10 tips for preparing your SMSF for tax time

With another financial year coming to an end, it’s time for you as a self-managed super fund (SMSF) trustee to review your funds and finalise your annual tasks.

These tips will help you prepare you and your SMSF for tax time:

1. Maximise your concessional contributions

For most people, concessional contributions may be an effective way of building your superannuation. You just need to make sure you don’t go over the concessional contributions cap for the financial year.

Concessional contributions include:

• Your employer’s super contribution;
• Any amount your employer contributes to your super through salary sacrifice; and
• Any personal superannuation contribution that you’re eligible for and claim as a personal income tax deduction.

2. Claim tax deductions for your personal superannuation contributions

If you’re employed, you can generally make personal tax-deductible concessional contributions to your super, even if your employer doesn’t offer salary sacrifice arrangements.

If you’re self-employed and receive an income, you can also make personal tax-deductible contributions regardless of the salary or wages you earn.

So if you’re under 75, you can claim tax deductions for personal contributions to your SMSF.

If you want to claim a tax deduction for personal super contributions, you’ll need to submit a valid ‘Notice of intent to claim or vary a deduction for personal super contributions’ form to your fund and receive an acknowledgement of a valid notice in writing from your SMSF.

3. Keep your non-concessional contributions below the cap

You can make non-concessional contributions to your super from your after-tax income. These contributions won’t be taxed in your super fund.

You’ll just need to make sure your non-concessional contributions are below the applicable cap for the income year. If you’re eligible, you can bring forward up to 3 future years’ worth of contributions depending on your total superannuation balance (TSB).

You’ll also need to make sure your non-concessional contributions don’t go over the set cap for your TSB. 

4. Make sure you meet the work test if you’re over 67

If you’re 67 or over, you’ll need to make sure you meet the work test before you make a personal contribution to your SMSF, but only if you are intending to claim a tax deduction on the contribution.

To meet the work test, you need to have worked for at least 40 hours within 30 consecutive days in the financial year you make the personal contribution.

Once you reach 75, keep in mind you generally won’t be able to make a personal super contribution, regardless of your work status.

If you’re a recent retiree aged 67 or over, you can use a work test exemption to keep making personal super contributions you intend to claim as a tax deduction for the financial year if you met the work test in the financial year before the contribution year, your total superannuation balance just prior to the year of contribution is less than $300,000, and you did not use the work test in a previous financial year.

You can check the age restrictions on SMSF contributions at the ATO website.

5. Make a downsizer contribution

You can contribute up to $300,000 of the sale proceeds from downsizing your home to your superannuation.

To be eligible, there are conditions to be satisfied, including the following:

• From 1 January 2023, you need to be at least 55 years old at the time of your contribution
• You need to have owned your home for at least 10 years
• Your home is in Australia and is not a caravan, houseboat or a mobile home
• The downsizer contribution is made within 90 days of receiving the proceeds of sale (or date of settlement)

Please refer to the ATO website for more information on downsizer contribution.

6. Don’t exceed the transfer balance cap

From 1 July 2023, the transfer balance cap on the super amount you can transfer over to the tax-free retirement phase is $1.9m. 

Super balances above this cap need to either be held in an “accumulation phase”, where earnings are taxed at up to 15%, or removed from your super, where assessable earnings are taxed at your marginal tax rate.

7. Review your current pension arrangements

If you start an account-based pension, you need to take out at least the minimum pension amount during the financial year. If you don’t, the earnings you make on all the assets supporting your pension may be taxed at up to 15%, rather than being completely exempt. Additionally, the account-based pension will be taken to have ceased at the start of the income year for income tax purposes, and any income received during the year will be subject to assessability at your marginal tax rates.

The minimum pension amount is a percentage of your pension account balance as at 1 July each financial year, and is fixed for the year. If you start a pension during the year, it’s a percentage of the account balance as of the start date, and pro rata based on the number of days left in the financial year. If your pension account started on or after 1 June, the minimum pension amount is set at 0.

If you’re paying a transition to retirement pension, you also need to make sure you pay the minimum pension amount (these are the same as for account-based pensions).

Unless you’ve met a full condition of release, or have enough unrestricted non-preserved benefits in your pension, you need to make sure your pension payment from your transition to retirement pension for this financial year doesn’t exceed 10% of your balance as at 1 July for each subsequent year (or the start date if commenced this financial year).

It’s also important to make sure you meet any extra conditions listed in your trust deed, or pension terms that apply to your pension.

8. Update the market valuation of your assets

For assets that have a quoted market price, such as listed stocks and managed funds, it’s a simple process to value your assets. But if your SMSF has assets that are unlisted, such as real estate and collectables, it’s a good idea to organise the relevant assessments early.

While you may not need to organise external valuations every year, superannuation law requires you as the SMSF trustee to determine the market value for each year’s set of financial statements, and to be able to justify your valuation.

9. Claim the spouse contribution tax offset if you’re eligible

You may be able to claim a tax offset if you paid a super contribution for your spouse and they earned less than $40,000 during the financial year.

The maximum spouse tax offset you can claim is $540.

You can find out more about the spouse contribution tax offset at the ATO website.

10. Review your current investment strategy

It’s important to review your investment strategy each financial year. SMSF trustees are required by law to review their investment strategy regularly. Doing so every 6 and 12 months is a good idea.

Reviewing your fund performance to plan and revisit your financial goals will help you determine if your goals are still relevant and achievable.

Talking to your adviser can help you when you’re reviewing your investment strategy. Superannuation can be complex, and the investment landscape is in a constant state of change.

Reviewing your SMSF’s strategies with a trusted and accredited adviser can provide you with insights and opportunities, particularly if you’re transitioning from accumulation to retirement phases and planning your estate.

It’s important to speak to an SMSF specialist adviser for tax advice on your SMSF. Our SMSF Specialist Team can help you find an adviser near you. You can call us on 1800 138 363.