2021 SELF MANAGED SUPERANNUATION NEWSLETTER
The latest Self Managed Superannuation update from Bush & Campbell, including:
Reminder to pay pensions by 30 June 2021.
Superannuation contribution caps and SGC to increase on 1 July 2021.
Change in Bush & Campbell SMSF audit procedures.
SMSF maximum membership to increase from 4 to 6 on 1 July 2021.
Downsizer contributions, a re-cap.
The Bush & Campbell team.
Pensions for 2021 – Reduction in the legislated minimum pension by 50% and reminder to pay before 30 June.
The Government has continued its temporary reduction for superannuation minimum drawdown requirements for account-based pensions and transition to retirement pensions, by 50% for 2020-21 and 2021-22 years.
This measure will benefit retirees by reducing the need to sell investment assets to fund minimum drawdown requirements.
If you require the pension drawdowns (at their historic rates) to fund lifestyle and living costs, then existing pension drawdowns, or draw downs in excess of the minimum pension, can still occur.
Your 2021 COVID-19 adjusted minimum pension was communicated to you at completion of your superannuation work for the 2020 year.
If a super fund fails to physically pay sufficient pensions to meet its minimum obligations, the fund will not be entitled to the tax exemption (i.e. it will lose its tax free income status). Other than in specific circumstances, it is not acceptable for the fund to accrue any pension shortfall in its financial statements.
Importantly, pensions paid by electronic transfer need to clear the super fund bank account on or before 30 June to be considered a pension for that year.
Superannuation contribution caps will increase from 1 July 2021
From 1 July 2021, the superannuation concessional and non-concessional contribution caps will be indexed. The new caps for the 2021/2022 financial year are:
Concessional cap - $27,500
Non-concessional cap - $110,000 or $330,000 over 3 years
The Total Superannuation Balance (TSB) limit that determines if an individual has a non-concessional contributions cap of nil will also increase from $1.6 to $1.7 million, effective from 1 July 2021. This is explained further below.
Super guarantee increasing from 9.5% to 10% on 1st July 2021
On 1 July 2021, the super guarantee rate will rise from 9.5% to 10%. If you have employees, you will need to ensure your payroll and accounting systems are updated to incorporate the increase to the super rate. Further, as part of the Federal Government measures (subject to legislation passing), there is a plan to remove the $450 per month threshold for superannuation guarantee eligibility from 1 July 2022.
The table below is a summary of the changes in the superannuation caps from the 2021 year to the 2022 year, including the changes proposed in the Federal Budget to take place from 1 July 2022 (subject to legislation passing)
* Subject to the measures in the 2021 Federal Budget becoming legislation.
1. The annual concessional cap and carry forward concessional contributions – what do they mean?
Historically, the annual concessional (before-tax) contribution caps offered little flexibility for those who take time out of work, work part-time, or have ‘lumpy’ income and therefore have periods in which they make no or limited contributions to superannuation.
From 1 July 2019, the Government has allowed individuals with a total superannuation balance of less than $500,000 (just before the beginning of a financial year before a carry forward up contribution is made), to make ‘carry forward’ or ‘catch-up’ superannuation contributions. Individuals will be able to carry forward their unused concessional cap space from the 2019 financial year on a rolling basis for a period of five years. Amounts that have not been used after five years will expire.
Broadly, this means that, if an individual has not maximised their $25,000 concessional cap in the 2019 or 2020 years, they can carry the unused amount (e.g. $25,000 per year less the actual concessional contributions made by the individual or their employer during the 2019 and 2020 years) to the following (20/21) year. In addition, if there was any unused component of the 2021 contribution cap, this can also be carried over to the 21/22 year. Then, if eligible to make contributions in the 21/22 year, they can contribute, and claim as a tax deduction in their personal returns, $27,500 (being the 21/22 annual concessional cap) plus the carry forward amount from the prior years.
Example –
Cassandra is a 46-year-old earning $100,000 per year. She has a superannuation balance of $400,000. In the 2018/2019 year Cassandra managed to contribute to super up to her $25,000 annual cap. In 2019-20, Cassandra had total concessional superannuation contributions of only $10,000 (inclusive of her employers SGC contribution). In 2020-21, Cassandra has the ability to contribute $40,000 into superannuation of which $25,000 is the amount allowed under the annual concessional cap and $15,000 is her unused amount from 2019-20 which has been carried forward. Cassandra can claim a tax deduction in her personal tax return for the full amount of $40,000 in 2020/21 year. If Cassandra had a realised capital gain in the 2020/2021 year, this superannuation deduction would also reduce any capital gains tax payable in that year.
Further, if Cassandra did not make the $40,000 contribution in the 2020/2021 year (or if she only deposited a component of her superannuation cap in the 2020/2021 year) then her contribution cap in the 2021/22 year is $27,500 plus whatever the carry over contribution from prior years are.
As the contribution caps are a function of the individuals circumstances and not the superannuation fund, contact your accountant responsible for lodging your personal tax return to determine your modified (if applicable) contribution cap.
2. Non-concessional contributions
You can make after tax contributions to super that could come from your personal savings, transferring personal investments, an inheritance or from the sale of investments. For the 2021 financial year provided your superannuation balance is $1.6m or less, the annual personal after tax contribution cap is $100,000. If you are under 67 and make total after tax contributions of more than $100,000 in a financial year the bring forward rule is triggered. This allows you to make non-deductible contributions of up to $300,000 in total over a fixed three year period commencing in the year in which you contributed more than $100,000 (subject to the $1.6m Total Superannuation Balance Caps).
From 1 July 2021 the annual non-concessional contribution cap is changing from $100,000 to $110,000. Individuals who are under 67 years old will be eligible to make non-concessional contributions of up to three times the annual non-concessional contributions cap ($110,000 x 3 = $330,000) in a single year. It is important to note that if an individual enters into a bring forward arrangement before 1 July 2021, they will not have access to any additional cap space as a result of the increase to the non-concessional cap.
Important: Key to the Government’s 2017 changes was that, for those individuals with a total superannuation balance (over all their super funds) in excess of $1.6m (increasing to $1.7m from 1 July 2021) on the proceeding 1 July, non-concessional contributions will generally not be allowable. In addition the 3 year bring forward provisions may be effected if an individual’s superannuation balance is $1.3m (increasing to $1.4m from 1 July 2021) or over. The specific workings of non-concessional contributions are technical in this regard and our office should be contacted for comment prior to considering such contributions.
3. Total Superannuation Balance and Transfer Balance Cap. On 1 July 2021 The Total Superannuation Balance (TSB) and Transfer Balance Caps (TBC) are both being uplifted by $100,000 to $1,700,000 each.
On 1 July 2021 The Total Superannuation Balance (TSB) and Transfer Balance Caps (TBC) are both being uplifted by $100,000 to $1,700,000 each.
The increase in the TSB will allow those with less than $1.7m in superannuation (on an individual basis) to contribute additional non-concessional contributions (as measured on the 1st July in the year of making the contribution). Since 1 July 2017 the TSB has been $1,600,000
The increase in the TBC will allow those commencing Account Based Pensions to start these pensions with a value of $1.7m (this has been limited to $1.6m from 1 July 2017). Importantly, for those that have already commenced an account based pension:
If the starting value of the account based pension was $1.6m, no indexation is available.
If the starting value of the account based pension was less than $1.6m, then part indexation is available and the individual will have their own personal TBC.
4. The Work Test
If you are between ages 67 to 75 you will need to meet a work test to contribute to superannuation. This means, in the financial year you intend to make a contribution, you need to be gainfully employed for at least 40 hours during 30 consecutive days before the contribution is made. Gainful employment refers to an arrangement where the individual is being paid for services the individual renders and is generally achieved through such means as an employment arrangement, working as a contractor or through a partnership.
1 July 2022 Change: Repealing the work test for voluntary contributions
In the 2021 Federal Budget papers, Treasurer Frydenberg indicated that, from 1 July 2022, the work test for after tax (non-deductible) contributions would be repealed. This would allow those aged between 67 to 74 (inclusive) to make non-concessional (including under the 3 year bring-forward rule) or salary sacrifice contributions without meeting the work test, subject to existing contribution caps and existing total superannuation balance limits.
Changes to SMSF audits from 1 July 2021.
The ATO has legislated that, from 1 July 2021, accounting firms who complete the financial statements and tax obligations of an SMSF are no longer allowed to audit that same SMSF. As you are aware, Bush & Campbell had a separate and independent audit division within the firm that was responsible for your SMSF audit. Even with the independence of this function, we will be precluded from auditing your fund for the 30 June 2021 year. This change has impacted every accounting firm across the industry.
What we have done.
We have partnered with an external SMSF audit firm, National Audits Group, who will complete your SMSF audit for the 2021 year and beyond. We have had a long association with this firm, where both its Directors where previous employees of Bush & Campbell and Daniel Uden was responsible for the initial accounting training and mentorship of its Managing Director. National Audits Group is based in Wagga and offer SMSF audit services to a number of other accounting firms. While this change is frustrating for the accounting industry we believe that the collaboration we have negotiated will result in the following outcomes for our clients:
You will see no change in the quality of service or processes offered by Bush & Campbell. Sign-off procedures at completion of the year will remain the same.
We will coordinate the audit of your SMSF as we have done in prior years. You will not need to communicate with National Audits Group as we will do this on your behalf.
There may be a minimal increase in cost to complete the audit of your fund. This will be no more than $50.
We will answer all audit queries from the auditor and be responsible for all communications the auditor has in regard to your fund.
National Audit Group are bound by the same professional and confidentially standards as our firm
If you would like to discuss this arrangement please contact Daniel Uden.
SMSF maximum membership to increase from 4 to 6 on 1 July 2021.
Last night (17th June 2021) legislation was passed by Parliament which will extend, from 1 July 2021, the maximum number of individuals in a self managed super fund from 4 to 6. While the majority of SMSF’s have one or two members this change may benefit certain family or business arrangements. Special consideration will need to be given in to these arrangements including a review of the super fund trust deed and ensuring that a number of minor balance members (by $ value) cannot dictate activities of the SMSF to the detriment of other members who may have significantly more superannuation value.
It is important to consider from an estate planning standpoint that, if superannuation benefits from a parent were ultimately being distributed to adult children, the fact that the adult children may be members of the SMSF will not mean that the deceased’s assets can remain in the SMSF. Rather, they will still need to be paid out/transferred from the super fund to either the Will of the deceased or to the adult children directly.
Downsizer contributions – what do they mean?
From 1 July 2018 the Coalition introduced ‘downsizing’ provisions where, in the event you sell the family home, some of the proceeds from the home sale (up to a maximum of $600k for a couple) can be contributed to super. The key eligibility criteria for these provisions are as follows:
You (or your spouse) are 65 years old or over at the time you make a downsizer contribution (there is no maximum age limit).
The amount you are contributing is from the proceeds of selling your home where the contract of sale was exchanged on or after 1 July 2018.
Your home was owned by you or your spouse for 10 years or more prior to the sale.
The proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, or would be entitled to such an exemption if the home was a CGT rather than a pre-CGT (acquired before 20 September 1985) asset.
You make your downsizer contribution within 90 days of receiving the proceeds of sale, which is usually the date of settlement.
These contributions are bound to be popular particularly when considering.
The size of the ‘new home’ is irrelevant for the purposes of accessing the downsizer contribution.
The downsizer contribution is available irrespective of a members superannuation balance (eg individuals can still access the downsizer contributions if their super balance is in excess of $1.6m)
The property being sold does not need to be your place of residence at the time of sale – merely it must have been your place of residence at some stage during the ownership period.
Please contact our office if you have further questions with regard to the downsizer contributions.
Reducing the eligibility age for downsizer contributions – 2021 Federal Budget change.
It is expected that, from 1 July 2022, the eligibility age to make downsizer contributions into superannuation will be reduced from 65 to 60 years of age. All other eligibility criteria remains unchanged, allowing individuals to make a one-off, post-tax contribution to their superannuation of up to $300,000, per person, from the proceeds of selling their home (provided the home has been owned for 10 or more years). These contributions will continue not to count towards non-concessional contribution caps. This change is subject to appropriate legislation passing in parliament.
The Bush & Campbell SMSF Team
Sharon Ferguson – Director
Sharon Ferguson is the Director of Bush & Campbell Financial Services. Commencing with Bush and Campbell in 2001, she has over 19 years financial planning experience. Sharon is an expert in providing total financial solutions to assist individuals, business owners and families to better manage their wealth and financial needs. Sharon specialises in investment advice including direct share portfolio management, superannuation, retirement planning, insurance and in more recent years, Aged Care. Sharon is now a sought after professional in the region of aged care financial advice, explaining and managing the maze of nursing home information.
Ann Thompson – Financial Planner
Financial Planner Ann Thompson has over ten years experience in the financial services industry. Ann's focus on getting to know her clients enables her to develop with them a personalised strategy to ensure they each achieve their goals throughout their lifetime. With specialised knowledge in the areas of life insurance and self managed superannuation funds, Ann can advise in all aspects of financial planning including strategic advice, investment advice, superannuation, retirement planning and personal insurance. Along with a genuine commitment to exemplary customer service, Ann enjoys mentoring team members and developing systems to continually enhance the customer experience.
Jessica Hof – Financial Planner
Jessica was raised on a farm in western NSW and completed a Bachelor of Accounting and Financial Planning with Charles Sturt University in Bathurst. After graduating Jessica moved to Wagga and started her career as an accountant before moving into financial planning as she really enjoyed working with clients to achieve their future goals.
“I am very passionate about financial advice and helping people achieve their personal and financial goals. My aim is to provide advice in a stress free and easy to understand manner offering services in strategic advice, insurance, superannuation, retirement planning and investment advice.
So many people need access to quality advice and someone with specialised knowledge to help guide them. I am proud to be a member of a great team who offer these services and can work together with your accountant and other professional services to achieve the best outcome for the client”.
Daniel Uden – Director
Daniel commenced at Bush & Campbell 20 years ago and heads our SMSF team. Daniel has been working with our superannuation client base over the last 8 years. Daniel is a Chartered Accountant, Registered Company Auditor and holds a Professional Certificate in Self Managed Superannuation Funds. Daniel is also licensed to provide advice, as an Authorised Representative of Aura Wealth Pty Ltd, with regard to superannuation and SMSF recommendations. Daniel is looking forward to working with our existing and new clients to continue to develop positive financial strategy outcomes for self managed superannuation.
Di McAlister – SMSF Manager
Di McAlister commenced employment with Bush & Campbell in 1978. After working with local real estate firms specialising in property management and accounting. She returned to Bush & Campbell in November 2001 to take up a position in our self managed super fund team. Di has been co-ordinating the superannuation team since and has a deep understanding of the transactions and day-to-day activities and obligations of super fund trustees.
Julie Zappala – SMSF Man
Julie Zappala started as a trainee with Bush & Campbell in February 1987. After time with KPMG in Albury and in commerce she returned to the Bush & Campbell in 2002 and took up a full-time position in the self managed super fund team shortly thereafter. She has been working as an integral SMSF accountant in the team ever since.
Liz Leman – Administration
With a background in office management in professional services firms, Liz commenced work with Bush & Campbell in 2016. Liz is our SMSF administration assistant who is responsible for all the administration functions that occur within the SMSF team.
Natalie Corbett – Administration
Natalie commenced work with Bush & Campbell in 2020. Nat assists Liz with the many administrative tasks that occur within the SMSF team.