June action list for SMSF trustees

Financial year-end is almost upon us and, if you’re an SMSF trustee, there are things you need to do before then. An important point to note this year is that 30 June falls on a Monday. If you need to do some last minute payments, depending on your bank, you might only have until Thursday 26 June to act.

Now for the SMSF trustee year-end action list.

Concessional contributions caps

Whilst the sting has been taken out of the penalties for excess contributions, you still don’t want to mess up, especially with the administration involved in fixing the problem. The concessional contributions caps for 2013/14 are set out in Table 1.

Remember that concessional contributions include employer contributions, salary sacrificed contributions, some insurance premiums, expenses paid on behalf of the fund, in-specie transfers and work done by a member, like labour on an SMSF property project. Add everything up and make sure you’re under the cap, especially if you’re planning more contributions before year-end.

If you exceed your concessional caps and choose to leave the amount in your fund then it is counted towards your non-concessional limit. So you need to be careful where you have used, or are planning on using, the ‘bring forward rule’ as you might exceed both caps inadvertently.

Fortunately, the proposed new rules will limit the penalties but the paperwork and accounting costs involved may be significant. Liam often recommends to clients that, unless they’re sure they won’t be maximising their non-concessional contributions, they take the option to refund excess concessional contributions.

Non-concessional contributions

If you’re considering make a non-concessional contribution keep in mind the change in limit (from $150,000 to $180,000) from 1 July 2014 and its impact on the bring forward rule (see work test.

Those younger than 65 might be better off waiting until 1 July to use the ‘bring forward’ rule. That way the total amount you can contribute across this year and next is increased, from $630,000 to $690,000 (see work test, which requires you to work more than 40 hours during any 30-day period during the financial year. Make sure you’ve satisfied it before making any further contributions or, if you haven’t, it might still be possible before 30 June.

Investment strategy

You must review your fund’s investment strategy regularly and ensure all investments have been made in accordance with it and the fund’s trust deed. Also, make sure your investment strategy covers the obligation that the trustees show consideration of the members' insurance needs. If it doesn’t, get it updated, or you face penalties and the risk of trustee disqualification.

Contributions reserving strategy

If your taxable income is higher this year than next (pushing you into a higher tax bracket), you can consider a ‘contribution reserving’ strategy. This allows you to claim extra deductions this year but utilise next year’s cap (see SMSF Alert: October 2013).

But note our comments in SMSF Alert: March 2014 and the potential complications which might arise. It should only be considered if you know what you’re getting yourself into.

Other matters

SMSF trustees should also consider:

1. Crystallising capital losses. If your fund’s not in pension mode, you should estimate your capital gains for the year and consider whether you can sell assets with unrealised capital losses, to offset the gains.
    
2. Ownership details. Before year-end, check all assets of the fund are held in the name of the trustee(s) on behalf of the fund. It’s critical to keep fund assets separate from other investments.
    
3. Market valuations. SMSF assets are required to be valued at market value each year. So year-end is a good time to get valuations of property, collectibles and other ‘difficult to value’ investments.

If your contributions, withdrawals and administration are already in order then sit back and relax. But if not, it’s time to get cracking.