The end of each financial year brings with it financial anxiety for individuals. And people tend to go through a lot of hassle managing their money and filing tax returns. Similarly, for an SMSF tax return, an individual should know whether their SMSFs are ready for the EOFY. Let’s discuss all you need to know about your SMSF before the next tax season.
Contributions
Prior to the end of the financial year (EOFY), you should:
- Review whether you have any income that is available to contribute to your SMSF; and
- Check that your total contributions are below the caps.
Non-concessional
Non-concessional or after-tax contributions have a limit of $110,000 (or a maximum limit of $330,000 if one satisfies the non-concessional contributions bring-forward rule).
However, you should check your super member balance on July 1 to determine whether you are eligible for making any non-concessional contribution because non-concessional contributions will not be allowed if your member balance is at $1.7 million or above.
Concessional
Concessional or before-tax contributions, on the other hand, have a limit of $27,500, and you may also use “unused” concessional contribution limits you have from the previous financial years. However, your super member balance must be under $500,000 on July 1 for you to be eligible to contribute the “unused” amount.
Excess Contribution Tax
Making excess large amounts of superannuation contributions are likely to attract excess contribution penalties. You should ensure that you don’t exceed the contribution caps. So that you save your time and money from dealing with excess contribution tax.
Your contributions are counted in a financial year. If they are received by your SMSF during that year, meaning that they must be in the bank account of the fund by June 30.
Division 293 Tax
Division 293 tax is another additional tax of 15% levied on the occasional contributions. It will only be applicable if your combined earnings and contributions are more than $250,000.
Note that, for your self-managed super fund tax return, you should approach SMSF tax accountants in your town.
Drawing Superannuation Pensions
If you’re in the pension phase. You should ensure that you have been paid the minimum pension for this financial year. If this requirement is not met, your fund will be levied a 15% tax on the pension investments rather than being in the tax-exempt status.
However, it should be noted that due to COVID-19, the federal government has made a reduction in the minimum annual payment needed for account-based annuities and pensions. Allocated annuities and pensions and market-linked annuities and pensions by 50% in the 2019-2020, 2020-2021 and 2021-2022 financial years.
Co-contributions
If you satisfy the relevant work tests and your earnings are less than $56,112, it is also worth considering. if you are able to benefit from the Government super co-contribution.
Investment Strategy
It is crucial for you to understand the investment strategy and objectives of your SMSF. All the trustees should regularly study the investments of the fund, probable returns, investment risks, insurance, liquidity, cash flow requirements and investment diversification.
Before any decision of an investment, the trustees should analyse the probable impact. It would have on the entire portfolio and ensure that the investment is being done according to the investment strategy.
Valuation of Your Assets
You and other trustees of your SMSF are required to get the market value of the fund’s assets on June 30 annually when preparing the financial accounts of the funds.
It needs to be ensured that member benefits are shown at market value while calculating each member’s TSB. It is used in determining what, if any, after-tax contributions can be made without exceeding your after-tax contributions cap and for determining. Whether you are eligible for making catch-up before-tax contributions and receiving government contributions.
SMSF Fund Expenses
If you are an SMSF member in the accumulation phase. It is crucial that any expense is actually incurred or paid before June 30 for being deductible in the current tax year.
Rebalancing Accounts Between Spouses
The end of the financial year is also an apt opportunity for rebalancing the pension account balances between spouses. It is to ensure that superannuation balances are as even as possible and the transfer balance cap of $1.7 million is maximised for each member.
Be on Top of SMSF Audit
You need to make sure that the financial statements and audit of your SMSF are complete for lodging your tax return. Gather all your information and records to send to your tax accountant Perth. Consult with your tax accountant beforehand on the documents you are required to gather for your tax return to avoid any last-minute rush.
Benefits from Tax Deductions
Your SMSF is eligible to claim tax deductions for quite a number of expenses. Some of them are:
- Audit fees
- Actuarial fees
- Subscriptions to reports
- Accountancy fees
- Updating a trust deed for compliance with the SIS Act
- Tax agent fees
- Ongoing (not initial) investment advisor fees
- Member life insurance premium (conditions apply)
- Other administrative expenses incurred in the fund management
- Investment property deductions associated with an SMSF
- Interest on a loan borrowed for acquiring an asset under a Limited Recourse Borrowing arrangement
Lodgement Obligations
You and other trustees of your SMSF should consult with your tax agent to ensure all of you meet your lodgement requirements on time.
Due to COVID-19 and its effects on the present economic situations. it may be challenging to keep up with the trustee obligations. However, you can access the SMSF early engagement and voluntary disclosure service of the ATO. Which can assist you with your lodgement.
If you miss the due date of your annual return lodgement. It may lead your SMSF’s status to change on the Super Fund Lookup of the ATO and may restrict your fund from receiving superannuation guarantee payments and also some other rollovers.
Final Words
If you want to file your SMSF return, you should consider contacting experienced tax agents Perth who can properly guide you with your lodgement.
