EOFY superannuation planning

Division 296 Tax

This proposal has received considerable feedback and various submissions. The Bills to give effect to the proposed additional tax for people with super balances above $3m was referred to a Senate committee, which has now issued their report recommending the Bills be passed. Given the proposed start date of 1 July 2025 and critical date of 30 June 2026, we still have time to advise affected clients.

Contribution planning

While the concessional contribution cap remains at $27,500 for FY24, there are opportunities for eligible people to utilise previously unused concessional contribution caps from earlier years. Should your Total Superannuation Balance be less than $500,000 (as of 1 July 2023), this is the last opportunity to catch up your concessional contributions using any unused carry forward amounts from the financial year ended 30 June 2019.  The carry forward provisions began in the financial year ended 30 June 2019 and carry forward for 5 years.

Another strategy to maximise concessional contributions is specific to SMSFs and involves contributions reserving, which allows you to bring forward next year’s concessional contributions cap for use in the current year. This strategy is generally used when an individual has a high income in the current year, but expecting much lower income in the following year, making the deduction more tax effective this year. Getting the timing right is crucial, along with the necessary paperwork.

Limited Resource Borrowing Arrangements

We have seen renewed interest in the use of Limited Recourse Borrowing Arrangements (LRBAs) in SMSFs, which can be used in conjunction with contributions to fund the purchase of permitted assets.

Withdrawal strategies

There are tax and preservation components of a superannuation benefit to consider, and conditions of release that must be met before a person can draw down on their super benefits. There are various examples of new opportunities to contribute and commence tax effective pensions, potential tax savings on superannuation death benefits, and evening up balances between couples to make the most use of the Transfer Balance Cap.

Other issues

SMSF Valuations requirements

SMSFs need to report their assets in their annual financial statements and tax return at their market value and provide supporting evidence to the fund’s auditor. The ATO are concerned about SMSF assets being recorded at the same value for a number of years and are sending targeted messages to SMSF trustees and auditors about this and will be monitoring what these funds report in their next return. Refer to the ATO’s SMSF valuation guidelines for more information.

Non-Arm’s Length Expenses (NALE)

Legislation to limit the tax penalty for general non-arm’s length expenditure has not been passed. The key takeaway here is to ensure all SMSF transactions are made on a commercial arm’s length basis. More information can be found in LCR 2021/2.

We’re here to help

Please reach out to our team of experts today if you’d like to discuss any of the above.

^{The above information is provided as an information service only and, therefore, does not constitute financial product advice and should not be relied upon as financial product advice. None of the information provided takes into account your personal objectives, financial situation or needs. You must determine whether the information is appropriate in terms of your particular circumstances. For financial product advice that takes account of your particular objectives, financial situation or needs, you should consider seeking financial advice from an Australian Financial Services licensee before making a financial decision in relation to any of the matters discussed.}