Managing an SMSF requires a comprehensive understanding of the evolving landscape of superannuation regulations and tax laws.
As a Trustee or Director of a Trustee Company oveAs the financial year progresses, it’s crucial to review and optimise your superannuation strategy to make the most of available benefits and ensure compliance with the Australian Taxation Office (ATO) regulations. By proactively staying up to date, you can ensure your SMSF remains compliant, maximize the benefits available to your fund, and effectively navigate potential risks. In this blog, we will explore important updates and considerations that Trustees and Directors should be aware of, empowering you to make informed decisions and safeguard the financial future of your SMSF.
Contribution caps
For 2023, the concessional contribution cap stands at $27,500. These contributions, made from either your employer or personal funds, are tax-deductible.
On the other hand, non-concessional contributions, which are not tax-deductible and are made from after-tax funds, have a cap of $110,000. It’s worth noting that individuals under the age of 75 have the option to utilise the bring forward rule, allowing them to contribute up to three years’ worth of non-concessional contributions to their super in a single year. However, if you have already utilised the bring forward rule in 2020 or 2021, your contribution cap will not increase until the three-year period has passed. The available bring forward contribution depends on your Total Superannuation Balance (TSB), ranging from $330,000 to NIL.
Total Superannuation Balance (TSB)
Less than $1.48 million
$1.48 million to $1.59 million
$1.59 million to $1.7 million
Above $1.7 million
Bring Forward Contribution Available
$330,000
$220,000
$110,000
NIL
Minimum pension payments
In response to the COVID-19 pandemic, the Federal Government temporarily halved the minimum drawdown amounts in March 2020. This reduction aimed to provide pension members with flexibility in managing their retirement savings during uncertain times.
The good news is that the 50% minimum drawdown reduction for pension payments has been extended until 30 June 2023. The minimum drawdown rates vary based on age, ensuring that individuals can withdraw less of their retirement savings and keep a greater amount invested.
Age
Under 65
65-74
75-79
80-84
85-89
90-94
95 or older
Default min drawdown rates
4%
5%
6%
7%
9%
11%
14%
2020 to 2023 reduced rates
2%
2.5%
3%
3.5%
4.5%
5.5%
7%
Carried forward unused concessional contributions
From 2020 carry-forward rules allow you to make extra concessional contributions – above the general concessional contributions cap – without paying extra tax.
The carry-forward arrangements involve accessing unused concessional cap amounts from previous years. An unused cap amount occurs when the concessional contributions you made in a financial year were less than your general concessional contributions cap.
To use your unused cap amounts, you need to meet two conditions:
- Your total super balance at the end of 30 June of the previous financial year is less than $500,000.
- You made concessional contributions in the financial year that exceeded your general concessional contributions cap.
The amount of unused cap amounts you will be able to carry-forward will depend on the amount you have contributed in previous years, starting from 2019. You can use caps from up to five previous financial years.
Please note that if your combined income and concessional contributions are above the Div 293 threshold of $250,000, then you may have to pay an additional 15% tax on these contributions.
Review your investment strategy
Your investment strategy is your plan for making, holding and realising assets consistent with your investment objectives and retirement goals. It should set out why and how you’ve chosen to invest your retirement benefits in order to meet these goals.
The superannuation laws require you to prepare and implement an investment strategy for your self-managed super fund (SMSF) which you must then give effect to and review regularly.
Your investment strategy should not be a “set and forget” document. You should review your strategy regularly to ensure it continues to meet the current and future needs of your members depending on their personal circumstances.
Certain significant events should also prompt you to review your strategy, such as:
- A market correction
- When a new member joins the fund or departs a fund
- When a member commences receiving a pension. This is to ensure the fund has sufficient liquid assets and cash flow to meet minimum pension payments prior to 30 June each year.
You should also review your strategy at least annually and document that you have undertaken this review and any decisions made arising from the review. For example, you could do this as part of the annual trustee meeting minutes. You should then provide these minutes or other evidence of a review to your auditor. This will show that you’ve met the requirement to review regularly and, where necessary, revised your investment strategy.
Review insurance inside your SMSF
SMSF trustees need to consider the need for insurance cover for the fund members when creating and reviewing the fund’s investment strategy.
It ensures that the members of your SMSF are adequately protected and that your fund remains aligned with your investment strategy and retirement goals. By regularly assessing your insurance needs, you can make informed decisions about the types and amounts of coverage required for your SMSF members.
When conducting a review of insurance inside your SMSF, it’s essential to consider factors such as the age, health, and financial circumstances of your members. Assessing the need for life insurance, total and permanent disability (TPD) insurance, and income protection insurance can help mitigate potential risks and provide a safety net for unforeseen events.
To ensure comprehensive coverage, it’s advisable to consult with a licensed financial adviser who specialises in superannuation and insurance. They can assist you in calculating appropriate insurance amounts for your members and advise on the most suitable insurance structures for your SMSF.
Contact KMT advisers now if you need assistance!
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek tax advice from a qualified accountant at KMT Partners. Information is current at the date of issue and may change.
