The best time for review and planning for your self-managed super fund (SMSF) is the beginning of the new financial year in July. Work through these checklist items and get 2022-23 off to a great start.
SMSF Administration Tasks
There’s some administration tasks that makes sense to do at the start of the financial year.
Assets with no publicly available market value
Does your fund have assets where there’s no publicly available market value? Good examples would be property, collectables, holdings in private companies and private trusts, sometimes even public investments that aren’t listed on a stock exchange fall into this group.
Your auditor will ask you for an up-to-date market value of all your assets as at June 30, 2022. It is much easier to get this ready now for your auditor when you have your tax return prepared.
Valuation for property owned by SMSF
There was a time when trustees investing in property would just ask a real estate agent for a rough value and then use it for the next few years. These days, an auditor would expect to see either a formal valuation report or something less formal but supported by additional evidence.
Commercial property – an informal valuation of a commercial property might need to be supported by information about the amount of income received from the property (does the yield look reasonable given the valuation?).
Residential property – an informal (kerbside) valuation by a real estate agent might be a good starting point for a residential property but it would need to be supplemented and supported by information about comparable sales in the area.
SMSF cash flow for an increase to pension payments?
If you’ve had an important birthday, your minimum drawdown rate might have increased.
For example, anyone turning 80 during 2021-22 will find that they have to take out 3.5 per cent of their pension balance at June 30, 2022 rather than the 3 per cent that applied last year.
Important to remember that these rates have been halved for one more year – they will return to normal levels of 7 per cent and 6 per cent respectively for 2023-24 and beyond.
There may also be an adjustment to your minimum pension requirements but we will not know until we prepare your previous year accounts. If you feel you may fall into this category, we recommend you have your tax return prepared as soon as possible.
Tax benefit to structuring extra payments
Often, SMSF members will actually take more than their minimum drawdown from their pension account. If you’re in that position, you might not be aware that there are tax benefits to structuring these extra payments rather than just bigger pension payments.
It is often better to withdraw a lump sum/s from either an accumulation account or your pension account(s). There is documentation you can put in place at the start of each year so that this happens automatically. That documentation can be prepared now.
If you wish to take advantage of a lump sum withdrawal, we encourage you contact us as timing is very important. We make all of our assessments on a case-by-case basis as we take the time to consider all your specific circumstances.
Also, important to note that if a lump sum payment is withdrawn from a pension account, a form may need to be lodged with the ATO at the end of that quarter.
Review of your investment strategy
A requirement of the SIS regulations is that the trustee must regularly review the fund’s investment strategy, so July is a great time to review it. It is even more important if there has been a change in member circumstances (admitting a new member, starting a new pension, etc.) or significant changes in the investment environment.
One of the things your auditor will do is double check that your fund is investing the way you have documented in your investment strategy. If you’ve changed your approach but haven’t updated your documentation, get that sorted out before your fund goes to audit.
Similarly, if you were temporarily investing outside your strategy (e.g. holding more cash than planned awaiting appropriate investment opportunities) at 30 June 2022, you can document your reasons before your fund goes to audit.
Prepare your SMSF Trustee 'Notice of Intent to Claim'
July 1 is often a time when pensions are started – there’s no good reason other than it’s a convenient date because the trustee has to place a proper value on all the assets and member accounts.
There is some important paperwork to do before starting a pension.
If you’ve made personal contributions in 2021-22 that you intend to claim as a tax deduction, make sure you’ve formalised that by completing the ‘Notice of Intent to Claim’ and acknowledging it as the trustee of your SMSF.
If that’s not done until after the pension starts, unfortunately the deductions will be denied.
Similarly, if there were contributions in 2021-22 that you intend to ‘split’ with your spouse (effectively move them from your super account to theirs), do that before starting your pension.
Consider contributions arrangements (this is not only for SMSFs)
The amount of superannuation employers must contribute on your behalf has increased to 10.5% for the 2023 financial year.
If you have regular salary sacrifice or other voluntary concessional (before-tax) contributions arrangements in place it would be a good idea to review these to ensure that you do not end up exceeding your concessional contributions cap (generally $27,500).
It’s time to get your information to us
If you have access to the documents encompassing the activity of your fund for the entire year, do not hesitate to get your information to us. Nowadays, it is often the only documentation that cannot be accessed soon after the end of the financial year are tax statements from WRAP platforms, public trusts, and managed funds.
In most cases, for example, a fund that is only holding ordinary shares and cash will be due a refund. That money is better off in your fund’s bank account growing your retirement savings than sitting with the ATO until May next year.
If there is tax payable, we will be happy to delay lodgement until May 2023.
How can Walsh Accountants help?
Walsh Self Managed Superannuation (SMSF) are trusted advisors for all things self managed superannuation – giving you peace of mind that your SMSF is taken care of by a team of independent expert SMSF specialists.
If you require any assistance in the review or planning for your SMSF, contact our resident SMSF specialist Grant Sloggett for assistance.
Content in this article is general in nature and should not be taken as financial advice. If you are interested in planning and strategy for your SMSF, please contact our office to speak with one of our Accountants before proceeding any further.