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Meg on SMSFs: My 30 June 2022 'To Do' list

In a monthly column to assist trustees, specialist Meg Heffron explores major issues relating to managing your SMSF.

There are always a myriad of things to think about before 30 June and this year is no different. But the end of the financial year is still weeks away, it’s amazing how quickly the time can disappear when you’re not prepared. So this is my 'To Do' list for SMSF members and trustees. In fact, many of the things I discuss could relate to any superannuation vehicle.

1. Make your pension payments

If you have pensions in an SMSF, make sure you have drawn at least the minimum amount required before 30 June. If that doesn’t happen, it’s as if the pension didn’t exist for the whole of 2021/22. For example, the fund won’t receive the special tax treatment that normally means it doesn’t have to pay tax on some or all of its investment income (rent, dividends, interest, capital gains etc). This tax break is only provided on pensions that actually meet all the rules.

2. Contribution timing

If you want to make contributions in 2021/22, make sure they’re paid into your fund in time. There are a few traps for the unwary.

In an SMSF, if you’re making personal contributions via internet banking, make sure the money actually shows up in the fund’s bank account before 30 June. And while online transfers often feel immediate (certainly I notice the money disappears from my own bank account immediately!) that doesn’t always translate in an immediate addition to the receiving (SMSF’s) bank account.

Believe it or not, if you’re running very late you’re actually better to pay the contribution by cheque. A contribution made by cheque counts as being received as long as it’s in the SMSF trustee’s hands before midnight on 30 June and there was enough money in your personal account to cover it. It has to be banked promptly but it’s virtually the only time a contribution appearing on your fund’s July (not June) bank statement will count as a 2021/22 contribution.

You don’t have the same flexibility with a personal contribution to a public fund. Many have cut off dates well before 30 June, sometimes a week or more. Make sure you’re aware of these dates before assuming a deposit at the last minute will be fine.

It can be even more tricky if your last minute contribution will come from an employer. These days, it’s virtually impossible for an employer to make these by cheque. Many employers also pay their super contributions using what’s known as a 'clearing house'. They give all their employees’ super to just one company (the clearing house) and it’s then the clearing house that splits the money up between the various superannuation funds correctly. That means there’s a delay between when the employer makes the payment and when it lands in your super fund’s bank account. If that delay takes you into the new financial year then unfortunately the contribution won’t be made in time.

Making sure your contributions count in 2021/22 can be important for many reasons. The limits or caps on your contributions operate on a financial year basis. If you have carefully planned your affairs so that you will (say) reach the limit on concessional contributions (contributions made by an employer or ones you make personally but claim a tax deduction) of $27,500 in 2021/22, you need all those contributions to arrive in your fund before 30 June.

Will you (or someone in your family) receive amounts from a family trust (known as distributions) that are counted in your 2021/22 income tax return? If so, are you planning to make a super contribution and claim a tax deduction for it to reduce the tax you pay on these distributions? That contribution needs to be made before 30 June, even if you don’t know the exact amount of the distribution yet. The same applies if you’re making a contribution you intend to claim as a tax deduction for any other reason.

3. Making co-contributions

Do you have family who might benefit from government co-contributions? This is the scheme where certain people can make personal super contributions and receive another 50% as a top up from the government. Someone meeting all the eligibility rules can contribute $1,000 of their own money and the government will add another $500. To lock in this benefit for 2021/22, the personal contribution has to be in the super fund before 30 June.

As an aside, this is a conversation all SMSF members (who have already seen the light and value their super) should have with the young adults in their lives. I recently explained the concept to one of my sons. He is in his first job and earning less than the $40,000 threshold so he is eligible for the maximum co-contribution. He couldn’t believe that the government would give him 'free money' and that it wouldn’t even slow down his saving for his first home as the $1,000 (but not the government’s $500) can come back out again when he’s ready to buy under the First Home Super Savers Scheme.

4. SMSF costs

Are there costs you’ve paid for your SMSF personally that should actually have been paid by the SMSF? If you don’t get those reimbursed, they get treated as a contribution. For example, Jim has insurance in his SMSF and paid the premium ($3,000) via his personal credit card in June. If he doesn’t get his fund to pay him back, the SMSF’s income tax return will have to show that this was an expense incurred by the fund but Jim paid it and in doing so effectively made a $3,000 contribution for himself.

If he’s already used up his contribution limits this will potentially cause him big problems. Technically there’s nothing magic about 30 June here. Jim just has to make sure he’s reimbursed 'promptly'. But in practice, it’s actually much easier to make sure it’s all done in the same financial year.

5. Thinking ahead for contributions in 2022/23

Believe it or not, June is also a time to be thinking ahead for the next financial year. Many super rules depend on how much you already have in super. 

For example, most people can make up to $110,000 pa in personal contribution (where no tax deduction has been claimed). Some can make multiple years’ contributions at once and contribute up to $330,000. But anyone with $1.7 million or more in super at 30 June 2022 has a cap of $nil for these contributions. 

What if you can see that your super balance will be slightly above $1.7 million at 30 June 2022 but would still like to add to your super in 2022/23? If you’re already eligible to take money out (for example, you’re over 65 or meet the definition of 'retirement' in the super rules), it might be worthwhile taking a small withdrawal in the next few weeks to scrape in just under that threshold.

Then, in the new financial year, you can put this and more back into super. Don’t forget there are new rules from 1 July 2022 that will make it possible to contribute much later in life. In future, retirees can continue making most super contributions up until they turn 75.

There’s never a dull moment when you have an SMSF but June and July are months requiring extra focus.

 

Meg Heffron is the Managing Director of Heffron SMSF Solutions, a sponsor of Firstlinks. This is general information only and it does not constitute any recommendation or advice. It does not consider any personal circumstances and is based on an understanding of relevant rules and legislation at the time of writing.

To view Heffron's latest SMSF Trustee webinar, 'Super contributions unpacked', click here (requires name and email address to view). For more articles and papers from Heffron, please click here.

 

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