Here are five keys tips for SMSF trustees to know before 30 June.
1. Maximise use of the available concessions now
When the 2016-17 federal budget was announced this year, many older Australians may have drawn a sharp breath around the changes to concessional contribution caps. What this means for Australians and their finances will depend on their personal circumstances.
For many, now is an opportune time for SMSF trustees to contribute more under the existing rules.
This is because from 1 July 2017 the concessional caps will be reduced to $25,000 regardless of age.
For those aged 49 or older on 30 June 2015, the current cap of $35,000 remains in place until next year.
The beauty of compound interest and long-term savings means that a little saved today can make a big difference in the future. So if you are considering tipping extra funds into super, before 30 June is a good time.
The lowering of the concessional contribution caps to $25,000 from 1 July 2017, means there is a stronger reason to consider investing more into super this year.
2. Be aware of the contributions previously made to super
With immediate effect from the 2016-17 budget night, a lifetime cap of $500,000 has been placed on non-concessional (or after tax) contributions. This cap includes any after tax contributions made to your super since 1 July 2007.
It’s important that you know your level of contributions to ensure they don’t inadvertently exceed the cap.
In the event that you have contributed more than $500,000 of after tax contributions prior to the budget announcement on 3 May, you will not need to withdraw any excess amounts.
It’s still good practice for you to keep a record of their contribution levels from prior years.
3. Review your guiding principles
SMSF trustees are required to review their investment strategy on a regular basis. It’s good practice to do this in the lead-up to the end of financial year.
SMSF trustees should review:
• how their funds are invested in their SMSF
• Have their retirement goals changed?
• Does the return match their retirement goals?
• Are insurance policies in place and are they appropriate?
The item that governs a trustee’s guiding principles is the trust deed for their SMSF, which should be reviewed on a regular basis to ensure it remains current with existing super law.
This doesn’t necessarily mean it needs to be changed, but it should be reviewed annually, especially if there has been any significant event in the last year or something is expected in the coming year.
For example, if you are planning to retire in the next 12 months, it’s important the deed provides them with the flexibility for retirement options allowed under super law.
4. Review any gearing arrangements in place
Depending on your investments, and whether you have exposure to gearing (or loans) in their SMSF, over the assets; it’s important to consider whether the arrangement remains appropriate.
This is particularly the case if the loan is from a related party such as a relative or even the trustee. The ATO recently released guidance on the minimum expectations they have for related party loans and have allowed SMSFs until 31 January 2017 to ensure any existing loans are on arm’s length terms.
5. Ensure you have the right support network
Running an SMSF is not easy, even for the most engaged trustees. The rules can be complex and new and proposed legislation can affect the way the SMSF operates.
But it’s important for SMSF trustees to know that they have the necessary support to manage their SMSF. You might choose to run your own SMSF for control and choice, but it doesn’t mean you’re alone.
The end of the year is a good time to review the support you have in place with your clients, not only to ensure they are complying with the rules, but that they feel they have the help they need, when they need it.
Bryan Ashenden is head of financial literacy and advocacy at BT Financial Group