SMSF checklist for 30 June 2021

SMSF checklist for 30 June 2021

It is that busy time of year again with many competing priorities and deadlines. 

However, despite the rush of June, it is imperative trustees take the time to consider any actions necessary before the end of the financial year.  Making the right choices now can not only prevent compliance issues arising at audit time but can also enable trustees to take full advantage of the superannuation benefits available to them before 30 June.

Make additional contributions

Consider both concessional and non-concessional contributions

The concessional contributions cap for each is member is still $25,000 for the 2021 financial year; it will only move to $27,500 for the 2022 financial year.  The lead up to 30 June is the perfect time for members to determine how much of their concessional cap has been used, and how much is still to be utilised.  Members need to consider their employer’s compulsory superannuation contributions, and any salary sacrifice or personal concessional contributions they have made.  Armed with this information, they may wish to make further salary sacrifice or personal concessional contributions up to the $25,000 cap.

Likewise, members should calculate their current position in relation to the non-concessional contribution (NCC) cap for the year ended 30 June 2021 to determine how much space they still have available.  The NCC cap remains at $100,000 per member for 2021 and will only be increasing to $110,000 for the 2022 financial year.  Remember that NCCs cannot be made by members with a total superannuation balance (TSB) of $1.6 million or more (measured at 30 June 2020).  When calculating a member’s TSB, consider all a member’s superannuation benefits held across all funds in the super system, whether self-managed, retail or industry funds.

Make a ‘catch up’ concessional contribution

If a member has a TSB of less than $500,000 at 30 June 2020 and they had an unused portion of their concessional cap in the 2019 and/or 2020 financial years, they can make a ‘catchup’ concessional contribution in the 2021 year. 

Trigger the bring-forward arrangement if desired

Members aged under 67 may wish to trigger the bring-forward arrangement, allowing them more than $100,000 of NCC in one year, provided only $300,000 is contributed over a three-year period.  Please note the bring-forward is limited to only $200,000 for members with a TSB between $1.4 and $1.5 million as at 30 June 2020, and no bring-forward is permitted for members with a TSB of $1.5 million or above at that date.  Moreover, please consider whether the bring-forward was triggered in a previous year in determining how much can be contributed for 2021.

Remember the work test and time to process the transaction

For members aged between 67 and 74, please consider whether the work test has been met for the 2021 financial year before making a salary sacrifice, personal concessional or non-concessional contribution.  If a member was stood down due to the COVID-19 downturn but they were receiving JobKeeper payments, the ATO will accept that they were ‘gainfully employed’, therefore satisfying the work test.

Furthermore, it is important to note that amounts are not considered to be contributed to a fund until they have been credited in the fund’s bank account. Sufficient time should therefore be given for electronic transfers or to process cheques.  For more information on the timing of contributions, please refer to TR 2010/1.

Consider other contribution strategies

Contribution split

A contribution split can be a useful way to shift benefits to a member with a lower balance, allowing full maximisation of the transfer balance cap. Up to 85% of a member’s total 2020 concessional contributions can be split to their spouse in 2021, so long as the spouse has not yet met retirement age. For audit purposes, we require the signed contributions splitting form. 

Government co-contribution or the spouse contribution

If a member is aged less than 71 years, earns less than $53,564 and has met the work test, they may be eligible for the government co-contribution.  This is a contribution which matches the non-concessional contributions of a member at a rate of 50%, up to a maximum of $500.

In addition, if a member makes a non-concessional contribution for their spouse and the spouse earns less than $40,000 per year, the fund may be eligible for a tax offset of up to $540.  From this year, spouse contributions can now be made until the receiving spouse is aged 75 (subject to them meeting the work test).

Please note the government co-contribution and spouse contribution are not available for members with a TSB of $1.6 million or more.

Pay all minimum pension amounts

As always, it is essential that trustees ensure the minimum pension has been paid for each pension interest from the fund’s bank account by 30 June 2021.  Failure to do so may lead to the fund losing exempt current pension income (ECPI) status for an income stream.  The reduced rates (50% reduction) in place under the COVID-19 temporary relief measures apply for account based and market-linked pensions for the 2021 financial year.

Rectify breaches from previous years

Trustees should ensure all contraventions identified during the 2020 audit have been fully rectified by 30 June 2021, especially those which required an Auditor Contravention Report.  Recently, the ATO has been focussing on funds with repeated reportable breaches.

Reduce the level of in-house assets

If the level of in-house assets was identified as being above 5% of a fund’s total assets at 30 June 2020, the trustees must ensure the in-house asset level is reduced below 5% by 30 June 2021 under Section 82 of the SISA.  This means reducing their investment in the specific in-house assets until the 5% threshold is reached.

Clear old sundry debtors and creditors

Sundry debtor and creditor amounts should always be cleared as soon as possible, especially those with related parties.  Amounts which have existed for more than a year should particularly be cleared before year-end as they may be reclassified as loans or borrowings if they are still held in the accounts after this time.

If you have any questions about any of these topics, please do not hesitate to contact any of our SMSF audit team members on 1300 047 673.  Wishing you a productive end to 2021 and a happy and successful new financial year!