Five-point checklist for the new tax year


Trustees of self-managed super funds can embrace the new financial year with a spring in their step. For all the kite-flying and noise, super was left unscathed by the federal budget. To make the most of the year ahead, Money has drawn up a guide with the help of SMSF specialist Monica Rule. Here is her five-point checklist.

Contribution caps

"If someone doesn't keep accurate records they are likely to lose track of what's gone into their SMSF and risk making excess contributions," says Rule. "No one wants to pay extra tax, so keep your contribution records up to date."


The concessional (before-tax) contributions cap for under-50s is $30,000. For those aged 49 on June 30, 2015, and older, it's $35,000. The non-concessional (after-tax) cap is $180,000 for everyone. If you are under 65 during this financial year, you can use the three-year bring-forward rule and contribute $540,000 this financial year, or you can contribute multiple times up to a $540,000 total over the next three consecutive financial years. If you slip up, the fallout isn't as bad as it used to be, thanks to changes made in 2013.

"Members who exceed their concessional contributions cap are able to withdraw the excess amounts and pay tax on it at their marginal tax rate plus interest. If a member exceeds their non-concessional contributions cap, they can withdraw the excess amount from their SMSF but the associated earnings are taxed at the member's marginal tax rate plus interest," says Rule.

Pension withdrawals

If you are drawing an account-based pension, you will need to calculate the minimum percentage you are obliged to withdraw based on your age and account balance at July 1, 2015. Fresh from doing your tax return, your accountant will be able to give you the market value of the fund's assets.

"The trustees will need it to calculate the minimum percentage they have to withdraw. If they don't know what the amount is, how are they going to work out the 4% or 5% they have to withdraw depending on their age?" asks Rule. "If they have a transition-to-retirement pension then a maximum withdrawal also applies. If they exceed 10% of the pension account balance, they are in trouble."

Non-compliance with the minimum and maximum amounts means your SMSF will not receive the tax exemption on earnings funding the pension.

Update trust deed

As a general rule, the trust deed should be reviewed annually to ensure changes to super law are included, says Rule.

The trust deed lays out what strategies the SMSF can implement, such as limited recourse borrowing arrangements, contributions to reserves, anti-detriment payments and binding death benefit nominations. Rule says if you are audited by the tax office, the two documents it always wants to check are the trust deed and the investment strategy.

Take the reserves strategy, which can be useful from a tax perspective. If it's not included in the trust deed you risk running foul of the ATO rules.

"Say you put a $35,000 concessional contribution into the SMSF in January but you need a big deduction in your personal tax return to reduce assessable income. You know that because you've put in $35,000 you can claim $35,000, but you want to claim more than that," says Rule. "So what you will do is put in another $35,000 in June [it only works if you do this in June]. It's then not posted to your members' account until July. It means you haven't exceeded your concessional contribution cap even though you've put two lots of $35,000 in. But it means you canclaim $70,000 as tax deduction in this financial year."

Similarly, there's no point in having a binding death benefit nomination unless there's a clause in the trust deed allowing for it. "The law requires that the investment strategy be reviewed on a regular basis. The start of the new financial year is a great time to do it," says Rule.

Check collectibles

If your SMSF acquired these before July 2011, you need to decide whether to continue holding them as the five-year transitional period ends on June 30, 2016. They include artworks, coins, stamps and vintage cars, to name a few.

Under the new rules, SMSF members cannot use or display items in their home. They can't be leased to a related party or stored in a private residence. Collectibles must be insured in the SMSF's name and kept in storage. If you decide to sell them, give yourself enough time to do so.

Penalty costs

The dollar value of each penalty unit will rise from $170 to $180 from July 2015. This means non-compliance will cost you more. "It might be a good time to meet with your SMSF professional to make sure your SMSF is complying with the law and get advice on how to take advantage of strategies that suit your needs," recommends Rule.

Vita Palestrant was editor of the Money section of The Sydney Morning Herald and The Age. She has worked on major newspapers overseas.



Vita Palestrant was the editor of the Money section of The Sydney Morning Herald and The Age. She has worked on major metropolitan newspapers here and overseas and has won several prestigious journalism awards including the 2001 Citigroup Award for Excellence in Journalism, Personal Finance Category.
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