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5 tips for a top SMSF in 2017


Here are five top tips for ensuring your SMSF is in the best shape it can possibly be in 2017.


 

A sweeping raft of changes will be introduced in 2017 that self-managed super fund (SMSF) members must take into account to ensure they are making the most of their fund.

The onus is on SMSF trustees to do as much as possible now to take advantage of the existing superannuation environment before the rules change. Here are five top tips for ensuring your SMSF is in the best shape it can possibly be this year.

1. Stay inside the new super cap

Damian Liddell, a financial adviser with Browell’s Financial Solutions, agrees on the legislative front, for SMSFs 2017 is going to be all about preparing for the new superannuation rules that were passed by parliament in 2016.

“If a member has a large super balance, it will be important to make sure that from 1 July onwards, they have no more than $1.6 million in the pension phase in the fund,” he explains.

The transfer balance cap rules, as they are called, that come into force at that time mean $1.6 million is the most someone can contribute to the superannuation environment and receive favourable tax treatment.

Greg Einfeld is a director of specialist SMSF advice business Lime Super. He says, “if the balance exceeds the $1.6 million amount you will need to commute part or all of your pension.”

2. Take advantage of existing contribution caps

New concessional caps are another change that starts from the 2017/2018 financial year. People 49 and over can now contribute $35,000 a year to their super fund tax-free, with this number being $30,000 for people younger than this. But a flat $25,000 a year will apply from 1 July for everyone.

Says Liddell: “For couples, the idea is for both partners to take advantage of the contribution caps to make the most of existing rules.”

He also says it’s important not to leave contributions to the last minute and make contributions regularly. “All of this means thinking strategically and looking forward with a big picture view of the fund.”

3. Review your transition to retirement pension

From 1 July this year transition to retirement pensions won’t be as tax effective as they are today. Changes are being introduced that reduce the tax exemption from earnings within a pension fund in a transition to retirement strategy.

Previously, many super fund investors who had reached the preservation age of 55 or older and were still working would take advantage of special provisions that allowed them to contribute up to $35,000 into their super fund and then also receive a small pension and pay either no tax on this, or a concessional rate of tax.

Previously, many super fund investors who had reached the preservation age of 55 or older and were still working would take advantage of special provisions that allowed them to contribute up to $35,000 into their super fund and then also receive a small pension and pay either no tax on this, or a concessional rate of tax.

Nevertheless, transition to retirement strategies will become less tax-effective from 1 July this year. In this situation, it might make sense to commute the pension back to the accumulation phase.

4. Review the capital gains tax (CGT) cost base of your assets

Einfeld explains if you have unrealised capital gains in your SMSF, and your pensions will be affected by the new super rules, there is a one-off opportunity to re-set your CGT cost base. This concession has been introduced as part of the transition to the new super environment that starts next year.

“This may allow you to pay some CGT now, and significantly less CGT when you sell assets in the future,” he says.

5. Look into your salary sacrifice arrangements

There will be an alternative to salary sacrificing from 1 July 2017 that will allow you to make what are known as ‘personal concessional contributions’ instead.

Under these provisions individuals will be able to contribute up to $25,000 a year, less any employer contributions the fund receives, from their own resources.

Says Einfeld: “Personal concessional contributions are more flexible than salary sacrifice arrangements.”

The main message is to take the time to understand the new rules, set up the fund so it is compliant from 1 July this year and make the most of existing rules before they are tightened.

 

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