SMSF practitioners and their clients will need to operate with greater diligence in light of some of the recent changes to super, particularly in regards to the bring-forward rules and changes to the non-concessional contribution caps, according to Perpetual head of strategic advice, Colin Lewis.
“Advisers and clients are going to have to be very aware of what they’re doing going forward so they don’t end up contributing too much,” he said.
Mr Lewis said they need to understand how the bring-forward arrangements are going to work, particularly with the transfer cap of $1.6 million.
“The complexities going forward are going to be the transitional cap just to start with just for the next couple of years,” he said.
“For example, if somebody triggers, say the bring-forward this year or perhaps triggered it last year, if they don’t utilise the full $540,000 by the 30th of June next year, they’ve got to be mindful that the bring-forward cap amount is being re-calculated, it’s going to be a transitional cap that will apply.”
“People will have to ensure that they don’t fall into the trap of thinking, ‘Well if I’ve got a bring-forward of $540,000 and don’t fully utilise it, then I’ve still got the ability to contribute the balance’ ... that is not going to be the case going forward.”
Once the transitional period has passed, Mr Lewis said each year people will be tested against the general transfer balance cap of $1.6 million which means that not only do they have to be mindful of what the unused portion of their non-concessional cap is, they need to measure that against what their balance is at 30 of June, the year before.
“If they are over the $1.6 million or over, then they won’t be able to use any unused portion of the non-concessional cap, that is something new that hasn’t applied to date, because we haven’t had this threshold determining eligibility to do a non-concessional contribution.”
SuperConcepts executive manager, SMSF technical and private wealth Graeme Colley said some of the changes around excess non-concessional contributions will make the system more efficient.
“In the current system, what sometimes happens is people have the letter from the commissioner about the excess non- concessional contributions, and don’t know what the letter is, put it in the bin or go to their accountant next time they saw them which was well after the 60-day period, and they got stung with the 47 per cent tax,” he said.
With the new assessment system Mr Colley said there will be a seven-day period for the fund to get into action, which is consistent with the concessional contributions excess assessments. After the 120 days, if the individual hasn’t made a decision about the tax and where it’ll be paid from, the commissioner will come after the fund and make a determination and get the payment of the tax there.
“[This] will save the individual from paying 47 per cent tax on the excess plus the penalty,” Mr Colley said.
He said it is important the legislation is passed this year rather than in February, as it will ensure SMSF administrators and SMSF trustees have sufficient time to prepare.