While the worst of the COVID-19 pandemic is (hopefully) behind us, trustees now must focus on how to meet their regulatory obligations for 2020 – 2021.
Meeting new pension requirements
Due to COVID-19, the Government has reduced the minimum drawdown requirements by half for pensions in 2020-21. While the minimum has been reduced, failing to meet the minimum drawdown will still mean your SMSF will be subject to 15% tax on pension investments instead of being tax free.
If you receive regular pension payments, such as weekly or monthly payments from you SMSF, you have more than likely met the required minimum payment for this year. If you are unsure, it is best to contact us now to ensure you have enough time to withdraw any shortfall.
As with previous years, non-concessional (after-tax) contributions are limited to $100,000 and concessional (before-tax) contributions are limited to $25,000. There are a few extra considerations however.
If you have less than $500,000 in superannuation and have not contributed your maximum concessional contributions in previous years you are able to contribute the unused amount in this year. For example if you only had $10,000 of concessional contributions in the 2020 financial year, you are able to contribute $40,000 before the 30 June 2021 without exceeding your cap.
If you are under 65 and have less than $1.4 million in superannuation, you are able to utilise the “bring forward rule” and contribute three years of non-concessional contributions in one year bringing the total you can contribute to $300,000.
For the first time since 2017 the contribution caps are changing from 1 July 2021. Concessional contribution cap will rise to $27,500 and the non-concessional cap will increase to $110,000 meaning it may be better to delay large contributions to the new financial year.
Investment strategy and property assessment
It is important to review your SMSF’s investment objectives and strategy and make any adjustments where required. This is particularly important as investment markets stabilise in a post-COVID world.
If you are invested in property, either directly or with a limited recourse borrowing arrangement (LRBA), there are new considerations. Many properties did not receive full rent payments under their lease agreements because of COVID-19 concessions.
If you did have an agreement with a tenant you will need to ensure you have all the documentation for the auditor to show the concessions given.
Annual Fund documentation
As usual, you will still need to provide us with the SMSF’s bank statements, annual investment statements and annual rental statements so we may complete your financial statements and tax return as well as any other audit documentation that may be required for the year.
As always, if there is anything that you are unsure about, please contact us so we can review your situation in more detail.