There are key compliance issues which require consideration by SMSF practitioners and trustees in the lead up to 30 June 2014 to avoid “severe” implications, according to one industry law firm.
In spite of the recent Budget announcement, exceeding the contribution caps can give rise to tax issues, DBA Lawyers director Bryce Figot said.
“Before any contributions are made, check them against the member’s relevant caps and any contributions previously made. This is especially important where the non-concessional contribution ‘bring forward rules’ are being utilised,” Mr Figot said.
Mr Figot also stated the financial year in which a member turns 65 is the last opportunity they will have to access the non-concessional contribution bring forward rules.
“In FY2015 the non-concessional contribution cap will increase from $150,000 to $180,000. This means that members will have the opportunity to contribute up to $540,000 from July onwards (instead of $450,000 as it currently stands),” Mr Figot said.
“Keep this in mind, before making any non-concessional contributions in FY2014 as triggering the bring forward rules after 30 June might provide the opportunity to get more into super, quicker.”
Contribution reserving strategies could potentially be “worthwhile” considering for SMSF trustees and advisers, Mr Figot indicated.
“Contribution reserving strategies can be used to assist in managing a member’s contribution caps,” he said.
“ATO ID 2012/16 and TD 2013/22 provide support for such strategies. Note, however, that successful implementation of contribution reserving typically relies on the necessary documentation (eg, the reserving strategy) being in place before a contribution is made.”
SMSFs with unpaid present entitlements (UPEs) owing from related unit trusts as at 30 June 2013 should seek to have these amounts paid prior to 1 July 2014, Mr Figot said.
Broadly speaking, the ATO may consider a UPE to constitute a loan by the SMSF to the unit trust if it is not paid within nine to 10 months of the end of the relevant financial year, he added.
SMSF practitioners should also ensure that the minimum pension payment has been paid in respect of each pension that a member is receiving, Mr Figot said.
He pointed out the implications of not paying the minimum can be “severe,” for example, the fund’s pension exemption for the entire financial year could be at risk.
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