Wide-ranging superannuation reforms come into effect on 1 July 2017.
With the changes come a series of issues that Trustees need to be across, even if they don’t immediately affect you or your fund:
Self-funded retirees – avoiding adverse tax outcomes
If you are receiving a pension or annuity, a $1.6m “transfer balance cap” applies to amounts in your tax-free pension accounts. The cap is essentially a limit on how much money a member can transfer into or hold in a tax-free account. If you have $1.6m or more in a pension phase account, you will need to reduce the pension value level back below the cap before 30 June 2017. If the excess amount is not removed from the pension phase account the amount will be subject to a transfer balance tax.
If you opt to sell fund assets to manage the cap, transitional capital gains tax relief may be available to manage any adverse tax outcomes.
How do you value SMSF assets?
One of the emerging problems for many superannuation fund members is understanding whether they are close to or are likely to exceed the $1.6m cap at 30 June 2017. For those with assets such as real estate, collectables or art, a current valuation that meets the ATO’s guidelines will be essential. Real estate, in particular, has substantially risen in value in some areas creating uncertainty about the real value.
Fund assets need to be valued at market value. While these assets do not have to be valued every year by an independent valuer, it will be important to have documentation validating the value assigned to the asset. A qualified and independent valuer is recommended if the asset is a significant part of the value of the fund – if the asset is real property, this could be as simple as an online real estate agent.
Should you update your SMSF trust deed?
Over the years there have been continuous changes in superannuation legislation. While many of these changes do not require you to update your SMSF deed, where a deed has not been updated in at least the last 5 years, we suggest that the deed is updated to ensure it is compatible with current law.
If we have not already contacted you about your fund’s deed, we will be in contact shortly to discuss if an update is required.
As always, before buying, selling, transferring assets, or making any payments, make sure your trust deed allows you to complete the transactions in the way you intended.
Salary sacrificing concessional super contributions
If you have entered into a salary sacrifice agreement to make concessional super contributions, you will need to review these agreements to ensure your concessional contributions do not exceed the new $25,000 from 1 July 2017.