A thorough review of your clients’ SMSF’s performance can help you maximise their contributions and tax deductions in the next financial year (FY). To help you start, here is the Ultimate SMSF Year-end checklist 2022.
Changes in SMSF laws and regulations starting from 1 July 2022 impacts the situation of every SMSF trustee. With the new SMSF regulations, trustees and advisers will have to make significant adjustments, to enjoy some flexibility moving forward.
The government has extended the 50% reduction in the minimum pension amount members must withdraw from their SMSF this 2021/22 FY. If the SMSF has not paid the minimum amounts, it could have compliance issues for underpayment of pensions and income streams. Hence, SMSF members must withdraw the minimum account-based pension or transition to a retirement income stream by 30 June 2022.
Moreover, withdrawing at least the minimum pension amount before the EOFY makes the fund eligible for a special tax treatment while in the retirement phase. An SMSF that meets the rules of the tax break will not be taxed at 15% on its investment income.
The general concessional contribution cap in 2022/23 FY is $27,500 and taxed at 15%. This includes employer Super Guarantee contributions, salary sacrifice, and personal deductible contributions. Moreover, concessional contributions exceeding this cap can now be taxed at personal rates.
Members may also be eligible for a higher cap of contributions or carry forward unused concessional contribution cap amounts. If their super balance is below $500,000 as of 1 July 2021, they can utilise unused contribution caps as far back as the 2018/19 FY.
In addition, the Australian government announced that, from 1 July 2022, work test is no longer required for members who are 67 to 75 years of age and would wish to make voluntary contributions and salary sacrificed amounts to their SMSF. This change allows older SMSF members to top up their fund and increase their super balances whilst getting a tax deduction for it at least 10 days before EOFY.
However, from 1 July 2022, members who wish to claim personal superannuation contributions as a tax deduction might have to meet the work test.
Non-concessional contributions are generated from assets acquired under the client’s name, including:
Non-concessional contributions are tax free and part of the SMSF member’s benefits. Currently, its contribution cap is at $110,000. Moreover, starting on 1 July 2022, members under 75 years of age can bring forward non-concessional contributions up to $330,000, depending on their total super balance. Here is a summary of eligibility options available:
Total super balance
Non-concessional cap eligible amount for the first year
Bring forward period
Less than $1.48 million
$1.48 million to $1.59 million
$1.59 million to $1.7 million
No bring forward period applies
Also, if they have more than the standard $1.7million Transfer Balance Cap, they need to withdraw the excess amount. Failure to do so could lead to a penalty tax, with the excess amount left in the account taxed at 45%.
SMSF members at the age of 65 and who have sold or are planning to sell their place of residence, and they have owned this over the last 10 years, may be qualified to a contribute an additional $300,000 for each spouse. There are strict eligibility requirements regarding this and make sure all the requirements have been met before making the contributions.
Starting 1 July 2022, members aged 67 to 75 years making personal or voluntary contributions must still meet the work test requirement. This rule also applies to members claiming a tax deduction under the Concessional Contributions Cap.
However, members who have turned 75 years of age can only make contributions within 28 days after their birth month. After which, they are only allowed to make Mandated Employer Contributions and Downsizer Contributions.
Also, if your client’s TSB is less than $300, 000, they may be eligible for a 12-month Work Test Exemption. Hence, they can make contributions within 12-months from the end of the FY where they last met the work test.
To meet the work test, members must have been employed for 40hours within 30 consecutive days before making the contribution. All other non-deductible concessional and non-concessional contributions no longer need a work test.
Indeed, every EOFY is a critical time for Self-managed Superannuation Fund (SMSF) trustees, professionals and specialists. However, planning always helps avoid headaches and ensure your SMSF nest-egg remains compliant over the coming years.
Whether you’re a trustee or adviser, we hope that our Ultimate SMSF Year-end checklist 2022 can help you prepare for the 2023 financial year. Moreover, if you need assistance or general advice regarding with your SMSF audit needs, don’t hesitate to send us an email query.