SMSFs: Preparing for the super changes
With changes to superannuation coming into play from 1 July 2017, it would be wise for SMSF members to review their fund and take advantage of the opportunities currently available to them.
Here are three tips for SMSFs during the lead up to 1 July 2017:
Make the most of your super contributions
SMSF members can utilise the current contribution caps for both concessional and non-concessional contributions up to 30 June 2017.
For those aged under 49 (as at 30 June 2016), they can contribute up to $30,000 in concessional contributions for the 2016/17 income year. Those aged 49 or over (as at 30 June 2016), can contribute up to $35,000 in concessional contributions for the 2016/17 financial year. From 1 July 2017, the general concessional contributions cap is $25,000 for all individuals regardless of age.
SMSF members who are 65 or over but under 75 can also take advantage of the current $180,000 non-concessional contributions cap or $540,000 over a three-year period (for members under 65). From 1 July 2017, the non-concessional contributions cap is reduced to $100,000 for members 65 or over but under 75. Those under 65 may have the option of contributing up to $300,000 over a three-year period depending on their total super balance.
Check your balance
A $1.6 million cap on the total amount that can be transferred into the tax-free retirement phase for account-based pensions will take effect from 1 July 2017. SMSF members will thereby need to check the likely value of their current or impending pensions as at 30 June 2017 and reduce the value of these pensions if necessary. If members do commute their current pensions and have assets to move back to accumulation phase, then members will need to decide if they wish to apply CGT relief. Members should seek professional advice if they wish to obtain CGT relief as it is a complex and final decision.
Review your trust deed and estate plans
Changes to the superannuation rules may have adverse effects on an SMSF member’s trust deed and estate planning. Members should consider updating their SMSF trust deed to reflect the current super rules, such as the new $1.6 limit on retirement balances. It is also worthwhile to review whether the SMSF trust deed has sufficient options in the death benefit payment provisions, as the new super rules will allow certain death benefits to be rolled over. Members will also need to consider whether their current trust deed will allow for the terms of the trustee’s pension to change without needing to stop and restart the pension.