People who have large taxable income this year because of a property sale, share sales or large bonus and are expecting lower taxable income in the next year should think of a contribution allocation strategy so they can maximise deductions for this financial year. Contributions Reserving involves bringing the personal concessional contribution forward from the next year to the current year so you get a larger deduction against your taxable income.
You should also check your eligibility for non-concessional contributions. Starting 1 July 2020, 67 is the new age limit and will apply to non-concessional contributions not having to meet the work test as well so you can make $100,000 in non-concessional contributions every year up to age 67. The government is considering an extension to the three-year bring forward rule up to 67 too. However, it is not yet law so work with your financial advisor closely so you can be updated.
Co-contributions are gov’t contributions to your super that match your own contributions. It can be beneficial in retirement planning so check your eligibility and if you are, take advantage of it. The amount you receive depends on your income and contribution.
You can also make contributions to a super fund on behalf of your spouse who’s not working or earns a low income. If your spouse has assessable income and reportable fringe benefits below $37,000 for full tax offset or up to $40,000 for partial offset, then it may be good to make spouse contributions. The offset is calculated as 18% of the lesser of your total contributions for your spouse for the year or $3,000 reduced by $1 for every dollar that the total of the assessable income, reportable fringe benefits and employer super contributions of your spouse for the year was over $37,000.
You must also keep your SMSF and personal expenses separate and pay expenses related to your SMSF directly from your fund’s bank account. You must check amounts that form a super contribution like expenses paid for the fund, debt forgiveness or in-specie contributions and insurance premiums for cover through super paid outside of the fund.
If you want to claim a tax deduction for personal concessional contributions, you need to complete a valid notice of intent to claim or vary a deduction form. If you want to start a pension, you must complete this form before your pension starts.
Spouse contributions splitting involves splitting up to 85% of your concessional contributions to your spouse. You can use it if your family has one main income earner with a higher balance, there’s an age gap where you can get funds to the pension phase earlier than a family member or you can improve eligibility for an age pension or concession card by retaining funds in super in the name of the younger spouse.
You can sell listed shares that are held in your name to your SMSF by a cash sale or contribution. Before you do this, talk to your financial advisor and accountant to find out if doing this is suitable to your needs.
In case you sold an investment and made money, you would need to pay CGT. If you have carried forward capital losses, you can offset your gains. If not, review your investments to know if any has unrealised losses that you could sell to offset the capital gains.
It’s also good to review your investment strategy and make sure all investments are made according to your strategy. Make sure your strategy includes consideration of life and TPD insurance. Your SMSF trust deed must also be up to date.
If you have an in-house asset, make sure its market value is less than 5% of the value of your SMSF except where the market value of an SMSF in-house asset is over 5% because of the share market downturn at 30 June 2020, the SMSF trustee prepares a rectification plan and by 30 June 2021, the plan can’t be implemented because of market conditions or doesn’t need to be implemented because the market has recovered and the 5% test is satisfied by then.
If you offered rent relief to your tenant because of Covid-19, it must be documented to show how the SMSF considered, managed and documented the request.
You must also review your insurance needs, including for the investments held by your SMSF. Review and find out if you are adequately insured and whether your SMSF investment property is insured at market value.
Super doesn’t automatically form part of your estate assets so you should review your Binding Death Benefit Nominations to make sure they are valid per your wishes. You should have the right Enduring Power of Attorneys to allow someone to act on your behalf as SMSF trustee in case of illness, mental incapacity or death.
As you look for different ways to grow and improve your business, seeking professional advice could prove to be an important and helpful decision.
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