End of the Financial Year for SMSFs: 2014

SMSF End of Financial Year EOY Tax TimeWith only a couple of weeks until the end of the 2014 financial year here are some issues you may wish to raise with your SMSF clients.

Minimum Pension Payments

With 2013/14 being the first year since 2008/09 that minimum pension payment rates for account-based pensions have returned to their standard rates, i.e. 4% for people under 65 SMSF trustees should ensure that they have paid at least the minimum pension payments. Failing to do so can mean the pension has ceased, any payments made are lump sums and the fund cannot claim Exempt Current Pension Income (ECPI). See the ATOs FAQ for Minimum pension payment requirements for details of when the Commissioner may allow the ECPI to be claimed even though the minimum payments weren’t made during the year.

Under contribution caps

Before SMSF members make any last-minute contributions are they under the contribution caps. Though there is now an option to withdraw concessional contributions, and if legislated and passed as announced there will be a similar option for non-concessional contributions from 1 July 2013 it is simpler and cheaper to not make excess contributions.

2013/14 is also the first year with the new split concessional contributions cap after everyone having a $ 25,000 cap in 2012/13. So check if your clients meet the requirements for the $ 35,000 cap.

Be wary of concessional contributions where the member didn’t meet the 10% rule, and also where contributions weren’t allowed (work test, age, etc).

Claiming tax deduction for personal contributions

Don’t forget that in order to claim a deduction for a personal super contribution a s290 Notice of intent to deduct conditions must be given to the trustee in the approved form, and acknowledgement of receipt made, prior to the earlier of:

  • “if you have lodged your income tax return for the income year in which the contribution was made on a day before the end of the next income year–the end of that day; or”
  • “otherwise–the end of the next income year”

The ATOs have a Notice of intent to claim or vary a deduction for personal super contributions.

Valuations

Following from the 2013 financial year, all SMSF assets will need to be valued to market value as at 30 June 2014. This article may be helpful: SMSFs & Annual Market Valuations.

Investment Strategy

Though the SIS Act and Regulations don’t define what regularly means in “review regularly” the end of year would be a good time to remind trustees of their obligations.

Binding/Non-Binding Nominations

Depending on the SMSFs deed and the nomination itself it may or may not have an end-date, but it is still good to review nominations so they are both still in force and reflect the members wishes, especially if they have updated their wills.

Contraventions

Are there any contraventions from previous years, or the current year, which can be resolved before the end of the financial year?

Unpaid trust distributions

Are there distributions from pre-99 or un-geared unit trust that should be paid across to the fund before the end of the financial year?

Capital Gains/Losses

Do your clients have some capital gains to losses they may wish to realise prior to the end of the financial year. Don’t forget the treatment of gains/losses when a SMSF is paying a pension.

Co-Contribution

Though the co-contribution is now only $ 500 the income thresholds are higher than 2012/13, that is –  easier to meet. Someone making a $ 1,000 non-concessional contribution prior to the end of the financial year, with income less than $33,516 could be eligible for the full $ 500 co-contribution. See the ATOs website for the full set of rates. Keep in mind that the contribution has to be received by the fund prior to the end of the financial year.

Spouse Contributions

The offset of up to $540 is available for contributions made for a spouse that meet these conditions. The offset is calculated as 18% of the spouse contribution, for contributions up to $3,000 ($3,000 at 18% = $ 540).

Contributions Splitting

The form for contributions splitting needs to be lodged with the fund in the year after the contributions to be split were made, unless the whole balance is being withdrawn, in which case it can be lodged in the same year.

The ATO form can be found here.

 

This list is by no means exhaustive, and last minute, end-of-year actions should be secondary to long-term, forward-looking plans.

 

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