SMSF Minimum Pension Withdrawal Reminder
A quick reminder for our SMSF trustees about the importance of withdrawing the minimum pension amount from your superannuation fund before Friday 30th June 2017. You can find each member’s minimum pension withdrawal amounts for 2017 in the covering letter we included with your 2016 financial statements. If you have any questions to do with your minimum pension requirements please call our office to discuss with one of our accountants.
Are you Salary Sacrificing into Super?
If you have a salary sacrificing arrangement at work to put extra into your super fund, please note that the concessional contributions cap has reduced to $25,000 from 1st July 2017. Take the time to review your arrangements now so you can provide adequate notice to your employer if you need to adjust the amounts to remain under the new reduced cap.
If you are a contributing member of a defined benefit fund eg CSS, PSS, Military Super, the type of contributions allocated towards the concessional contributions cap have changed. If you need assistance with calculating whether you are still able to continue making additional concessional contributions please call our office.
Scam Alert!
If you receive an email from tax@ato.gov.au asking you to download an attachment or provide information, beware. It is yet another scam. Delete the email immediately and do not click on the link.
Our office has also received emails claiming to be special newsletters with hot stock tips. These are also scams and do not provide accurate market information.
If you are unsure about an email you have received, please contact our office for more information.
Important Considerations Leading up to 30 June 2017
By now most people are well aware of the changes announced to superannuation in last year’s budget which have now been enacted by law. These changes limit the amount of tax concessions available to retirees when total superannuation benefits exceed $1,600,000. Importantly, total superannuation benefits means all amounts held in super including any defined benefit income streams. The calculation to determine the capital backing these defined benefits is simply the annual income multiplied by 16. So if you receive $50,000 in a PSS pension for example, that’s an amount of $800,000 that counts towards your $1.6M cap.
These changes are simple in concept (but as always, difficult in execution) and basically limit the amount of capital a person can transfer into pension phase to $1,600,000 and thus attract the 0% tax rate that applies to pension accounts. For individuals with more than $1,600,000 in super, all is not lost. You still have full access to your benefits (once meeting a condition of release) and the tax rate on the excess over $1.6M is still attractive at 15% on income and 10% on capital gains for assets held for more than 12 months.
The changes also remove tax concessions received by a super fund on assets used to pay a Transition to Retirement Income Stream. These funds will be required to pay tax on earnings from the assets backing these pensions from 1 July 2017.
Fortunately there is some transitional relief for Capital Gains accrued on assets up to the 30th June 2017 where these assets were supporting a pension on 9th November 2016 and your super balance exceeds $1.6M (for balances under $1.6M capital gains will remain tax free and no relief will be required).
The new provisions also limit the amount of contributions a member can make from 1 July 2017. If you have $1.6m in super at the end of the previous year, you will be unable to make any further non-concessional contributions, whilst those with less than that can contribute $100,000pa or $300,000 over 3 years under the bring forward rule. Of course it gets more complicated when your balance is not $1.6m but the non-concessional contribution would cause it to exceed that amount. We could write an entire article on those provisions alone.
There are also some changes to the concessional contributions rules with the limit reducing to $25,000pa. If your super balance is less than $500,000, any unused cap will be able to be carried forward for use in a later year although this does not commence until 1 July 2018. In addition, fund members who are employees and could not previously make personal concessional contributions will be able to do so with the removal of the 10% test from 1 July 2017 (provided still that total contributions are under the concessional cap).
So what are the important things to do before 30th June 2017?
- Utilise the current non-concessional and concessional caps to get as much into super as possible. This includes considering borrowing funds short term if cash will not be available to you until after 30th June 2017 (ie from the delayed sale of an asset, administration of an estate etc).
- Look at your super balance and that of your spouse. If one of you is close to $1.6M and the other is well under, consider a withdrawal and re-contribution (assuming you are eligible to contribute) to even out balances.
- If you have significant taxable proportions consider utilising the current contribution caps to affect a withdrawal and re-contribution for estate planning purposes.
- If receiving a Transition to Retirement income stream, consider if it is worthwhile continuing that income stream once the tax concessions are gone or if it can be transferred to an Account Based Pension instead (i.e has condition of release been met).
- Wait to make any contributions under the CGT Cap (sale of business proceeds). This can affect your ability to contribute other amounts prior to 30 June 2017.
- For SMSF members who have made contributions from 1 July 2016 that will be turned into pension immediately, make sure you take a bit more pension than the amount listed on your SMSF accounts cover letter to cover the minimum pension withdrawal requirement for the additional pension.
Importantly, if you believe you have greater than $1.6M in super benefits, including your defined benefit pension, contact us ASAP to discuss any pre 30th June action that may be advantageous.
ATO Data Matching Program – Online Selling & Uber Drivers
As many of you know, the ATO gathers data from numerous sources to match against the information that you provide on your annual tax return. The most common ones are the banks for interest income, the share registries for dividend information and the health funds for private health insurance information.
Right now, the ATO are focusing on online selling, in particular, taxpayers who have sold $12,000 or more of goods and services online for the 2016, 2017 and 2018 income years to ensure that people who are considered to be conducting a business are reporting their income appropriately. To this end, the ATO will be collecting data from eBay Australia and New Zealand Pty Ltd and it is likely that additional providers, such as Gumtree, will be required to provide information in future years.
The Federal Court has recently confirmed that the ATO’s stance that Uber drivers are conducting a business is valid so they have released some guidance. Uber drivers must keep records, have an ABN and be registered for GST, pay GST on the full fares received, lodge BASs and declare ride sourcing income on their tax returns. As the ATO will be receiving data directly from Uber it is not worth trying to hide this information, and failure to comply will result in penalties.
If you are unsure if you are conducting a business or indulging in a hobby or you are an Uber driver in need of GST help, please contact our accountants for assistance.