In the year since event-based reporting (EBR) started for SMSFs (from 1 July 2018) the ATO says an unprecedented number of transfer balance cap reports have required re-reporting.

The transfer balance account report (TBAR) is used to report certain events and is separate from the SMSF annual return. The TBAR enables the ATO to record and track an individual’s balance for both their transfer balance cap and total superannuation balance.

The ATO says the regulations in place do not provide it with a discretion for “special circumstances” regarding contraventions of the transfer balance cap, and that it is particularly important for all SMSF trustees and members to self-monitor and ensure that no member exceeds the cap.

Continue reading “Event-based reporting mistakes lead to more SMSF audits” →

The income year of 2019-20 has just ticked over, which is also the first year in which an individual is able to make additional catch-up contributions to super through the application of unused concessional (before tax) contributions.

These are “unused” if the fund member made less than the legislated cap on such contributions, which was reduced to $25,000 per year from 1 July 2017.

The rules that allow for a catch-up started to take affect one year later. From 1 July 2018, if a fund member had a total super balance of less than $500,000 on the previous 30 June, and they make or receive concessional contributions (CCs) of less than the “basic cap” of $25,000 a year, they have been able to accrue unused amounts for use in subsequent financial years.

Continue reading “Carrying forward concessional super contributions” →

A change to the rules around superannuation means that more Australians may be eligible to claim a tax deduction for putting money into super.

Before June 30, 2017, if more than 10% of your income was sourced from salary or wages from an employer, you were rendered ineligible to claim any tax deduction for after-tax contributions you may have made to your superannuation fund.

But this rule has been removed, effective for the 2017-18 financial year and onwards, so now anyone who puts their own money into super — called personal contributions or (in the lingo of superannuation professionals) non-concessional contributions — may be able to claim a tax deduction for it.
Continue reading “Self-employed? You could claim a deduction for saving for your retirement” →

Whether or not the trustee of a complying superannuation fund can accept member contributions for those aged between 65 and 75 depends on the member satisfying the “work test”.

The work test requires a member to have been gainfully employed for at least 40 hours in a period of not more than 30 consecutive days during the financial year a contribution is made.

To be “gainfully employed” a person must either be employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, or occupation or employment.

The definition of “gain and reward” is particularly broad and does not limit itself to salary or wages. It includes business income, bonuses, commissions, fees or gratuities, in return for personal exertion.

If the contribution is made to an industry or retail fund, the person making the contribution is generally required to tick a box that states that the work test has been satisfied.

In the case where the contribution is made to an SMSF, a Work Test Declaration would typically suffice as proof the work test has been passed.

It is however essential to retain evidence of the work performed as there is always the risk of being asked (in the event of an ATO audit) to provide appropriate evidence that the work test has been met. If the ATO is not satisfied with the evidence provided, the contribution is likely to be disallowed.

Many questions have been asked about the work test over the years. The following is a compilation of answers to some of the most relevant questions.

Continue reading “Superannuation contributions ‘work test’ for over 65s” →

The days of a lax approach to valuations are over. While there is not always the need to employ a qualified independent valuer for each valuation, there are important circumstances where it is mandated, and others where it is recommended. Where one is not used then appropriate documentation needs to be kept of how valuations were determined. Back of the envelope or simply made-up valuations will not suffice.

Whilst in the old days the ATO had little it could do against SMSF trustees; the current penalty rules provide the ATO with much greater firepower. In particular, be careful in the valuation of assets for determination of whether a member is or is close to being in excess of the contribution rules. The ATO has signalled this is an area they will police in 2017/18.
Continue reading “Valuations and your SMSF” →

The ATO has recently released the latest of what has become a regular update on the state of the SMSF market. The Self-managed super fund statistical report, with the latest covering the quarter to March this year, has become an anticipated overview for many in the SMSF arena – containing as it usually does some good news.

This quarterly update is no exception.

The statistical report is put together from the vast swathe of data gathered by the ATO from lodgements, returns, registrations and auditor contravention reports. As getting all of the relevant statistics together can take some time, relying as this effort does on all returns and so on being completed, some of the data used in this ATO report is sourced from very recent financial years. Otherwise the data reflects that state of play for the period January 1 to March 31, 2017.

Continue reading “SMSF stats just keep getting better” →

The transfer balance cap applies to the total amount of superannuation that has been transferred into retirement phase. The balance of assets in pension phase can be held across several accounts, so the number of accounts is immaterial.

The amount of the lifetime cap will start at $1.6 million, and will be indexed periodically in $100,000 increments in line with consumer price index. The ATO says the amount of indexation you will be entitled to “will be calculated proportionally based on the amount of your available cap space”. It says that if, at any time, you meet or exceed the cap, you will not be entitled to indexation.

Continue reading “Super’s new $1.6m transfer balance cap — what counts towards it?” →

Recent superannuation reforms introduced a concept of “total superannuation balance”, which on the surface may give the simple impression that it is the sum of the balances of a person’s superannuation interests. However, this is not the case.

What is the total balance relevant for?

The total superannuation balance is relevant in determining a super fund member’s eligibility for:

• making non-concessional contributions according to the non-concessional contributions cap
• receiving the government co-contribution
• the tax offset for spouse contributions
• using the segregated assets method to determine exempt current pension income (ECPI), and
• the unused concessional contributions cap carry forward (this measure comes into effect from July 1, 2018).

Broadly, the first three of the above will not be available to an individual if his or her total superannuation balance is greater than the new general transfer balance cap (set at $1.6 million for the 2017-18 financial year and indexed in $100,000 increments in line with the CPI).

The yet-to-be-initiated unused concessional contributions cap carry forward is going to be tested against a $500,000 total superannuation balance. The test time for this balance is to be set immediately before the start of the financial year in which a fund member seeks to get or access an advantage — for instance, to make a non-concessional contribution.

Continue reading “What is your “total superannuation balance” and why does it matter?” →

The rules around the valuation of assets held under an SMSF have seen a lot of changes over the years. The requirement to consider valuing SMSF assets at market value when preparing the annual financial statements of the fund was one of the most significant and controversial of these changes.

The use of market value accounting for financial statements is regarded as a good practice, but was not imposed on SMSF trustees as a legal requirement.

Since 7 August 2012, a mandatory requirement by regulation came into force, and now aligns SMSFs with accounting principles. Consequently, for the 2012-13 and later financial years, SMSF trustees are required to use market values for the purpose of preparing year-end financial accounts and statements.

Continue reading “Does Your SMSF Need a Valuation?” →

From 1 July 2017, there is a limit on how much of your super you can transfer from your accumulation super account to a tax-free “retirement phase” account to receive an account-based pension income.

This is known as the super “transfer balance cap”. If you have more than one super account, the cap applies to the combined amount in all of your pension phase accounts. You will be able to make multiple transfers into the retirement phase as long as you have available cap space.

Continue reading “New Transfer Balance Cap for Pension Phase Super Accounts” →