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This superanuation and SMSF end of financial year checklist contains a number of key items for trustees to review and action prior to 30 June 2020. This 2020 end of financial year is slightly different due to a number of specific items related to COVID-19.

Due to the size of this article we recommend you utilise the Article Contents menu below to skip to the relevant section of interest.

SMSF End of Financial Year Document Checklist

If you are looking for a checklist for the documentation you need to gather to help us complete annual SMSF accounts for 2020, you can download a copy here: 2020 SMSF Documentation Checklist (Word.docx)

Contributions

The 30th of June 2020 falls on a Tuesday this year, meaning that any contributions made directly to an SMSF via EFT transfer should occur on Monday 29th of June 2020 at the latest to ensure the contributions clear into the SMSF bank account prior to 30 June 2020.

If payment of a contribution is to be made by cheque or promissory note (not recommended) then the trustee must be in receipt of the cheque (dated on or before 30 June 2020) and the cheque must be cashed (cleared and deposited) into the SMSF bank account as soon as possible upon receipt, i.e. within a few business days following 30 June.

Contribution Caps

Contribution caps for the year ending 30 June 2020 are as follows:

Type of Contributions2020 CapDescription
Concessional Contributions$25,000

Personal contributions (where a tax deduction is claimed).

SG contributions from employment. Salary sacrifice amounts.

Non-Concessional Contributions$100,000

Personal after-tax contributions where no tax deduction is claimed.

Total superannuation balance must be below $1.6m as at 30 June 2019.

Non-Concessional Contributions (Bring-Forward Triggered)$300,000

Available where a person is age 64 or under as at 1 July 2019.

Maximum amount is impacted by total superannuation balance.

With concessional contributions, it’s essential any SMSF members liaise with their employer or payroll office to determine the timing of contributions. Many employers might pay contributions prior to 30 June 2020 to obtain a tax deduction for their business, even though they might not typically pay SG employer contributions under after the end of the respective financial quarter.

When an individual is looking to claim a personal tax deduction for contributions made they need to ensure:

  • They have the appropriate level of personal taxable income (super contributions cannot push an individual into a negative taxable income position)
  • A s290-170 form (download PDF from the ATO) is completed the earlier of:
    • The date of the lodgement of the individual’s personal income tax return; or
    • Before 30 June of the income year of which the contribution relates to (i.e. 30 June 2021 for the 2020 financial year)

The ATO has further information on this topic: Notice of intent to claim or vary a deduction for personal super contributions

Compliance Concession for Concessional Contributions 2019

The ATO has said they will not review the timing of the acknowledged notice of intent to claim form for concessional contributions relating to the 2019 financial year, provided these individuals obtain an acknowledgement from their fund before 30 June 2020 – even though they’ve already lodged their personal income tax return.

Typically these forms need to have been lodged with the superannuation fund receiving the contributions before the lodgement of the individuals tax return. This concessional is primarily relevant for members of APRA regulated funds rather than SMSFs.

Unused Carry Forward Concessional Contributions

30 June 2020 is the first SMSF end of financial year where members can take advantage of carry forward unused concessional contributions. The ability to carry forward concessional contributions applies from 1 July 2018, with 2019-20 financial year being the first year an individual can access their unused carry forward concessional amount.

If an individual has unused concessional contributions, i.e. they did not contribute the full $25,000 in 2018-19 or 2019-20, then they can carry forward these amounts for five years on a rolling basis if provided their total superannuation balance is below $500,000 on 30 June (prior to the year you intend to access the unused amount).

For example, if total concessional contributions in the 2018-19 financial year were $10,000 and the eligibility criteria is met, the unused $15,000 is carried forward. Higher deductible personal contributions of up $40,000 ($15,000 + $25,000) can be made in the 2019-20 financial year. This is useful if a large taxable capital gain is made during the year as it will reduce a person’s taxable income and therefore their tax liability from the capital gain.

Remember:

  • Total superannuation balance must be below $500,000 on 30 June of the prior year before you utilise any carried forward amount (e.g. as at 30 June 2019 for the 2020 year); and
  • In some cases, an additional 15% tax can apply (30% total) to concessional contributions made to super where income and concessional contributions exceeds certain thresholds ($250,000 in 2019-20). A persons income could be higher than usual in the year when you sell an asset for a capital gain.

Catch up concessional contributions are an excellent SMSF end of financial year strategy.

In-Specie Contributions

An in-specie contribution is where an asset is transferred into an SMSF from a member of the fund at market value rather than a cash contribution. In-specie contributions made to SMSFs are limited to assets that are allowed to be acquired from members such as:

  • Listed securities (shares, ETFs etc)
  • Business real property (i.e. commercial property)

With the significant decline in equity markets across February and March 2020 due to COVID-19, individuals may be holding shares where it may be appropriate to trigger / crystallise a capital gain or loss by transferring them into their SMSF. Advice from a licensed financial advisers should always be sought prior to making these types of transactions.

In addition to in-specie contributions, SMSF members should be aware that the following will also be counted as contributions:

  • Paying expenses on behalf of the SMSF
  • Undertaking work to increase the value of an asset of the fund (e.g. ‘sweat equity’ on DIY property renovations)
  • Forgiving a debit the SMSF owes a member or related party
  • Paying a liability on behalf of the fund
  • Providing services to an SMSF on less than market value

1 July 2020 Changes to Work Test Age to 67

Currently, where an individual is over the age of 65 at 1 July of a financial year, they need to meet the work test of 40 hours in a consecutive 30 day period to be able to make concessional or non-concessional contributions. This applies for the current SMSF end of financial year 2020.

However, regulations have recently changed that push the age where the work test is required to be met to age 67. This means persons currently aged 65 or 66 who don’t meet the work test will be able to make contributions after 1 July 2020 provided they are under age 67 at that date.

Non-Concessional Contributions

A common SMSF end of financial year strategy is for individuals to make non-concessional (after tax contributions). As per the above contribution caps, an amount of $100,000 per anum is able to be made, or $300,000 per individual where the bring-forward is triggered.

It’s important to understand that a persons total superannuation balance impacts the amount of non-concessional contributions that can be made to their SMSF:

Total Superannuation Balance on 30/06/2019Non-concessional cap availableBring-forward period
Less than $1.4m$300,0003 years
$1.4m to $1.5m$200,0002 years
$1.5 to $1.6m$100,0001 year only (current)
More than $1.6m$0Not available

It’s important to understand that the total superannuation balance is determined based on 30 June of the prior financial year, i.e. 30 June 2019 for the current SMSF end of financial year 2020.

There are many SMSF members whose total superannuation balance has dropped significantly between 30 June 2019 and June 2020, however their reduce total superannuation (for example if it’s declined from $1.8m to $1.4m) won’t be relevant until the NEXT 2021 financial year.

Contributions Splitting

Contributions splitting enables a person to transfer or rollover 85% of their concessional contributions for a financial year from their account to their spouse’s superannuation account.

The due date for splitting contributions made during the 30 June 2019 financial year is 30 June 2020.

Spouse Contributions

If an individual’s spouse earns a low or no income, they may be able to claim a tax offset if they contribute to their spouses super fund. The offset is calculated as 18% of contributions made of up to $3,000 where the spouses income is under $37,000.

More information on the spouse super contribution offset can be found here: ATO – Spouse Contributions

Pensions

For an SMSF to claim a tax exemption on income and capital gains relating to assets that support a pension, it must meet the minimum pension requirements. Review pensions is a critical SMSF end of financial year action item for 2020.

50% Reduction in Minimum Pension for 2020

The Government has reduced the required SMSF minimum pension 2020 draw-down rates for all superannuation pensioners including SMSFs for the current financial year 2019-20 and the next financial year 2020-21.

Draw-down rates for account based pensions are normally 4% per annum for people under 65 and increase as pension recipients age. These rates have been halved for the 2020 financial year and the 2021 financial year to 2% for those people aged 64 or under and 2.5% for those between 65 and 74 years old.

The updated minimum pension drawdown rates for 2019-20 are as follows:

 % of Account Balance
 2018-192019-202020-21
Under 654%2.0%2.0%
65 – 745%2.5%2.5%
75 – 796%3.0%3.0%
80 – 847%3.5%3.5%
85 – 899%4.5%4.5%
90 – 9411%5.5%5.5%
95 +14%7.0%7.0%

 

New Pensions Commenced

Where a new pension has been commenced during the 2019-20 financial year, the minimum pension amounts above are calculated as a pro-rata. Prior to 30 June is an ideal time to review SMSF member balances and ensure any new pensions have been correctly documented, transfer balance account reporting has been completed and minimum pension requirements have been met.

Any new pensions commenced during the month of June do not require a minimum pension to be taken prior to 30 June of that year.

Condition of Release Triggered

Another pension related SMSF end of financial year action item for 2020 is to determine whether any members of the SMSF have triggered a condition of release.

For an individual aged between 60 and 65, a condition of release is triggered when they cease an employment arrangement, so in light of the business impacts of COVID-19, many individuals may have effectively retired early and therefore can either access their super, or where they are drawing a transition to retirement income stream convert it into an account based pension.

The ATO has an excellent web page on conditions of release.

COVID-19 Early Release Payments

As part of it’s response to COVID-19, the Government enabled eligible persons to access $10,000 as a tax free lump sum from their superannuation.

The last day for eligible persons to make an application via their MyGov ATO account is 30 June 2020 (for the 2020 financial year) and 24 September 2020 for the 2021 financial year.

SMSF 2019 Annual Return Lodgement

The Australian Tax Office has announced (22 April 2020) an automatic deferral of SMSF annual return lodgments for the 2018-19 financial year to 30 June 2020. To be clear, where an SMSF had an original lodgement date of 15 May 2020, the 2019 SMSF annual return lodgment date is deferred to 30 June.

A key SMSF end of financial year item for 2020 is to ensure the prior 2019 SMSF annual return is lodged before (preferably well before) 30 June 2020. If lodgement is late, the ATO may remove the SMSF from Superfund Lookup, meaning it will not be eligible to receive contributions, rollovers or even open new bank accounts until the lodgements have been brought up to date.

Investment Administration

Leading up to 30 June is always a great time to undertake some housekeeping of your SMSF investments.

Property Valuations

A rule of thumb with property investments held by an SMSF is that a valuation will be required at least every three years. Residential properties are typically easier to value and we can often obtain an automated valuation through our system via RP Data. Commercial properties, or properties with limited comparative sales typically would require an independent valuation from a third party.

In general SMSFs are required to value their assets at market value. Depending on the situation, a market valuation may be undertaken by a:

  • Registered valuer
  • Professional valuation service provider
  • Member of a recognised professional valuation body, or
  • A person without formal valuation qualifications but who has specific experience or knowledge in a particular area, such as a real estate agent or even the trustees themselves if they are able to follow the ATOs asset valuation approach.

For real property, the valuation may be undertaken by anyone as long it is based on objective and supportable data. A valuation undertaken by a property valuation service provider, including online services or a real estate agent is acceptable.

However, where the value of the asset represents a significant proportion of the fund’s value or where the nature of the asset indicates that the valuation is likely to be complex, the use of a qualified independent valuer should be considered. We can assist with recommending valuers who can undertake SMSF valuations

In general, real estate does not necessarily need a formal valuation each year by a licenced valuer unless there is a significant event that occurs during the year which may affect the previous valuation. A significant event could be one that directly involves the property itself, the fund on a general level such as one of the fund’s members going into pension mode, or if the asset represents a significant portion of the fund’s value.

Where as commercial property is leased to a related party business, it’s also essential that a rental appraisal is undertaken every three years to ensure the lease arrangements is conducted on an arms-length basis – i.e. market rent is being paid.

Property Lease Agreements

In addition to market valuations of properties, ensuring the lease agreements for properties, especially commercial ‘business real property’ leases are up to date and  in force is an important SMSF end of financial year item for 2020. This is especially important where an SMSF leases a commercial property to a related party tenant.

Ensure the related party tenant is adhering to the terms of the lease and has made all appropriate rent and outgoings payments (except where rent relief is applied – see below). Ensure the lease agreement has not expired and the terms of the lease are at arms length as per a rental appraisal.

Rent Relief

As a result of the economic impact of the COVID-19 pandemic and government restrictions imposed causing the widespread and substantial revenue reduction for many Australian businesses, many tenants are seeking rental relief from the landlords. This includes tenants both related and unrelated to the SMSF.

Providing rent relief to tenants is a complex area, and specialist guidance should be sought.

Private Company and Unit Trust Valuations

A key focus area with the ATO, and therefore all independent SMSF auditors over recent years has been the valuation of unlisted assets including private company and unit trust investments. All SMSF assets must be valued at market value in the financial accounts of the fund, however as there is typically no active market for these assets (compared to listed shares) obtaining accurate valuations is more difficult.

The method of valuing the private company shares or units in a private unit trust will vary depending on the exact nature of the investment – for example a unit trust holding real estate would base the valuation of the issued units on the underlying property, whereas shares in a private company operating a business could look at recent arms-length share sales / trades between shareholders or the valuation of the underlying business.

At the end of the financial year if an SMSF has these private / unlisted assets the relevant company or trust should be contacted to obtain an indicative valuation or at least copies of the financial statements to enable a valuation to be completed. If a valuation is not able to be determined, the independent auditors would likely need to qualify the audit report of the SMSF.

Valuation of Precious Metals, Artwork and Crypto-Currency

Similar to private / unlisted investments, SMSF trustees need to provide evidence of the ownership and valuation of non-standard assets such as precious metals (gold, silver, platinum), artwork and collectibles and also crypto-assets including bitcoin etc.

Artwork and Collectibles

Artwork and collectibles should typically be valued every three years by a qualified valuer. Some SMSF trustees may also want to take the opportunity to simplify the administration of their SMSF by either personally buying the artwork from their SMSF at market value, or by transferring it to themselves via an in-specie lump sum payment (if they are eligible to receive a lump sum). For either of these transactions to occur an up to date valuation must be obtained beforehand.

Precious Metals: Gold and Silver Bullion

In regards to precious metals, where any physical metals are held by a third party such as Perth Mint or with a secure storage provider such as Reserve Vault, those providers should provide a holding report and sometimes also an audit report that can be relied upon by the SMSF auditor. Where a trustee of an SMSF stores the physical bullion at their residence, they need to document an inventory, which can be done via taking photos of the relevant bullion (showing serial numbers if possible) together with a 30 June newspaper to help confirm the exact physical holdings as at the end of financial year.

Cryptocurrency

Cryptocurrency reporting is improving, however it’s recommend on or soon after 30 June, SMSF trustees who hold crypto assets as part of their investment strategy download holding and valuation reports, and if necessary a screen shot to confirm the crypto holdings as at the end of the financial year. This applies to both online wallet and broker account as well as offline cold storage wallets. In addition the public keys of all SMSF coin wallets should be provided to enable the independent auditors to review transactions via the various blockchain explorers available.

Data Feeds

A useful piece of housekeeping to ease the future administration of an SMSF is to check to ensure your accountant or administrator has all data feeds for the fund’s underlying bank and investment accounts active. Ensuring everything is turned on prior to 30 June will ensure the following year administration will be more efficient.

Review Capital Gains Position

As per of the investment strategy review (see below), its recommended that SMSF trustees and their advisers determine whether there are any tax advantages of re-balancing the investment portfolio prior to 30 June. It’s important that any such transactions are not ‘wash sales’ to deliberately reduce or eliminate capital gains tax buy selling and then re-purchasing the same investments to crystalise a capital loss, but are part of a legitimate review and adjustment to the investment strategy of the fund.

Investment Strategy Review

Trustees are required to ‘regularly review’ the fund’s investment strategy. We recommend that trustees review the strategy and document the review at least annually or when the circumstances of the fund change.

Where an SMSF has entered into a borrowing arrangement to acquire an asset, trustees should seek advice to structure insurance cover either inside or outside the SMSF to assist in meeting the on-going obligations of the debt repayments. The fund’s ability to meet the on-going debt repayments can be severely jeopardised where one member of the fund dies, as the fund may have needed to utilise contributions that were being made for that member to meet the repayments. Such a scenario could result in the fund having to sell the property.

SMSF Insurance Review

SMSF trustees need to consider the need for insurance cover for the fund members when formulating and reviewing the fund’s investment strategy.

Superannuation funds are only able to offer or take out new insurance cover where the definitions are consistent with the death, terminal illness, permanent incapacity and temporary incapacity conditions of release under the Superannuation Industry Supervision Act.

It’s important that you review insurance inside your SMSF not just for compliance with the law but also effectiveness. An important issue to consider is how any insurance inside your fund should be structured; that is, from where the premiums are paid from the fund and what account any policy proceeds will be paid to inside the fund.

Correctly structuring insurance inside your fund can be complex. We recommend that SMSF Trustees seek the advice of their financial adviser to achieve the most tax effective outcomes for insurance proceeds, especially on the death of a member.

2020 End of Financial Year Summary

We’ve attempted to make this SMSF end of financial year guide as comprehensive as possible, however if you have any questions or feedback, please contact us or your adviser.

In addition, you may also find the other articles relating to the 2020 end of financial year relevant:

The Queensland Government has recently announced that property owners will be given land tax relief where their tenants have been impacted by Coronavirus.

Land tax relief Queensland measures

There are three Coronavirus land tax relief measures property owners may be eligible for:

Property owners do not need to apply for the foreign surcharge waiver or the 3-month deferral however the 25% Queensland land tax rebate must be applied for by 30 June 2020.

25% Land Tax Rebate

The land tax rebate will only apply to each property that meets the eligibility requirements and conditions.

Where there are multiple tenants for a single property, including mixed-use developments, if the eligibility requirements and conditions are met for at least one tenancy, then the whole property is eligible for the land tax rebate.

Property owners may be eligible for the land tax rebate if at least the following circumstances applies:

  1. Property owner is a landowner who leases all or part of a property to one or more tenants and all the following apply.
    • The ability of one or more tenants to pay their normal rent is affected by the coronavirus (COVID-19) pandemic.
    • The property owner will provide rent relief to the affected tenant(s) of an amount at least commensurate (in proportion) with the land tax rebate.
    • The property owner will comply with the leasing principles even if the relevant lease is not regulated.
  2. Property owner is a landowner and all the following apply.
    • All or part of the property is available for lease.
    • The ability to secure tenants has been affected by the COVID-19 pandemic.
    • Relief required to meet financial obligations.
    • The leasing principles are complied with even if the relevant lease is not regulated.

If you are eligible for the land tax rebate under both the above circumstances, it is expected you will apply the rebate paid firstly to provide rent relief to your tenants. You can then apply any remaining rebate to your own financial obligations (e.g. in relation to debt and other expenses).

Please find below the leasing principles referred to in the criteria lists above:

Relief package for landlords and tenants – leasing principles for a commercial landowner

To be eligible for land tax relief, a landowner must commit to comply with the principles set out below. These principles will also be introduced into Queensland law.

If you are a commercial landowner, the principles are as follows:

  1. You will negotiate in good faith with your tenant to seek a mutually agreeable resolution if their ability to pay is impacted by COVID-19;
  2. You will not evict your tenant if they are in financial distress and unable to meet their commitments due to the impact of COVID-19;
  3. You will not increase rent, except where rent is linked to turnover;
  4. You will not penalise a tenant who stops trading or reduces opening hours;
  5. You will not charge any interest on unpaid or deferred rent; and
  6. You will not make a claim on a bank guarantee or security deposit for non-payment of rent.

In addition to these principles, the Prime Minister announced a mandatory code of conduct for small and medium enterprise commercial tenancies on 7 April 2020.  The Palaszczuk Government will consult with stakeholders on the development of systems and implementation of the code in Queensland. Compliance with this code is not a requirement to receive land tax relief, but landowners with small and medium enterprise commercial tenancies are advised to familiarise themselves with the code. Visit www.australia.gov.au for further information.

There has not yet been a lot of guidance as to whether or how, you need to show you have passed the land tax rebate on to your tenants.  Until further guidance is provided by the OSR/Qld Government we would suggest the following:

For properties where you as landowner pay the land tax – We suggest that when providing the rent reduction to your tenants, you clearly state the rent reduction is partly due to the Queensland land tax relief package.  This should then be evidence you have passed on the rebate to your tenants by way of rent relief.

For properties where the tenant already pays the land tax – If you determine each property is eligible and you claim the land tax rebate of 25%, as your tenant pays the land tax directly, by applying for this rebate you are effectively giving them a rent reduction by reducing their outgoings to an amount equal to the land tax rebate you get.

If you meet the criteria and would like to apply for the rebate, please find below the link and information from the OSR website:

How to apply

  1. Log onto OSR Online (or create an account if you don’t already have one).

Your 2019–20 land tax assessment notice will have the details of your land holdings. (If you have not received your notice, you can find it under the Assessments tab once you log onto OSR Online).

  1. Select My Land.
  2. Select Manage details.

To receive the rebate, you must include or update your contact details (including email and telephone number) and bank details so that we can contact you if necessary and pay the rebate into your nominated bank account.

  1. Select Manage exemptions then Lodge new exemption.
  2. Select COVID-19.
  3. Complete the application by certifying your eligibility and selecting the applicable land parcel(s).
  4. Complete the declaration.

To access future assessment notices electronically through OSR Online (rather than by post), select Assessments. If you select this option, you will receive an email when an assessment is available.

If you have not yet paid your land tax assessment for 2019-20 or are paying by instalments, and are eligible for land tax relief, we will issue a reassessment and adjust your instalment payments.

Please take the time to read our other articles relating to COVID-19.

Most people are now aware that scammers are unfortunately ever present in our modern-day life and the frequent use of the internet has only served to increase this risk. We noticed an increase in this activity during the initial roll out of the NBN and other Government programs or initiatives. Covid 19 is yet another opportunity for increased scam activity including scams targeting superannuation.

ScamWatch, a division of the Australian Competition and Consumer Commission (ACCC) that helps protect Australians from scams, has recently reported an increase in scams since the Coronavirus crisis began.

The ACCC has advised that scammers are taking advantage of people financially impacted by the Coronavirus crisis by falsely selling products or services online and using fake emails or text messages to try and obtain personal data.

There are also reports of scammers offering to check if a person’s superannuation account is eligible for various benefits (such as the early release of superannuation) or claiming new schemes will lock people out of their accounts.

In 2019, Australians lost over $6 million to superannuation scams with people aged 45–54 losing the most amount of money.

Please remember, never give any personal information about your superannuation, bank accounts or other financial information to anyone who has contacted you by phone or email. You should first confirm who has contacted you and make sure they are a legitimate company or government representative. Hang up and call the organisation directly by doing an independent search for their contact details. Better still, check with your relationship manager if you have any doubts to their legitimacy.

Steps you can take

If you think you may have provided information about your superannuation account to a scammer, please contact our office immediately. You can also contact www.idcare.org, a free Government-supported service which will work with you to develop a specific response plan to your situation and support you through the process.

More information on Coronavirus scams is available on the Scamwatch website (https://www.scamwatch.gov.au).

Quill is here to support you if you have any further questions, please contact our office.

About COVID-19 scams

Scamwatch has received over a thousand coronavirus-related scam reports since the outbreak. Common scams include phishing for personal information, online shopping, and scams targeting superannuation.

If you have been scammed or have seen a scam, you can make a report on the Scamwatch website, and find more information about where to get help.

Scamwatch urges everyone to be cautious and remain alert to coronavirus-related scams. Scammers are hoping that you have let your guard down. Do not provide your personal, banking or superannuation details to strangers who have approached you.

Scammers may pretend to have a connection with you. So it’s important to stop and check, even when you are approached by what you think is a trusted organisation.

Visit the Scamwatch news webpage for general warnings and media releases on COVID-19 scams.

Below are some examples of what to look out for.

These are a few examples, but there are many more.  If your experience does not match any of the examples provided, it could still be a scam. If you have any doubts at all, don’t proceed.

Phishing – Government impersonation scams

Scammers are pretending to be government agencies providing information on COVID-19 through text messages and emails ‘phishing’ for your information. These contain malicious links and attachments designed to steal your personal and financial information.

In the examples below the text messages appear to come from ‘GOV’ and ‘myGov’, with a malicious link to more information on COVID-19.

Examples of phishing scams impersonating government agencies

Scammers are also pretending to be Government agencies and other entities offering to help you with applications for financial assistance or payments for staying home (Click for larger version).

Tips to protect yourself from these types of scams:

  • Don’t click on hyperlinks in text/social media messages or emails, even if it appears to come from a trusted source.
  • Go directly to the website through your browser. For example, to reach the MyGov website type ‘my.gov.au’ into your browser yourself.
  • Never respond to unsolicited messages and calls that ask for personal or financial details, even if they claim to be a from a reputable organisation or government authority — just press delete or hang up.

Scams targeting superannuation

Scammers are taking advantage of people in financial hardship due to COVID-19 by attempting to steal their superannuation or by offering unnecessary services and charging a fee.

The majority of these scams start with an unexpected call claiming to be from a superannuation or financial service.

The scammers use a variety of excuses to request information about your superannuation accounts, including:

  • offering to help you access the money in your superannuation
  • ensuring you’re not locked out of your account under new rules.
  • checking whether your superannuation account is eligible for various benefits or deals.

Example of a scam targeting superannuation

A scammer will call pretending to be from a superannuation or financial service. They may refer to the government’s superannuation early release measures, and ask questions such as:

  • Have you worked full time for the last 5 years?
  • Are you going to apply for the $10 000 superannuation package?

Or falsely claim:

  • Inactive super accounts will be locked if not merged immediately.

Tips to protect yourself from these types of scams:

  • Never give any information about your superannuation to someone who has contacted you — this includes offers to help you access your superannuation early under the government’s new arrangements.
  • Hang up and verify their identity by calling the relevant organisation directly — find them through an independent source such as a phone book, past bill or online search.
  • See our Scamwatch media release warning about superannuation scams.
  • For more information on superannuation scams visit ASIC’s MoneySmart website.

 

If you are thinking about switching your super to cash due to recent market volatility, it’s important to understand that doing so locks-in losses and that even the savviest investors will have trouble figuring out when to re-enter the market so as to fully capture the rebound.

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Did you get a letter recently from your super fund about protecting your super?

In February 2019, changes proposed in the 2018 budget became law, and if action isn’t taken then inactive superannuation accounts could lose their insurance. The changes are due to commence from 1 July 2019, however there are steps you may need to take now to ensure the best outcome for you.

Protecting your super reforms coming into effect 1 July 2019

These reforms are designed to protect Australians’ retirement savings by ensuring their super isn’t unnecessarily eroded by fees and premiums on insurance policies they may not need.

If you are to be impacted by these changes you should have received a letter from your super fund which we encourage you not to ignore, or if you think this may impact you please contact your super fund to check.

Why is it important?

Your insurance could be cancelled

Super providers need to cancel the insurance in any super account considered inactive. An inactive account is any account that hasn’t received any contributions into the account for more than 16 months (this includes accounts that have had no contributions since 8th May 2018).

Please read the options your super provider has offered in the letter if you wish to retain your insurance. Generally, you should be able to “opt-in” via online or a form provided, which will protect your insurance cover and stop your account from being inactive, however please seek advice from your super fund or ourselves if your balance is under $6,000 as this could potentially mean your insurance is still at risk.

You could also make an urgent contribution to your super account so it is no longer inactive however you will also need to repeat this at least once every 16 months to prevent the fund from again becoming inactive. Note also the cut-off dates for opting into your insurance as they vary across super providers and some will be well before 30 June 2019.

Inactive super accounts with low balances will be closed

Many inactive accounts with a balance of less than $6,000 will be closed, and the balance transferred to the Australian Tax Office. The ATO will then use data matching to connect these super accounts with an active account of the member where possible. If there is any insurance attached to these accounts, it will also be lost.

We’re here to assist you in your financial journey

If you have any questions about completing the form, or if you would like us to review the existing cover, and do an analysis of the cover, and your insurance needs, please contact us on 07 3840 4700.

The Government introduced Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 into Parliament on 28 March 2018 which affects employer superannuation contributions. This Bill introduces very serious consequences for employers who break the law by short changing their employees. The ATO will have access to new enforcement and collection provisions, including strengthened arrangements for director penalty notices. Some of the proposed amendments are to:

  1. enable the Commissioner of Taxation to issue directions to employers to pay unpaid superannuation guarantee
  2. undertake superannuation guarantee education courses
  3. to disclose more information about superannuation guarantee non-compliance to affected employees;
  4. extend Single Touch Payroll reporting to all employers;
  5. require more regular reporting by superannuation funds
  6. strengthen the commissioner’s ability to collect superannuation guarantee charge and pay as you go withholding liabilities

As an employer, specifically as a Director of a company where employer superannuation contributions and obligations have not been met, you may find yourself personally liable for unpaid superannuation. This is because Director penalties can apply to Directors of companies where the company does not meet its Superannuation Guarantee Charge (SGC) obligations.

Proposed Superannuation Guarantee Amnesty

Proposed Superannuation Guarantee Amnesty

The Government introduced Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2018. The Bill makes numerous amendments to superannuation and related tax laws, including to encourage the recovery of unpaid Superannuation Guarantee (SG) by introducing a temporary amnesty from late payment penalties for employers who disclose that they have underpaid SG in the past.

It is estimated that in 2014-15, around 2.85 billion in SG payments went unpaid. Of particular concern is that this estimate only relates to one income year!

The Bill complements measures proposed in Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 into Parliament on 28 March that seeks to strengthen the penalty regime for SG non-compliance.

The Amnesty is proposed to last for 12 months, commencing on Thursday 24 May 2018 and ending on Thursday 23 May 2019.

The Amnesty applies only to disclosures of previously undeclared SG shortfall amounts that are made during the 12-month amnesty period and the disclosures relate to the quarters starting when the SG regime commenced and all subsequent quarters until and including the quarter starting on 1 January 2018 — that is, the period from 1 July 1992 to 31 March 2018. This is an astonishing 26 years.

The benefits of the Amnesty will not be available for SG non-compliance that occurs on or after 1 April 2018.

When is an employer eligible for the Amnesty?

To be eligible for the Amnesty, an employer must:

  1. voluntarily disclose SG shortfall amounts, relating to any period from 1 July 1992 to 31 March 2018, within the Amnesty period (24 May 2018 to 23 May 2019);
  2. disclose SG shortfall amounts that have not previously been disclosed;
  3. make the payment of the SG shortfall amount during the 12-month Amnesty period; and
  4. not have been previously informed that the ATO is examining (or that it intends to examine) the employer’s SG compliance for the relevant quarter.

An employer may still qualify for the Amnesty if it has previously made disclosures about an SG shortfall for a quarter but comes forward with information about additional amounts of SG shortfall for that quarter.

 

quill group accounting specialists employer superannuation

 

The benefits for employers who take part in the amnesty are:

  1. Administration component for SG shortfalls will be waived (currently $20 per SG statement lodged)
  2. the Part 7 penalty for failing to lodge an SG statement, equal to double the amount of the SGC, i.e. 200 per cent of the SGC payable will not apply
  3. Catch-up SG payments made between 24 May 2018 and 23 May 2019 will be tax deductible (generally, late payments of SG are not deductible for tax purposes)

The measures are aimed to incentivise employers to get up to date with their obligations and assist the Government in tackling the SG gap problem.

We are your business accounting specialists.

Get in touch with us or give our office a call on 07 5528 2000 to discuss registration in more detail. At Quill, we are passionate advocates for all of our clients and our team is focussed on providing an experience, not just great service. As the largest multi-disciplined financial services practice on the Gold Coast, we provide a high touch personalised service delivered with competence, confidence and amazing results.

As one of the country’s largest privately owned specialist Self-Managed Super Fund (SMSF) business, we are often asked about our SMSF offering and SMSF establishment, particularly:

SMSF setup can be split into five simple steps:

  1. Select the fund members and trustees
  2. Set up the trust deed
  3. Set an investment objective and an investment strategy
  4. Register with the Australian Taxation Office (ATO)
  5. Open a bank account

What are the timeframes involved in setting up a SMSF?

How long it takes to set up a SMSF can depend on a few different factors. The first three steps of setting up a SMSF can be completed in a matter of days. Step four involves the ATO and their standard processing timeframe is 28 days.  For the current financial year, the ATO is committed to finalising 93% of registrations in 20 business days.

The final step relies on your bank’s processing timeframes.

 

setting up a smsf

 

How much does it cost to set up a SMSF?

Costs of setting up a SMSF vary widely. Some SMSF businesses offer free set up in exchange for your agreement to numerous conditions.  At the other end of the spectrum, set up costs run closer to $3,000 and usually incorporates access to a professional’s time, expertise and guidance.

Contact us today if you would like more information about set up costs and our inclusions.

What is involved for a trustee in running a SMSF?

Running a SMSF needs your time, interest and know-how to keep it operating within the super laws. Breaking super laws may lead to severe penalties, regardless of whether your actions were intentional or non-intentional.

Running a SMSF typically involves keeping on top of the super laws, record keeping, accepting contributions, making payments, reviewing investments, organising fund audits, meeting tax obligations and reporting regularly to the ATO. You can engage specialists like us that help you along the way, however, the consequences of all fund decisions rests with you.

Contact us today | Quill Group are your specialists in SMSF

Now that you have the foundational knowledge of what’s involved, costs and timeframes of setting up a SMSF, get in touch with one of our specialist team members today so we can guide you through the process.

How many super accounts do you have? Two? Three? Four? It’s easy to accumulate multiple super accounts, especially if you have had many different jobs over your working life. According to the ATO, 14.8 million Australians have a super fund account. Approximately 40% of these people have more than one super account (as at 30 June 2017).

Many of these accounts become “lost” over time, as people change address or change their name etc. This is why it is so important to make sure that you provide your TFN when opening a super account, as the ATO will use it to locate and consolidate super of any of your funds that become lost.

Consolidating super via the ATO service in MyGov

If you have a MyGov account and have provided your TFN to any previous super accounts, you can locate any lost super by linking the ATO service in MyGov, and then consolidating all of these accounts into one fund.

 

 

Why should I consolidate super?

The more super accounts you have, the harder it is to keep track of them all. It also means you could be unnecessarily paying two or three sets of fees and/or insurance premiums, which erodes your precious super balance. Consolidating your accounts could also save you some administration headaches – only one statement to file each year instead of three!

Having all your super in one place means that you know exactly what fees etc that you are paying and can see your whole super balance at a glance, making it easier for you to keep track of and giving you some peace of mind. Consolidating your super accounts is also quick and easy to do!

A new year or a change in jobs could be a good time to consolidate your super accounts, but it’s crucial to weigh up the pros and cons of each of your accounts carefully before closing any of them.

Below are some key points to consider before consolidating super:

 

Of course, this is just a guide to get you thinking carefully before making any changes to your super funds. Always read the relevant Product Disclosure Statement before making a decision, or even better, contact the fund directly.

For help consolidating your super accounts or assistance with choosing a super fund, contact Quill Group today!

 

As an SMSF trustee with the end of financial year approaching, make sure you’re up-to-date on the regulations and requirements to ensure your Self Managed Superannuation Fund is compliant and takes advantage of any tax benefits.

 

1.     Valuation of Assets

The assets in your SMSF need to be valued each financial year. Your administrator needs to report the market value of the assets in the SMSF’s financial statements for income tax purposes. Your auditor will need to verify that the SMSF is compliant and has not violated tax and super laws. The valuation must also be backed up by supportive data.

 

2.     Superannuation Contributions

All current year contributions must be received before 30 June. If making a non-concessional contribution, check if the bring-forward provision has been triggered. This will affect how much you can contribute.

 

3.     Employer Superannuation Contributions

Employer contributions need to be made by the 28th day of the month following the end of the quarter the employee’s salary was earned. If an employee’s Superannuation Guarantee for last financial year was received by your SMSF this financial year, you will need to include the contribution in your contribution cap for the 2017 – 2018 financial year.

 

4.     Salary Sacrifice Superannuation Contributions

If you have a salary sacrifice arrangement in place with your employer, to sacrifice your pre-tax wages into superannuation, these are counted towards your concessional contribution caps. Make sure you check your records before contributing more to avoid exceeding your cap of $25,000.

 

5.     Tax Deduction on Your Personal Superannuation Contributions

Effective 1 July 2017, the 10% maximum earnings condition was removed for the 2017-18 and future financial years. This means most people under 75 years old can claim a tax deduction for personal super contributions (including those aged 65 to 74 who meet the work test), up to their personal cap of $25,000. This amount includes Employer and Salary Sacrifice contributions.

If you are eligible to claim a tax deduction, you will need to lodge a ‘notice of intention to claim a tax deduction’ with your SMSF Trustee before you lodge your personal income tax return. Your SMSF Trustee must also provide you with an acknowledgement of your intention to claim the deduction.

 

6.     Spouse Superannuation Contributions

To claim a tax offset on your spousal contributions, you need to ensure the contributions are received by your SMSF by 30 June. The maximum tax offset you can claim is 18% of the non-concessional contributions of up to $3,000. To claim the maximum, your spouse’s income must be $37,000 or less in this financial year. The tax offset progressively decreases above this amount and cuts out at $40,000. You are both required to be Australian residents for tax purposes and be living together on a permanent basis at the time the contribution is made.

 

7.     Superannuation Contribution Splitting

Contributions made into your SMSF can be split between you and your spouse. This is only valid if your spouse hasn’t reached their preservation age or if they have, they need to be aged under 65 and not retired from the workforce. The maximum amount that can be split for a financial year is 85% of the contributions made into your SMSF in that financial year – up to your concessional contribution cap level. If you are intending to split contributions, you must do so in the financial year immediately after the one in which your contributions were made. You can only split the contributions you have made in the current financial year if your entire benefit is being withdrawn from your SMSF before 30 June as a rollover, transfer, lump sum benefit or a combination of these. Also, you can’t claim the superannuation spouse contribution tax offset for a contribution split to your spouse’s superannuation account.

 

8.     Superannuation co-contribution

Under certain circumstances, the Government will match your non-concessional contributions with a co-contribution of up to $500 per year. To be eligible you must earn at least 10% of your income from business and/or employment, be a permanent Australian resident and be under 71 years of age at the end of the financial year. The Government contributes 50 cents for each $1 of your non-concessional contribution to a maximum of $500 made to your SMSF by 30 June. To receive the maximum co-contribution of $500, your total income must be less than $36,813. The co-contribution progressively reduces above this amount and then cuts out completely at $51,813.

 

9.     Low Income Superannuation Tax Offset

If you earn less than $37,000 and either you or your employer have made contributions into your SMSF, you could be entitled to a refund of 15% contribution tax (up to $500) paid by your SMSF. To be eligible, at least 10% of your income must come from business and/or employment and you can’t hold a temporary residence visa. To receive the refund, you must ensure the contributions are received by your SMSF by 30 June.

 

10.  Minimum Pension Payments

If you are accessing an Account Based Pension from your SMSF, make sure that the minimum amount required to be paid under superannuation law is paid from your SMSF by 30 June in order for your SMSF to receive tax exemptions. The minimum amount is determined by your age and the percentage value of your pension account balance at either the commencement date of the pension or 1 July each year. There is no maximum pension payment amount required.

So the changes to superannuation have meant that you are restricted with how much you can contribute and you ask, “What are tax effective investment structures when super is maxed out?”.

Good question.

With superannuation becoming difficult for people to contribute large amounts in a tax effective manner, where to place these funds outside of superannuation is becoming much more important. Everyone’s situation is different and will lend themselves to some options more than others, but there are still some incredibly effective options for most people to build wealth outside of superannuation.

We will look at some of these below and how they can be of benefit in managing the level of tax that is paid.

 

Tax effective investment structures when super is maxed out: Private Companies

For those tax payers whose incomes is taxed at a marginal tax rate of 30% or more, investing funds through a private company gives the ability to limit tax to 30% on earnings until those funds are withdrawn from the company. The tax rate may be even less if the company meets the definition of a Base Rate Entity (BRE). To be a BRE the company must be operating a business and have turnover less than $25m (for the 2017/18 financial year.

The drawbacks of companies are the added costs that are incurred each year through ASIC fees, and annual compliance costs to prepare tax returns and financial statements. Companies also miss out on the 50% CGT discount on capital gains, which does make them unattractive to invest in growth assets, although this may not be as bad as it seems. Companies are able to access the small business CGT concessions if the conditions are met.

As mentioned above companies only offer the ability to defer tax that is paid on the profits derived, as when these funds are withdrawn by the shareholders they must get taxed at their marginal rates at the time. Depending on circumstances, this deferral of tax could mean the final tax paid by the shareholder is significantly less than otherwise would have been paid. Due to imputation, the shareholder receives a tax credit for the tax paid by the company, so you may even receive an additional refund of these!

 

 

Tax effective investment structures when super is maxed out: Trusts

Family trusts offer an attractive investment vehicle, especially for growth assets as capital gains made in trusts may be able to access all of the CGT discounts and concessions. Family trusts require the profits to be paid out each financial year though (or they’re taxed at the highest marginal tax rate), so depending on where these profits can be distributed among beneficiaries decides the level of tax that is paid. Family trusts give you the choice each year on where the profits go, so give great flexibility to be able to achieve the best tax outcome possible in the circumstances available.

Unit trusts offer the same advantage as family trusts in that capital gains may be able to access the CGT discounts and concessions, but they are limited to where the profits must be distributed each year by who the unit holders are. They’re a little less flexible and have other tax consequences that may occur, so careful consideration needs to be made as to the situations in which they are used.

How to set up a family trust

If you’ve been wondering how to set up a family trust correctly, you are not alone. Thousands of new family trusts are set up in Australia each year for a variety of reasons including asset protection, tax optimisation or to act as the legal structure for a business.

The following article from Christina Wolfsbauer of Intello Legal provide a step-by-step guide to setting up a family trust.

How to Set Up a Family Trust

 

 

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Tax effective investment structures when super is maxed out: Investment Bonds

Investment Bonds, also known as insurance bonds and a few other names, are tax paid investments. They allow you to invest a lump sum where the earnings are reinvested and taxed within the fund at the company tax rate of 30%. After 10 years it is then possible to withdraw the funds with no additional tax paid. Funds are able to be withdrawn at any time, but if withdrawn before 10 years there are tax implications, with a sliding scale of how these are taxed. A tax offset of 30% (much like imputation credits with private companies) is applied to the taxable amount of any funds withdrawn.

Investment bonds also allow for additional contributions to be made each year without affecting the 10 year time frame but are limited to 125% of the previous year’s contributions.

Investment bonds are also an effective way to transfer wealth to the nominated beneficiary of the account, as upon death the beneficiary receives these funds tax free. This is the case even if the 10 years hasn’t passed.

As you can see there are still various options available to accumulate wealth outside of superannuation that offer flexibility and access to funds when needed. As each persons situation is different and may involve one or a combination of the above, it is always best to seek professional advice before establishing your future investment plan.

 

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