Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 239

Five things SMSF trustees should consider right now

Into a new calendar year and more than half way through FY18, it’s a good time to take stock of the super reform issues. Here are five items for SMSF trustees to consider:

1. Is your SMSF eligible for CGT relief?

Capital Gains Tax (CGT) relief is available for SMSFs that, between 9 November 2016 and 30 June 2017, had members who:

  • Took action to comply with the $1.6 million transfer balance cap, or
  • Had in place a transition to retirement income stream (TRIS).

The relief is specific to FY17. Those intending to access the relief must make an election by the due date of their FY17 SMSF annual return. The ATO has announced that all SMSFs have until 2 July 2018 to lodge their FY17 SMSF annual return.

Accessing the CGT relief may have tax consequences, particularly for SMSFs using the unsegregated or proportionate method to claim tax exemption on current pension income in FY17. The proportionate method is available to SMSFs in pension and accumulation phase that use an actuary to determine the percentage of fund income that is tax exempt.

2. Retired and under age 65

If you have reached your preservation age but are under age 65, being ‘retired’ can be important especially if you are currently receiving a TRIS. From 1 July 2017, the income earned on fund investments paying a TRIS will be taxed at 15% if it is not in a ‘retirement phase’. Previously such income was tax exempt.

The removal of the tax exemption has created a distinction between a ‘TRIS in retirement phase’ and a ‘TRIS not in retirement phase’. A TRIS in retirement phase is exempt from tax on any income earned on fund investments that support it. However, the value of a TRIS in retirement phase is counted against the member’s transfer balance cap.

A TRIS moves from not being in retirement phase to retirement phase if the fund has been notified that the member is totally and permanently disabled, is terminally ill, or has reached their preservation age but is under age 65 and has ‘retired’. If the fund has not been notified of one of these events, it will remain a ‘TRIS not in retirement phase’.

The notion of retirement for some may mean the gold watch, a retirement party or an oversized ‘Sad to see you go’ card – but under the super law it is quite different. Retirement for super purposes depends on retirement age, your intentions and ceasing work. Anyone who is between 60 and 65 is considered to have ‘retired’ when an employment arrangement has ceased.

Case study

David is aged 61 and is an employee for company A. He receives a better employment offer from Company B and so resigns from Company A. He finishes on a Friday with Company A and starts with Company B on the following Monday. In David’s mind, he’s changed jobs, but, under superannuation law, he has retired.

If David was receiving a TRIS, such an event would result in his TRIS becoming a ‘TRIS in retirement phase’, which means the fund will be tax exempt on the earnings allocated to the TRIS and it will count towards David’s transfer balance cap. Consequently, it is important for David to notify his fund that such an event has occurred. In an SMSF context, this may mean notifying his fund accountant or service provider that he has retired.

3. The reduced concessional contribution cap

The concessional contribution cap for everyone, no matter their age, is $25,000 for FY18. If you have salary sacrifice arrangements in place, check that no more than $25,000 in employer and personal deductible contributions will be made to super in FY18.

There are changes proposed which, effective 1 July 2018, will remove salary sacrifice contributions from offsetting an employer’s Superannuation Guarantee liability, which in turn may result in additional contributions being included under the reduced cap.

4. Split contributions where it makes sense to do so

With the introduction of the transfer balance cap, consider longer-term strategies designed to equalise balances between couples. The ability to split up to 85% of concessional contributions from one spouse to another can help equalise members’ accounts over time. The current concessional cap of $25,000 allows a spouse to effectively allocate $21,250 to the other spouse in the financial year after the contribution has been made. This strategy can provide some estate planning benefits.

One of the benefits of equalising account balances between spouses is that it may assist in keeping one or both spouses under the non-concessional cap thresholds.

Case study

Rob has concessional contributions of $25,000 made to his SMSF in FY18. He has a total super balance of just under $1.4 million and decides to split 85% of the concessional contributions during FY19 to his spouse, Narelle, who has a total super balance of more $1.6 million. By keeping the total super balance below $1.4 million, Rob is able to access the ‘two year bring forward’ rule if he wishes to maximise non-concessional contributions, provided all the other conditions are met.

5. Estate planning

Any estate plan should be regularly reviewed so it meets a family’s changing needs and wishes. The introduction of the super reforms is a trigger to review the appropriateness of estate plans, even when not affected by the $1.6 million transfer balance cap. A couple with combined transfer balance account balances of more than $1.6 million could have an estate plan that is now out of date with their wishes. This may be due to the restricted amount that can be retained in retirement phase.

Dust off that estate plan, have a read, and consider its appropriateness.

 

Mark Ellem is Executive Manager, SMSF Technical Services at SuperConcepts, a leading provider of innovative SMSF services, training and administration. This article is for general information only and does not consider the circumstances of any individual.

RELATED ARTICLES

Applying CGT relief for SMSFs and TTR pensions

Limits to a will’s power over an SMSF

7 vital steps to compliance for your SMSF

banner

Most viewed in recent weeks

Australian house prices close in on world record

Sydney is set to become the world’s most expensive city for housing over the next 12 months, a new report shows. Our other major cities aren’t far behind unless there are major changes to improve housing affordability.

The case for the $3 million super tax

The Government's proposed tax has copped a lot of flack though I think it's a reasonable approach to improve the long-term sustainability of superannuation and the retirement income system. Here’s why.

Tariffs are a smokescreen to Trump's real endgame

Behind market volatility and tariff threats lies a deeper strategy. Trump’s real goal isn’t trade reform but managing America's massive debts, preserving bond market confidence, and preparing for potential QE.

The super tax and the defined benefits scandal

Australia's superannuation inequities date back to poor decisions made by Parliament two decades ago. If super for the wealthy needs resetting, so too does the defined benefits schemes for our public servants.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Getting rich vs staying rich

Strategies to get rich versus stay rich are markedly different. Here is a look at the five main ways to get rich, including through work, business, investing and luck, as well as those that preserve wealth.

Latest Updates

SMSF strategies

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Superannuation

The huge cost of super tax concessions

The current net annual cost of superannuation tax subsidies is around $40 billion, growing to more than $110 billion by 2060. These subsidies have always been bad policy, representing a waste of taxpayers' money.

Planning

How to avoid inheritance fights

Inspired by the papal conclave, this explores how families can avoid post-death drama through honest conversations, better planning, and trial runs - so there are no surprises when it really matters.

Superannuation

Super contribution splitting

Super contribution splitting allows couples to divide before-tax contributions to super between spouses, maximizing savings. It’s not for everyone, but in the right circumstances, it can be a smart strategy worth exploring.

Economy

Trump vs Powell: Who will blink first?

The US economy faces an unprecedented clash in leadership styles, but the President and Fed Chair could both take a lesson from the other. Not least because the fiscal and monetary authorities need to work together.

Gold

Credit cuts, rising risks, and the case for gold

Shares trade at steep valuations despite higher risks of a recession. Amid doubts that a 60/40 portfolio can still provide enough protection through times of market stress, gold's record shines bright.

Investment strategies

Buffett acolyte warns passive investors of mediocre future returns

While Chris Bloomstan doesn't have the track record of his hero, it's impressive nonetheless. And he's recently warned that today has uncanny resemblances to the 1990s tech bubble and US returns are likely to be disappointing.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.