The new rules for super are in, and with them new reasons for knowing what your super balance is. One of the main changes in thinking is that we now have this concept of "Total Super Balance" or TSB. Your TSB comprises the balance of all your super accounts held, whether they are within an SMSF or an APRA fund (subject to some modifications for defined benefit accounts).
What this means is that you can no longer look at your SMSF in isolation if you hold other superannuation accounts.
In order to know the options that are available to you for contributions and pensions, your Total Super Balance as at the prior June 30 must be known.
Here are 5 reasons why it is important to have your fund's financials prepared quickly after the end of the financial year.
Transfer Balance Cap Reporting. There are new reporting obligations for funds paying pensions. For pensions that were in place as at 30th June 2017 these amounts should have already been reported, however if during the 2018 financial year a new pension has commenced, or a full or partial commutation has occurred, these events also have to be reported to the ATO. For funds that have any member with a TSB of more than $1 million the fund needs to report these events to the ATO by the 28th October, 2018. For funds without any member with a TSB over $1 million the fund can report these events by the due date for lodgement of the fund's tax return. In this case, it is important to know not just your own TSB but also that of the other members in your fund.
Non-concessional contributions. To be eligible to make non-concessional contributions, your TSB must be below $1.6 million as at the previous 30th June. There are also restrictions on your ability to use the bring forward rule where your TSB is between $1.4 million and $1.6 million.
Catch- up concessional contributions. From 1st July 2018, if your TSB as at the previous 30th June was below $500,000 and you do not fully utilise the concessional cap this year (currently $25,000), the unused amount can be carried forward for up to 5 years to increase your cap in future years.
Government co-contributions. To be eligible to receive the co-contribution a member's TSB as at the previous 30th June must be below $1.6 million to receive this.
Tax exemptions on pension income. There are changes to how the exempt income for a fund paying pensions is calculated. If a member receiving a pension has a TSB greater than $1.6 million as at the previous 30th June, the fund can no longer elect to segregate assets or be deemed to be segregated, for tax purposes. This will mean an actuary certificate is required in order to calculate the exempt income of the fund even if the fund is 100% paying pensions.
Minimum pension amounts. By having your fund accounts prepared early you will also know how much your minimum pension requirement will be well in advance of the end of the year. This all helps with cashflow and planning. (Yes, you spotted it - a bonus reason!)
As you can see from the list above, if it is likely that you will be affected by one of these scenarios it is vital to have your superfund accounts prepared sooner rather than later. It's more important than ever to know your total super balance.
Of course, the added benefit of being organised early is that you can then relax about your super knowing the compliance side is taken care of.
Please be advised that the information contained in this article is purely factual in nature and does not take into account your personal objectives, financial situation or needs. The information is objectively ascertainable, and therefore does not constitute financial product advice. If you require personal advice that takes into account your particular objectives, financial situation or needs you should consult us in our licensed capacity.