– both pension & accumulation accounts in the fund
– 100% pension phase; or
– 100% accumulation phase; or
– segregated assets
Not many sleeps now until the new contribution rules kick in as of 1 July 2017. So here’s a reminder to share with your team to ensure they’re all prepared to consult with confidence and accuracy to your clients.
Concessional Contribution Cap
The existing caps for the 2016/2017 FY for concessional contribution limits are (table 1):
From 1 July 2017, the concessional contributions cap will be reduced as follows (table 2):
Individuals over 65 years of age must be gainfully employed in order to make concessional contributions. That is, working for at least 40 hours over 30 consecutive days during the financial year.
Non-Concessional Contribution Cap and Bring Forward Provisions
From 1 July 2017, the annual Non-Concessional Contribution limit has been reduced from $180,000 to $100,000 per annum.
Individuals under the age of 65 are able to utilise the Bring Forward provisions, of which the following conditions will apply:
Total Super Balance at
30 June Prior
NCC Cap for the
Less than $1.4m
$1.4m to less than $1.5m
$1.5m to less than $1.6m
$1.6m or more
In addition, if the bring forward provision is triggered in subsequent years the client’s total super balance must still be under the cap balance at 30 June of any given year in order for the Non-Concessional Contributions to be accepted.
Note that the members balance must be under $1.6 million at 1 July of the given year the contribution is made. This means if the balance DURING the year moves over the $1.6 million threshold prior to the Non Concessional Contributions being made (due to market movements or SG contributions), those contributions will be acceptable if they meet the requirements as per table 3 above.
The current market perception of the new rules is that the limit of the bring forward provisions for the 2017 financial year is based on the following two years Non-Concessional Contribution limit of $380,000. However, the changes don’t take effect until 1 July 2017 effectively providing your clients with the ability to contribute $540,000 up until 1 July 2017.
Single Year Cap
Limit of BFP based on
It’s a smart idea to scan your SMSF data base for clients who are effected by any of the new rules looming for 1 July 2017, including the Pension Caps and planning for CGT Relief. Get some quality consulting completed to set your clients up the best possible way.
How often are you left with a client who makes a contribution after the date you tell them to? For example, if you told your client to make a contribution the week before 30 June, however, due to the client’s inability to remember this important date, they make the contribution after the advised date, only for the contribution to reach the funds bank account in the first week of July. If this was your client, in what year would you declare the contribution?
It is important that the different sources of contributions received by an SMSF are properly identified to enable correct treatment in the financial statements.
TR 2010/1 is a very important ruling, as it provides direction with respect to timing of contributions, including payments by way of cheques or promissory notes; payments made by person to a third party to satisfy a liability; and a contribution by way of debt forgiveness.
Paragraph 13 of the ruling details when certain payments will be deemed to have been received by the fund:
If the funds are transferred by ...
A contribution is made when ...
Making a cash payment to the SMSF
The cash is received by the SMSF
An electronic transfer of funds to the SMSF
The funds are credited to the SMSF's account.
Giving the SMSF a money order or bank cheque on which payment is made
The money order or bank cheque is received by the SMSF, unless the order or cheque is dishonoured.
Giving the SMSF a personal cheque (other than one that is post-dated) that is presented and honoured with cash or its electronic equivalent
The personal cheque is received by the SMSF, so long as the cheque is promptly presented and is honoured.
Giving the SMSF a personal cheque that is post-dated and that is presented and honoured with cash or its electronic equivalent
The cheque is able to be presented for the payment (that is, the date on the cheque), so long as the cheque is promptly presented and is honoured.
A related party (as maker) issuing a promissory note, payable on demand at face value, to the SMSF and the note is paid with cash or its electronic equivalent
The promissory note is received, so long as payment is demanded promptly and the note is honoured.
A related party (as maker) issuing a promissory note, payable on a future date at face value, to the SMSF and the note is paid with cash or its electronic equivalent
Payment is able to be demanded or required to be made, so long as the demand (if required) is promptly made and the note is honoured.
What should be noted is that when a contribution is being paid by way of a cheque, the contribution is “deemed” to be made when the contribution is received by the trustees of the fund, provided the intention is to present the cheque for payment in a timely manner. However, where a member pays a contribution by way of electronic transfer, the contribution is counted as being made when the contribution hits the SMSF’s bank account.
So, when a member of a SMSF writes a cheque on 28 June, and it is not deposited in the SMSFs bank account until 1 July, the contribution will be treated as having been made in June, providing the cheque is in the hands of the trustees before midnight on 30 June.
If you have a SMSF that is in this situation, we suggest you consider following these steps: