As the 2020 Budget has been postponed until October this year, it’s a bit more quiet on the planning front as we don’t need to take into account any recent changes at this time.
However, there are a few things that we can do in order to plan for the 2020 end of financial year.
- Calculate your Total Superannuation Balance and make your Super Contributions before 30 June
Essentially, your Total Super Balance is a calculation of your overall super value, across all superannuation accounts that you have, whether in accumulation or pension phase. Hopefully you are now able to see your Total Super Balance in your myGov accounts online.
Why is calculating your total super balance important? It is important mostly for contribution purposes.
While your total super balance can be more than $1.6m in super overall, if you do exceed $1.6m it will affect your ability to make additional non-concessional contributions. As I mentioned, your total super balance includes your superannuation across all funds, which you should be aware of if you have multiple accounts across a few funds. In particular, if you are receiving a defined benefit pension, this will also be counted against your total super balance so watch out.
Once you’ve calculated your Total Super Balance, and verify which contributions you’re eligible to make, you can then make those contributions. I’ve written more about what kinds of contributions you can plan for in our preceding two articles, to view them please click here: Contributions part 1, Contributions Part 2
- Minimum Pension Payments
As always, if you are drawing a pension from your super fund you need to ensure that the annual minimum amount is paid before the end of this month.
One thing to watch out for is if you made additional contributions during the 2020 financial year while already running existing pensions – if you want the income derived from those additional contributions to also be tax free, you’ll need to make a minimum pension on those as well. Unless you make the contribution in June, there is a minimum payment required, which is pro-rated. Don’t forget that there is a cap of $1.6m on amounts converted to pension phase, known as the transfer balance cap.
- Overall fund review
I think it’s a good idea for trustees to do an overall review at least once a year. The things that I think are essential to review are:
- Your investment strategy – It is good practice to review your current asset allocation against your documented strategy, especially as it is required by law to do so. If your asset allocations are outside of the documented strategy, you may wish to make an adjustment to either the strategy or the asset allocation so that they fall into line. Common situations where a review is warranted include purchase of property, commencing a pension, or the use of borrowing or leverage.
- Life insurance – If you have life insurance, consider whether it’s still relevant or needs to be updated. If you don’t have life insurance, is this still right for you, or do you need to consider having a policy?
- Double check your death benefit nominations – are they still valid? Key life events that warrant an update to your nominations include marriage, divorce, birth or death.
- Valuations – if your fund’s assets include real estate, artwork, or other exotic investments they may be due a separate valuation this year so get that done.
- Capital gains tax – in the lead up to the end of the financial year, you may wish to undertake tax planning to minimise the CGT position of your SMSF. If you have assets with an unrealised loss position, you may want to seek advice on whether it is worthwhile to crystallise any unused losses to reduce the fund’s realised gains. Be aware however, that there may be tax consequences to simply selling an asset to realise a loss and buying it back immediately.
We hope that this assists you with planning for your end of financial year. If you have any questions feel free to email us or use the comment box below.
