By Jo Scrima
The end of the financial year is fast approaching and like many, you may not have your superannuation affairs in order – you may not even know where to start.
But fret not, there’s still time. To help you out, here’s a checklist of items trustees of self-managed superannuation funds (SMSFs) should review before June 30.
1. The minimum pension must be paid
For a fund to receive its tax free status on benefits supporting a pension, the minimum pension must be paid before June 30. The Australian Tax Office provides little to no flexibility on this so it’s important to review the payments taken since July 1, 2015, and ensure they are within the minimum and maximum requirements.
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2. Contributions must be received by the fund
Contributions are recognised when received by the fund not when paid. It’s a good idea to make any last minute contributions well before June 30 as any delays caused by banking errors or similar may mean the fund does not receive your contribution in time to count towards this year’s caps. The concessional contributions caps for the 2016 year are $30,000 for those under 50 and $35,000 for those over 50. If you are over 65, you need to meet the work test (40 hours in 30 consecutive days).
Since a lifetime cap of $500,000 for non-concessional contributions was announced in the recent federal budget you should check with your advisor prior to making any further non-concessional contributions this year.
3. SuperStream obligations must be met
For super funds that receive employer contributions it’s important to take note that since 2014 the ATO has been gradually introducing SuperStream, a system whereby super contributions are received and made electronically.
If SuperStream compliancy does not already apply to you and you’re not aware of the SuperStream compliancy guidelines, you have until June 30 to familiarise yourself with the obligations. The ATO has given employers with 19 or fewer employees until June 30, 2016, to become SuperStream compliant.
All funds must be able to receive contributions electronically and will need to obtain an Electronic Service Address (ESA) to receive contribution information. If you are not sure if your fund has an ESA, contact your fund’s administrator, accountant or your bank for assistance.
Many employers are in the process of registering for SuperStream and may ask SMSF members for their ESA, ABN and bank account details. Some employers may also ask for your Unique Superfund Identifier (USI) – for SMSFs this is the ABN of the fund.
4. Collectables and personal use assets must comply with new rules from 1 July
Since July 1, 2011, the ATO has had strict storage and insurance requirements for SMSFs holding assets that are deemed to be “collectables” or “personal use”.
According to the ATO, collectables and personal use assets are things like artwork, jewellery, vehicles, boats and wine. Investments in such items must now be made for genuine retirement purposes only. They are not to provide any present-day benefit.
Collectables and personal use assets can’t be:
- leased to, or part of a lease arrangement with, a related party;
- used by a related party; or
- stored or displayed in a private residence of a related party.
- your investment must comply with all other relevant investment restrictions, including the sole purpose test;
- the decision on where the item is stored must be documented (for example, in the minutes of a meeting of trustees) and the written record kept;
- the item must be insured in the fund’s name within seven days of the fund acquiring it; and
- if the item is transferred to a related party, this must be at market price as determined by a qualified, independent valuer.
Funds with collectables and personal assets held prior to July 1, 2011, that have been relishing grandfathering provisions, be warned, your grandfathering rights are about to expire on June 30, 2016.
5. Market valuations of unlisted assets to be determined
Trustees are required to ensure the assets held in their fund are valued at market value. This should be detailed in the financial statements and based on objective and supportable data. This is particularly important for funds that hold real estate. To determine the market value of the property will require some research and if possible, a professional valuer to ensure you obtain an accurate valuation.
6. Review your insurance requirements
While insurances can be reviewed at any time, superannuation laws require SMSF trustees to consider the insurance needs of their members as part of the fund’s investment strategy each year. In order to comply with this requirement SMSF trustees should regularly consider their life, total and permanent disability, trauma or income protection insurance needs and talk to an advisor that can assist with navigating this.
Jo Scrima is a Chartered Accountant and director of superannuation at MGI Adelaide.