With just a month to go until the end of the financial year trustees of self-managed super funds should be doing some housekeeping chores. If this is not done the fund could face the risk of paying penalty tax.
First, check the level of contributions made by or on behalf of members for the year. For the 2013 financial year one limit applies to all members for concessional tax deductible contributions, as opposed to previous years when older members had a higher limit.
The concessional contribution limit for the 2013 year is $25,000 for all members. Anyone who has been taking advantage of salary sacrifice contributions with their employer, or may have received a bonus payment that resulted in a large one-off employer SGC contribution, needs to be especially careful that they will not exceed the limit this year. If you are close to exceeding the concessional contribution limit, or have only just exceeded it, you should request your employer to delay paying any further contributions to your fund until after June 30, 2013. Under the current excess contribution rules an excess contribution of up to $10,000 can escape the penalty tax.
Superannuation fund members cannot be proactive with regard to obtaining relief from excess contributions tax. They must wait until they receive a notice from the ATO advising them of the excess contribution. Once received they have 28 days to accept an offer to have the excess contribution refunded.
As new legislation will apply to excess contributions from July 1, this is the only year this one-off relief from excess contributions tax will be available. If the deadline for accepting the offer from the ATO is missed, excess contributions tax of 46.5 per cent will be payable.
Trustees of self-managed super funds should also be aware of how much members have made in non-concessional after-tax contributions. The non-concessional contribution limit is $150,000. Where the member is under 65 years of age a limit of $450,000 can apply by bringing forward the next two year's contribution limits.
For self-managed super funds with accounts in pension phase, trustees should check that the minimum pension payment requirements will be met by June 30. This amount is calculated by multiplying a member's pension superannuation balance at the start of the financial year, or when the pension is commenced, by a percentage rate based on the member's age.
For the 2013 year a 25 per cent discount applies to pension rates. This means for someone aged 55 to 64 the rate is 3 per cent, for someone aged 65 to 74 it is 3.75 per cent, and for members aged 75 to 79 it is 4.5 per cent. Trustees should also be careful, if they have only been paying the minimum rate for the 2013 year, to make sure that the minimum pension payment increases as the discount will not apply for the 2014 year.
When reviewing the minimum pension payment amounts trustees should also ensure that the cash resources of the fund as they are now, after allowing for some income to be earned from investments for the 2014 financial year, will be sufficient to fund the pension for the next 12 months.
Trustees should also review the investments of their fund. From July 1, all investments of those funds must be valued at market value. Investments that do not have an easily obtainable market value, such as listed shares, will need to be valued by June 30, 2014.