In the 2022-23 Budget 2.0 release in late October there were six updates that will affect Self Managed Superannuation Fund (SMSF) trustees and members.
Cancellation of three-year audit cycle policy for certain SMSFs
It had previously been proposed that certain SMSFs may be eligible for a three-year audit cycle rather than the annual requirements under current legislation. While on the surface, this may appear to be a negative outcome for trustees, annual audit requirements often mean issues with SMSF compliance can be recognised and fixed in an acceptable timeframe. The three-year policy potentially meant that if there was a compliance issue, it may not be recognised for almost four years. Breaches of the super rules become much harder to rectify that far down the track.
Deferral of relaxation to SMSF residency rules
This policy proposed that the current temporary absence of up to two years for trustees of a fund be extended to five years, allowing the fund to remain resident and compliant. It also includes the removal of the restriction on members contributing to their SMSF while out of Australia. While the policy failed to come into effect 1 July 2022, it is good to see that this important change is still on the government’s agenda.
Incentivising pensioners to downsize their home
Proceeds from the sale of the principal residence of an age pension recipient will be exempt from the assets test for 24 months, up from 12 months. For income test purposes, the lower deeming rate (0.25%) will be applied to these amounts during this 24-month period.
Age limit for downsizer contributions and Seniors Health Care Cards
The extension of the lower age limit for downsizer contributions from 60 to 55 years of age, and the increase of the income thresholds for the Commonwealth Seniors Health Care Card were reconfirmed in the budget speech and both bills are currently before the Senate.
(Update: the increase of the income thresholds for the Commonwealth Seniors Health Care Card has now passed legislation).
Increase to penalty unit rates
The value of one penalty unit will increase from $222 to $275 from 1 January 2023. This means that contraventions of the SIS Act could expose each trustee to penalties of up to $16,500 per breach.
Important policy items missing from the budget
The review and amendment of the disproportionate legislation around non-arms-length expenditure rules received no attention from the government in this budget cycle. The rules deem general expenditure at less than market value as being connected to the entire income of a fund and subject all income of the fund (including contributions) to a 45% tax rate.
Also missing from this budget announcement was the proposed two-year amnesty allowing the exit of legacy non-commutable pensions. These, along with the residency changes are very important issues that impact SMSFs and we hope to see the government act on them in the near future.
How can Walsh Accountants help?
Our resident SMSF Manager Grant Sloggett is here to assist any SMSF members and trustees understand the latest and upcoming changes to the SMSF legislation and how it will affect their funds and investment strategies.
A technically focused SMSF specialist, Grant takes great pride in assisting his clients to stay compliant, understand any new legislation, and to take advantage of any new measures brought into play.
If you’re in need of specialist SMSF assistance, feel free to contact our office.