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Six quick SMSF tips for the 2021/22 financial year

A new financial year always brings a new 'to do' list. With two months over already, we’ve put together a list of six tips that are worth checking.

Tip 1: Pensions often start early in the financial year. Don’t forget that if the member made personal contributions in 2020/21, the relevant notices about the deduction must be dealt with before the pension starts (a “Notice of Intent to claim or vary a deduction for personal super contributions” and the relevant acknowledgement from the trustee). In fact, if the pension started on 1 July 2021 it’s already too late to give this notice to the fund. The deduction will be denied.

A related issue is to think about these notices when a lump sum is paid from an account that received personal contributions in 2020/21. If a lump sum is paid before the notices are given, the deduction is reduced.

Tip 2: If a member is going to use the 'contribution splitting' rules to transfer some of their concessional contributions in 2020/21 across to their spouse, do this as early as possible. It means these contributions will be earning income in the spouse’s name rather than the account of the original contributor. And if the contributions being 'split' are personal contributions, the notices mentioned in Tip 1 need to be dealt with first.

Tip 3: Some people with more than one job can be in danger of exceeding their concessional contributions cap even if they never receive more than the minimum Superannuation Guarantee amount from each employer. People can now 'opt out' of Superannuation Guarantee contributions if they meet certain conditions. One of these conditions is that the relevant forms must be lodged at least 60 days before the first quarter to which it applies. 

Tip 4: Remember that the minimum pension amounts for 2021/22 are still only 50% of the usual levels. Clients who need the full normal minimum pension to meet their income needs could consider treating the excess over the minimum as a lump sum payment from their accumulation account or a partial commutation from their pension account. The best way to achieve this is to have documentation in place now – before the minimum pension payments are met – that request the trustee to treat the payments this way. This makes it abundantly clear to auditors and the ATO that all decisions about how to treat payments were made prospectively rather than backdated after the event.

This is exactly one of the moments when Tip 1 becomes crucial. If the payment ends up being a lump sum from the member’s accumulation account it will be vital that the notices about tax deductions for personal contributions have already been given to the trustee for the 2020/21 contributions.

Tip 5: Revalue the fund’s assets before the auditor asks you to. This is particularly relevant for funds with assets such as property where values can change during the year. A current market value will be needed for the 30 June 2021 financial statements and it’s much easier to get that as close as possible to the applicable date. Asking an agent (or trying to find your own external evidence) to value your residential unit as at 30 June 2021 when it’s already (say) April 2022 makes the job harder than it needs to be. Don’t forget the same rules apply to properties held within any unlisted companies or unit trusts in which the fund invests. Similarly, check things like lease agreements to see if rental payments made by the fund should be increased in line with CPI.

Tip 6: SMSFs owning bullion or similar assets will be familiar with the difficulties in proving to the fund’s auditor the existence of the asset at 30 June, particularly where it is stored in a private vault or deposit box with a bank. Often the auditor will ask for a photo of the bullion on top of a newspaper showing the date. Getting this evidence documented now will make the year end audit a lot simpler.

 

First published on the Firstlinks Newsletter. A free subscription for nabtrade clients is available here.

 

Analysis as at 20 August 2021. This information has been provided by Firstlinks Pty Ltd (ACN 161 167 451), a Morningstar publication, for WealthHub Securities Ltd ABN 83 089 718 249 AFSL No. 230704 (WealthHub Securities, we), a Market Participant under the ASIC Market Integrity Rules and a wholly owned subsidiary of National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 (NAB). Whilst all reasonable care has been taken by WealthHub Securities in reviewing this material, this content does not represent the view or opinions of WealthHub Securities. Any statements as to past performance do not represent future performance. Any advice contained in the Information has been prepared by WealthHub Securities without taking into account your objectives, financial situation or needs. Before acting on any such advice, we recommend that you consider whether it is appropriate for your circumstances. This article does not reflect the views of WealthHub Securities Limited.

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Meg Heffron , Firstlinks

Meg Heffron is the Managing Director of Heffron SMSF Solutions. Firstlinks is an investments newsletter providing content written by financial market professionals with experience in wealth management, superannuation, banking, academia and financial advice. Authors are investors and market practitioners with long careers in senior management positions. Firstlinks shares both their knowledge and their battle scars. Our community of 80,000 users discusses ideas from an informed and impartial point of view. Firstlinks was acquired by Morningstar Australasia in October 2019 to enable an expansion of its services and audience.

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Meg Heffron

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