Federal Budget & year end issues - Accurium
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Federal Budget & year end
issues
Mark Ellem Melanie Dunn
Head of Education SMSF Technical Services Manager
Accurium Accurium
www.accurium.com.au www.accurium.com.au
Phone: 1800 203 123 Phone: 1800 203 123
The information in this presentation has been prepared by Accurium Pty Ltd ABN 13 009 492 219 (Accurium). It is general information only and is not intended to be financial product advice, tax advice or legal
advice and should not be relied upon as such. Whilst all care is taken in the preparation of this presentation, no warranty is given with respect to the information provided and Accurium is not liable for any loss
arising from reliance on this information. Scenarios, examples and comparisons are shown for illustrative purposes only and should not be relied on by individuals when they make investment decisions. We
recommend that individuals seek professional advice before making any financial decisions. This presentation was accompanied by an oral presentation, and is not a complete record of the discussion held. No
part of this presentation should be used elsewhere without prior consent from the author.
Introduction
Agenda
Superannuation year end issues
Federal Budget – super perspective
3
Tech talk live Q & A
SLIDO – ask your questions and vote for your favourite
TAKE OUT YOUR OPEN A WEB GO TO SLIDO.COM TYPE IN EVENT
SMART PHONES BROWSER CODE Q422
4
Federal Budget
Super changes
First Home Super Saver Scheme
Downsizer contributions
Work test for voluntary contributions
SG threshold + rate
Residency rule for SMSFs and SAFs
Opportunity to exit legacy pensions
5
First Home Super Saver Scheme
Increase to access amount
Introduced from 1 July 2017 for eligible voluntary concessional + non-concessional contributions
Where an individual meets the eligibility requirements → can apply for release from 1 July 2018
Allows an individual to save money inside super for purpose of acquiring first home → save faster due to
concessional tax treatment of superannuation
- Currently $15,000 annual limit + $30,000 total limit for maximum release amount
Further details refer ATO website QC 54085
Budget proposal:
Maximum release amount – total limit increased from $30,000 to $50,000
Expected to apply from 1 July 2022
+ four technical changes (apply retrospectively from 1 July 2018)
6
Downsizer contributions
Access cap earlier
Commenced 1 July 2018 → allows one-off, post tax contribution to super up to $300,000 per person from
proceeds of selling a qualifying home
Does not count towards non-concessional cap + not subject to prior 30 June total superannuation balance
Further details refer ATO website QC 54086
Budget proposal:
Eligibility age to be reduced from 65 to 60 from 1 July 2022
All other eligibility requirements remain unchanged
7
‘Work test’ for contributions
Trustee contribution acceptance rules
‘Work test’ for acceptance of:
- Member contributions
- Employer non-mandatory contributions
‘Work test’ = gainfully employed for 40 hours in 30 consecutive days in the year of income the contribution is
made → generally required to be satisfied prior to acceptance.
Budget proposal:
‘Work test’ abolished from 1 July 2022 for personal non-deductible contributions + salary sacrifice contributions
Bring forward rule for non-concessional contributions available for those < 75 (from 1 July 2022)
BUT → Personal deductible contributions for those aged 67 to 74 remain subject to ‘work test’
8
Abolition of ‘work test’
Misaligned contribution and access ages
1 July 2020 → 30 June 2022
- Trustee can accept contribution from member without satisfying the ‘work test’, provided under age 67
- Member can access preserved superannuation benefits from age 651
1 July 2022 →
- Trustee can accept contribution from member2 without satisfying the ‘work test’, provided under age 75
- Member can access preserved superannuation benefits from age 651
Strategy opportunities:
Top up retirement savings
Re-contribution strategies
1. Item 106 Schedule 1 to SIS Regulations
Spouse contributions
2. Personal non-deductible + salary sacrifice
contributions Maximise super in pension phase 9
Superannuation guarantee
Minimum threshold
Generally, employer must pay super for employee where they are paid $450 or more in a calendar month
- Superannuation guarantee rate applies → currently 9.5%1 of OTE2 → paid quarterly
- Additional requirements for employee under age 18 or is a private of domestic worker
- Contractors may be included as ‘employee’ for SG purposes
Budget proposal:
$450 threshold to be removed from 1 July 2022
1. Increasing to 10% from 1 July 2021
2. Ordinary time earnings + subject to a maximum contribution base
10
Superannuation Guarantee
No change to legislated increase
Period SG rate (%)
1 July 2021 – 30 June 2022 10.00
1 July 2022 – 30 June 2023 10.50
1 July 2023 – 30 June 2024 11.00
1 July 2024 – 30 June 2025 11.50
1 July 2025 – 30 June 2026 and onwards 12.00
11Australian superannuation fund
Relaxing the residency requirements for SMSFs and SAFs
Superannuation fund must satisfy the definition of an ‘Australian superannuation fund’:
1. Establishment Test or owns an Australian asset; AND
2. Central Management & Control (CMC) test; AND
3. Active Member test
Failure to satisfy all 3 tests, at all times = non-complying fund + significant tax consequences
Budget proposal:
1. Extend safe harbour rule for CMC test from 2 years to 5 years for SMSFs
2. Remove the Active Member test for SMSFs and SAFs
Expected to apply from 1 July 2022
12Legacy pensions
Budget proposal
A two-year period (likely from 1 July 2022) to exit
legacy retirement products
- Market-linked, life-expectancy and lifetime
products
- Not flexi-pensions, lifetime products in large
APRA-regulated or public sector DB schemes
13Legacy pensions
Budget proposal → Opportunity to exit!
Individuals will have a choice (not compulsory) to shift into more flexible contemporary retirement products
by fully commuting the underlying capital and reserves into accumulation phase
- Commutation is a TBA event → use existing rules to calculate TBA debit value
- Consider TBC space for any new retirement phase pension → Account Based Pension
- Social security and tax treatment not grandfathered, but no re-assessment of previous benefits
- Commuted ‘reserve’ taxed as assessable contribution of the fund (15% tax rate), but does not count
towards concessional contribution cap
Due to the complexity of these products, advice will be important to assist individuals in deciding whether to
take up this choice.
14Legacy pensions
Example – access to lifetime complying pension capital
Jill is 80 years old and has a lifetime complying pension provided by her SMSF (commenced 2003)
Decides that this type of pension no longer suits her needs and wishes to have access to pension capital
Proposed rules1 allow Jill to:
- Commute her lifetime complying pension + reserve back to accumulation
- Commence a new account-based pension, subject to her personal transfer balance cap
‘Reserve’ transferred back to accumulation → included as assessable income of the SMSF
Jill’s new ABP will count towards age pension assets test → Jill’s part pension re-assessed.
1. From the start date of the measure – expected to be 1 July 2022 15Federal Budget
Other non-super related measures
Refer to our Federal Budget Summary
- Emailed out 12 May 2021
- Available on TechHub
- Available handout in today’s session
16Superannuation - Year end issues
17Contributions – when received?
If the funds are transferred by...... A contribution is made when......
Making a cash payment The cash is received by the superannuation fund
An electronic transfer of funds The funds are credited to the superannuation fund’s bank account
Giving the superannuation fund a money order or bank cheque The money order or bank cheque is received by the superannuation fund,
unless dishonoured
Giving the superannuation fund a personal cheque (not post The personal cheque is received by the superannuation fund, provided
dated) that is presented and honoured promptly banked and is honoured
Giving the superannuation fund a post dated personal cheque The cheque is able to be presented for the payment (date on cheque),
that is presented and honoured provided promptly banked and is honoured
A related party (as maker) issuing a promissory note, payable on The promissory note is received, so long as payment is demanded
demand at face value & the note is paid with cash or electronic promptly and the note is honoured
equivalent
A related party (as maker) issuing a promissory note, payable on Payment is able to be demanded or required to be made, so long as the
a future date at face value & the note is paid with cash or demand (if required) is promptly made and the note is honoured.
electronic equivalent
Payment of a personal cheque or related party promissory note will be taken to have been demanded
Para 13 –TR 2010/1
promptly if payment is demanded within a few business days. (Para 14 TR 2010/1)
18Employer contributions via Clearing House
Employer has < 20 employees or turnover < $10m pa
Use free ATO Small Business Clearing House (SBSCH)
SG obligation met Tax deduction for contribution
SBSCH Other Clearing House SBSCH Other Clearing House Note: Contribution
will count towards
When employer When relevant super When employer makes When relevant super member’s relevant
payment & instructions fund has received payment to SBSCH & all fund has received cap in year fund
are accepted by SBSCH. contribution from relevant info provided to contribution from receives from
clearing house. allow contribution to clearing house. SBSCH or other
pass to relevant fund & clearing house.
payment not
dishonured1.
PCG 2020/6: Timing of income tax deductions for superannuation contributions made through the Small Business Superannuation Clearing House -
ATO compliance approach 19Contributions: 2020-21
Acceptance v caps
Acceptance1 Cap consequences
Concessional
Can the trustee accept the contribution?
Under 65 → all contributions, except Downsizer
- Employer ;Member deductible; Allocation from
reserve (unless exemption)
65 to under 67 → all contributions Non-concessional
67 to under 75 → mandated employer; downsizer; - Member non-deductible; Spouse contribution;
‘recently retired’; ‘work test’ Rollover from foreign fund (ex assessable amt)
75+ → mandated employer; downsizer Other cap amount
Requirement to return within 30 days of
- Downsizer; CGT lifetime cap
becoming aware trustee could not accept No cap applicable
- Personal injury; Government co-contribution.
1. SIS r.7.04(1) 20Contributions: 2020-21
Concessional cap
Standard
Catch-up Total
$25,000 (not
(subject to concessional
subject to
TSB1) cap
TSB)
1. Application of catch-up concessional contribution subject to prior 30 June TSB < $500k 21Contributions: 2020-21
Contribution reserving strategy to an SMSF
Contribution made in June (Yr 1) → allocated by 28 July (yr 2)
Contributor claims deduction in year 1
Assessable income of SMSF in year 1
Counts towards member’s concessional cap in year 2 Employer contributions made via
SuperStream to non SMSF must be
allocated within 3 business days
Max concessional cap 2020-21
- $25,000 + unused CC cap 2020-21 [excludes reserved cont (June 2021)]
30 June 2020 Allocated by
TSB < $500k 28 July 2020
22Contributions: 2020-21
Contribution reserving strategy to an SMSF
2020-21 reserved amount:
No more than $27,500 (where no catch-up
available in 2021-22)
Need to consider any concessional contributions
in 2021-22
When does ‘work test’ apply?
Apply ‘work test’ at time contribution is made
NOT when contribution is allocated
23Contributions: 2020-21
Non-concessional: transitional bring forward rule
Standard non-concessional cap $100,000
- 30 June 2020 total super balance < $1.6m
Bring forward rule where individual was under age 65 at 1 July 20201
- 30 June 2020 total super balance < $1.4m → bring forward 2 years cap = $300k maximum
- 30 June 2020 total super balance $1.4m to < $1.5m → bring forward 1 year cap = $200k maximum
Bring forward rule triggered where non-concessional contribution more than $100k
If trigger bring forward rule prior to 1 July 2021 → no cap indexation for bring forward period that covers
2021-22 and beyond.
1. Bill to increase to under age67 – retrospective effect from 1 July 2020 → not yet passed 24Contributions: 2020-21
Non-concessional: transitional bring forward rule
Standard non-concessional cap $100,000
- 30 June 2020 total super balance < $1.6m
Bring forward rule where individual was under age 65 at 1 July 20201
- 30 June 2020 total super balance < $1.4m → bring forward 2 years cap = $300k maximum
- 30 June 2020 total super balance $1.4m to < $1.5m → bring forward 1 year cap = $200k maximum
Bring forward rule triggered where non-concessional contribution more than $100k
If trigger bring forward rule prior to 1 July 2021 → no cap indexation
for bring forward period that covers 2021-22 and beyond.
1. Bill to increase to under age67 – retrospective effect from 1 July 2020 → not yet passed 25Pensions
Minimum pension payment – Account Based Pension
Age Standard minimum Reduced minimum
pension % pension % for 2019-20
& 2020-21 financial
years
< 65 4% 2%
65 – 74 5% 2.5%
75 – 79 6% 3% Also applies to:
80 – 84 7% 3.5% •TRIS (10% max)
85 – 89 9% 4.5% •TRIS in retirement phase
90 – 94 11% 5.5%
95+ 14% 7%
26Pensions
Minimum pension payment – Market Linked Pension
Standard annual pension range:
Minimum – 90% of calculated amount per Schedule 6 SISR
Maximum – 110% of calculated amount per Schedule 6 SISR
Annual pension range for 2019/20 & 2020/21:
Minimum – 45% of calculated amount per Schedule 6 SISR
Maximum – 110% of calculated amount per Schedule 6 SISR.
27Pensions
Transfer balance account reporting
SMSF annual reporters for TBA events:
2020-21 TBA events to be reported by due date of 2021 SMSF Annual Return
SMSF quarterly reporters for TBA events:
TBA events to be reported by 28 days after end of relevant quarter.
Consider reporting TBA events early to allow for correct calculation of
entitlement to indexation of the general TBC.
Post 30 June 2021 TBA reporting will affect entitlement to TBC indexation
→ ATO will re-calculate entitlement
28Pensions
Transition to retirement income streams
SMSF member with a TRIS meets a full condition of release (CoR)
‒ TBC considerations
‒ TBA reporting requirements
‒ SMSF able to claim ECPI
‒ 10% maximum removed
‒ No effect on calculation of minimum pension for 2020-21
Full CoR occurs prior to 65
‒ Requires member to notify SMSF trustee
Full CoR occurs @ 65
‒ Automatically converts to ‘TRIS in retirement phase'
29Year end issues
Other
In-house asset 30 June market value ratio test Year end market values
- 30 June 2020 IHA excess amount disposed by 30 - Consideration of evidence of market value for
June 2021 audit
- COVID-19 compliance relief Outstanding compliance issues from prior year
Investment strategy - Review prior year audit management letter +
- ATO’s continuing focus on investment strategy audit report
- COVID-19 compliance relief
Residency
Refer to the SMSF 2021 year end check list
- ‘Australian super fund’ handout + on TechHub
- COVID-19 compliance relief
30Contact us
The information in this presentation has been prepared by Accurium Pty Ltd ABN 13 009 492 219 (Accurium). It is general information only and is not intended to be financial product advice,
tax advice or legal advice and should not be relied upon as such. Whilst all care is taken in the preparation of this presentation, no warranty is given with respect to the information provided
and Accurium is not liable for any loss arising from reliance on this information. Scenarios, examples and comparisons are shown for illustrative purposes only and should not be relied on by
individuals when they make investment decisions. We recommend that individuals seek professional advice before making any financial decisions. This presentation was accompanied by an
oral presentation, and is not a complete record of the discussion held. No part of this presentation should be used elsewhere without prior consent from the author.
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