2022 SMSF All You Need to Know

Being truly Financially Sorted is so much more than just submitting your annual income tax return. It’s also being prepared for 2022 and know what contributions you would need to submit for your SMSF.

Contributions

The 30th June 2022 falls on a Thursday this year, meaning that any contributions made directly to a SMSF via EFT transfer should occur on Wednesday 29th June 2022 at the latest to ensure the contributions clear into the SMSF bank account prior to 30th June 2022 (even earlier would be better just in case).

If payment of a contribution is to be made by a cheque, then the trustee must be in receipt of the cheque (dated on or before 30th June 2022) and ideally the cheque must be cleared and deposited into the SMSF bank account by the 30th June 2022.  For further details for trusts, we have complied an article for your needs. 

 

Contribution Caps

Contribution caps for the year ending 30 June 2022 are as follows:

Type of Contribution

FY2022

Notes

Concessional Contributions

$27,500 (in total)

This may include personal contributions where a tax deduction is claimed, SG contributions & salary sacrificed amounts)

Non-Concessional Contributions

$110,000

Personal after-tax contributions where no tax deduction is claimed.

 

Please note – with concessional contributions, it’s essential all SMSF members liaise with their employer or payroll office to determine the timing of contributions. Many employers might pay contributions prior to 30 June 2022 to obtain a tax deduction for their business, even though they might not typically pay SG employer contributions until after the end of the respective financial quarter.

When an individual is looking to claim a personal tax deduction for contributions made, they need to ensure:

  • They have the appropriate level of personal taxable income (super contributions cannot push an individual into a negative taxable income position)
  • A “notice of Intent to Claim or Vary a Deduction for Personal Super Contributions

This needs to be completed the earlier of:

  • The date of the lodgement of the individual’s personal income tax return; or
  • Before 30 June of the income year of which the contribution relates to (i.e. 30 June 2023 for the 2022 financial year)

Notice of intent to claim or vary a deduction for personal super contributions

 

Unused Carry Forward Concessional Contributions

We bring to your attention that members can now take advantage of carry forward unused concessional contributions. The ability to carry forward concessional contributions applies from 1 July 2018, with 2019-20 financial year being the first year an individual could access their unused carry forward concessional amount.

If an individual had unused concessional contributions, i.e. they did not contribute the full $27,500 in 2020-21, then they can carry forward these amounts for five years on a rolling basis if provided their total superannuation balance is below $500,000 on 30 June (prior to the year you intend to access the unused amount).

This can be quite a complex area and requires some checking to be done to ensure that contribution levels are not breached.

Andrea & Cassie are here to help – please just ask!

Financially Sorted Tip:

Total superannuation balance must be below $500,000 on 30 June of the prior year before you utilise any carried forward amount (e.g. as at 30 June 2021 for the 2022 year); and

Catch up concessional contributions are an excellent SMSF end of financial year strategy.

In-Specie Contributions

An in-specie contribution is where an asset is transferred into an SMSF from a member of the fund at market value rather than a cash contribution. In-specie contributions made to SMSFs are limited to assets that are allowed to be acquired from members such as:

  • Listed securities (shares, ETFs etc)
  • Business real property (i.e. commercial property)

With the significant decline in equity markets since January 2022, individuals may be holding shares where it may be appropriate to trigger / crystallise a capital gain or loss by transferring them into their SMSF.

Advice from a licensed financial advisers should always be sought prior to making these types of transactions.

In addition to in-specie contributions, SMSF members should be aware that the following will also be counted as contributions:

  • Paying expenses on behalf of the SMSF,
  • Paying a liability on behalf of the fund

Spouse Contributions

If an individual’s spouse earns a low or no income, they may be able to claim a tax offset if they contribute to their spouse’s super fund. The offset is calculated as 18% of contributions made of up to $3,000 where the spouse’s income is under $37,000.

 

Pensions

For a SMSF to claim a tax exemption on income and capital gains relating to assets that support a pension, it must meet the minimum pension requirements. Review pensions is a critical SMSF end of financial year action item for 2022.

Please note, there is a 50% Reduction in Minimum Pension for 2022

The Government has reduced the required SMSF minimum pension 2022 draw-down rates for all superannuation pensioners including SMSFs for the current financial year.

 

Property Valuations and Rental Appraisals

As we head into the new financial year and under current Superannuation Legislation, all investments held within a SMSF must be always shown at market value. It’s imperative that the property or properties owned inside of your SMSF, are recorded at their market value as at 30th June 2022.

Therefore, we shall shortly be requesting that the following occurs in preparation for the completion of your SMSF financial affairs for the year ended 30th June 2022:

  1. Regardless of whether you have or don’t have an agent managing your property on behalf of your SMSF, please request a market valuation as at 30th June 2022 from an independent real estate agent.

A valuation undertaken by a property valuation service provider, including online services or real estate agent, would be acceptable. We advise that on the 1st July 2021, ATO issued new valuation guidelines. This means that all valuations now require to include “based on objective reference data” to provide for basis of the valuation. For example, in the case of a real estate agent appraisal or online report, the valuation should list the comparable sales it relied on. What this means is, the property agent should include 2-3 examples of the recent relevant sales in their valuation letter.

Please note, this doesn’t need to be something that you pay for. It’s just a friendly request to them on their email or letterhead of a market valuation in their qualified opinion.

  1. If your property is leased to a related party, please also request a rental appraisal from an independent real estate agent of the market value of the rental as at 30th June 2022.

A related party could be your business that you or a related person operates from, for example – a factory or office.

Like always, we will also run a “behind the scenes” check of any market valuation to ensure its accuracy.

 

Record Keeping Requirements

You’ve probably been running your SMSF for a while and have amassed a lot of information about your fund. You know that your SMSF must keep some records, but which ones do you keep, how long for and where do you store them?

Let’s see what you need to do.

The Superannuation Industry (Supervision) Act 1994 (SIS Act) requires you to keep accounting records that:

  • correctly record and explain the fund’s transactions and financial position,
  • enable annual financial statements such as a Statement of Financial Position and Operating Statement to be prepared, and
  • allow the preparation and lodgement of your SMSF’s annual income tax and compliance return to be lodged with the ATO.

In simple terms, as trustee of your SMSF, you need to keep records that allow preparation of financial statements and annual tax and compliance returns. This information needs to be kept for at least five years after the end of the financial year, even after your SMSF has been wound up.

There are some records your SMSF must keep for at least ten years which relate mainly to the underlying operation of the fund. They are:

  • Trustee resolutions and minutes of meeting.
  • Change of trustee notices.
  • Trustee declarations that acknowledge the obligations and responsibilities as trustee.
  • Copies of a Trustee’s consent to be appointed as trustee of the SMSF.
  • All reports provided to members such as an annual member statement.
  • Decisions about the storage of ‘collectables and personal use assets (if applicable).

What happens not keeping the fund’s records?

If your SMSF doesn’t keep the records for at least the time required, you may be penalised.

For further information, we have compiled an investment strategy for your SMSF and how to maximise your contributions 

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