 to make voluntary contributions (previously restricted to people below 65) without meeting a work test. These older individuals will also be able to make up to three years of non-concessional superannuation contributions under the bring forward rule, so it will pay to get advice to maximise their contributions.
$1.6 Million Transfer Balance Cap and Total Superannuation Balance
The $1.6 million transfer balance cap applies to SMSF members who are receiving a pension. A $1.6 million transfer balance cap limits the amount of tax-free assets that can support a pension. Ensure you are aware of the consequences of excess transfer balances and avoid exceeding the cap.
Different total superannuation balance thresholds exist for SMSF. Ensure you are across your fund’s total superannuation balance which may be relevant for contributions, exempt pension income or transfer balance account reporting.
How Can We Assist?
The team at R T Accounting & Taxation Services will provide you with all the assistance you need to get your SMSF up and running with minimal fuss. Our SMSF Administration Package includes:
- Tax Return
- Year-Round Support
- Fund Accounting and financial statements
- Online portal
- Coordination of annual audit via our in house Registered SMSF Auditor
- Fund minutes and resolutions
- Corporate secretarial services for your SMSF Trustee company where applicable