New financial year opportunities for SMSFs
Minimum pension drawdown
During the 2011–12 financial year, the factors used for calculating minimum pension amounts were reduced by 25% for those with account-based, allocated and market-linked pensions.
The federal government originally planned to revert back to the normal pension factors in the 2012–13 financial year. However, because global equity markets continued their volatility, retirees have not had opportunity to recover their capital losses.
To offer relief, the Australian Taxation Office (ATO) has announced that the pension factor reduction will continue to apply for the 2012–13 financial year.
The table shows the ATO’s usual pension factors and the reduced pension factors for comparison.
Age |
Normal % Factor |
Reduced % Factor |
55-64 |
4.00 |
3.00 |
65-74 |
5.00 |
3.75 |
75-79 |
6.00 |
4.50 |
80-84 |
7.00 |
5.25 |
85-89 |
9.00 |
6.75 |
90-94 |
11.00 |
8.25 |
95+ |
14.00 |
10.50 |
Super co-contribution indexation freeze
Co-contribution is the “matched amount” that the government offers qualifying individuals who make personal contributions to their super fund.
Under current thresholds, to be eligible for the maximum government co-contribution of up to $1,000, you must have an income less than $31,920. The amount the government co-contributes reduces incrementally for those with an income between $31,920 and $61,920.
The ATO has announced that these thresholds will remain the same until the end of the 2012–13 financial year.
Concessional contributions cap
Concessional contributions, which include superannuation guarantee, salary sacrifice, and contributions made by you and claimed in your income tax return as a personal contribution, are undergoing a review by the ATO.
In the recent 2012 Budget, the government announced that all individuals contributing to superannuation will be able to contribute up to the concessional contributions cap of $25,000.
This cap is indexed in line with average weekly ordinary time earnings (AWOTE) in increments of $5,000 but the indexation will be delayed until the year 2014 – 15 when it is anticipated that the concessional contributions cap will be raised to $30,000.
SMSF members who are 50 or older on the last day of the financial year and have super balances less than $500,000 had expected to qualify for a higher concessional contributions cap of $50,000. This increase will also be delayed until the year 2014 – 15 when the concessional contributions cap is likely to increase to $55,000.
In summary, until the year 2014 – 15, the concessional contributions cap of $25,000 will apply to all individuals.
Excess contributions tax
While there has been no real change to the penalties that are applied to contributions in excess of contribution caps, the ATO is allowing individuals a reprieve for excessive amounts up to $10,000. Individuals found to have breached their contribution cap will be allowed to take the excess amount out of their super fund. This amount will then be taxed at the individual’s marginal tax rate.
To be eligible, the breach must have occurred in the 2011–12 financial year or later – and only once! If there is a repeat of the breach in later years, the normal penalties will apply.
SMSF auditors to be registered
From 1 July 2012, all SMSF auditors must be registered with the Australian Securities and Investments Commission (ASIC). Although the ruling is not yet legislated, the government has flagged its intention to compel SMSF auditors to be compliant under APES 110 of the Code of Ethics for Professional Accountants.
This recommendation, part of the government-commissioned Cooper Review of Australian superannuation, is expected to be readily accepted by the Parliament because it aims to protect the interests of SMSF members.
If you would like to discuss any of the key points in this article, please call us on 02 9318 6400 or email fred.tortora@surrypartners.com.au.
Sources:
www.ato.gov.au Reductions in the minimum payment amounts for account based pensions in 2012/13 (Last modified 19 Dec 2011)
www.superguide.com.au Accessing super (29 Nov 2011)
www.thedunnthing.com Impact of the federal budget for SMSFs (5 May 2011)
www.asic.gov.au Audit compliance update (Last modified 23 Feb 2012)