Minimum pension payments

As with previous years, Ms Philip said the ATO will be keeping a close eye on SMSFs claiming exempt current pension income exemptions (ECPI).

“In order to claim this for the 2018–19 financial year, the minimum pension payments must be withdrawn from the fund’s bank account prior to 30 June 2019,” she said.

SMSF professionals and trustees, she said, should be mindful that 30 June falls on a Sunday this year.

“Accordingly, we recommend that the payment be made by no later than Friday, 21 June 2019, to allow for bank processing times,” she noted.

“If the minimum pension payments are not withdrawn in time, the fund will not be able to claim the ECPI and will instead have to pay up to 15 per cent tax on the income from the pension assets. This could be a costly mistake.”

Monitoring the contribution caps

It is important where clients make contributions that they don’t exceed their caps, she said, as this may result in additional tax to pay, she warned.

The contribution caps this year are again $25,000 for concessional contributions and $100,000 for non-concessional contributions. The bring-forward cap for non-concessional contributions also remains at $300,000.

Ms Philip reminded SMSF professionals that a client’s ability to use the bring-forward rules will be subject to their total superannuation balance.

“To secure a tax deduction for any concessional contribution for the year ending 30 June 2019, remember that all contributions must be received into the super fund’s bank account by 30 June 2019,” she said.

“This applies to employers making contributions on behalf of employees and for individuals who make a concessional contribution with the intention of claiming it as a deduction in their personal tax return.”

As 30 June falls on a Sunday this year, Ms Philip said it would be advisable to make any final contributions at least one week in advance, to allow for processing time.

“This would be particularly prudent where the superannuation fund uses a clearing house facility to process the contributions,” she cautioned.

Carry-forward concessional contributions

Ms Philip also pointed out that next year is the first income year that unused concessional contribution caps can be carried forward from the previous financial year.

“The carry-forward concessional contribution rules allow an individual to carry forward any unused portion of their concessional contribution cap in a given year on a rolling basis for up to five years, provided their total superannuation balance at the end of 30 June of the previous income year is less than $500,000,” she explained.

“For example, if in the 2018–19 financial year the concessional contributions cap is $25,000 and you contribute $15,000, you will be able to carry-forward your remaining $10,000 for the next five years.”

This is only on the basis that the individual’s total superannuation balance is less than $500,000 on the 30 June of the year prior to your contributions, she noted.

Work test

If a client is 65 years old or older, Ms Philip said they must meet the work test before making any contributions to your fund.

“This means you must work at least 40 hours in a 30-consecutive-day period before you can make contributions,” she said.

Maximising contributions

If a client has a much larger superannuation balance than their spouse, she said, they may want to consider splitting their contributions as a way of boosting their spouse’s balance.

“You can split up to 85 per cent of your concessional contributions to your spouse. This may be a useful strategy if your spouse does not have much in super, or if you are keen to equalise your balances as you both approach retirement age,” she explained.

There are some restrictions with contribution splitting, she noted.

“You can only split 85 per cent of your concessional contributions from the prior year, you can only split concessional (taxable) contributions and your spouse must be under preservation age, or must be under 65 years of age and not be retired,” she said.

Spouse superannuation tax offset

An individual may claim the maximum tax offset of $540 for superannuation contributions they make to an eligible superannuation fund of their spouse if the sum of the spouse’s assessable income, total reportable fringe benefits amount and reportable employer superannuation contributions is $37,000 or less, Ms Philip said.

“The amount of the offset progressively reduces when that income exceeds $37,000 and completely phases out when the income reaches $40,000,” she explained.

“However, the individual will not be entitled to the tax offset if their spouse has exceeded their non-concessional contribution cap for the year, or the spouse has a total superannuation balance from all of their superannuation accounts equalling or exceeding their total super balance cap of $1.6 million immediately before 1 July 2019.”

Government superannuation co-contribution

Some clients may also be able to take advantage of the government superannuation co-contribution.

The government will make a tax-free co-contribution to your superannuation fund if an individual satisfies a number of conditions. The maximum co-contribution is currently $500 for a non-concessional contribution of $1,000 made to a superannuation fund.

“If the non-concessional contribution is less than $1,000, the co-contribution will be half of the non-concessional contribution amount,” she said.

Low-income superannuation tax offset

Individuals with an adjusted taxable income of $37,000 or less, she said, will be entitled to a low-income superannuation tax offset payment to their superannuation fund, which is calculated at 15 per cent of the total concessional contributions made on their behalf in the income year, up to $500.