Important Super Updates |
In this issue
How can I maximize the concessional contributions into my SMSF?
When must the super contribution be made in order to claim a deduction?
Property owned in your SMSF
Unit trust distributions and your SMSF
Life insurance in super
Super contribution limits
How can I maximize the concessional contributions into my SMSF?
If you make a super contribution before 30 June 2010 you should be aware of who can claim a deduction for the concessional super contribution. A concessional contribution can be made by you or your employer. Your employer includes a company that you may own but because you are receiving a wage for services performed then you are considered an employee of the company. Being an employee in a company it is advisable that you salary sacrifice your super contribution. This means that the extra amount you want to put in super should be deducted from your wages rather than you contributing the money personally as you may not be able to claim a deduction under your personal name.
Under the new rules you can only claim a deduction under your personal name if the sum of assessable income, reportable fringe benefits total and reportable employer superannuation contributions attributable to the activities is less than 10% of your total assessable income, reportable fringe benefits total and reportable employer superannuation contributions in the income year that the contribution is made. A reportable super contribution is generally the super contribution that you salary sacrifice which is more than the 9% mandatory employer contribution requirements. Therefore, if you are an employee who derives wages then it may be difficult passing this “10%” test and its advisable that the company makes the super contribution on your behalf.
In the situation that you are self-employed then you are able to claim a deduction under your personal name for the super contribution. You may also be able to claim a deduction for a super contribution made under your name if you are operating your business through a trust. However, if you are receiving a wage from the trust that operates your business then you will need to salary sacrifice the super contribution through the trust.
Lastly, you should remember that you can only claim a super contribution under your personal name and you are between 65-75 years of age then you must pass the work test. This means that you must be gainfully employed for at least 40 hours in a 30 day period in the financial year in which the contribution is made.
When must the super contribution be made in order to claim a deduction?
In order to claim a deduction for the super contribution before 30 June 2010 under your name or by your business then the money should be credited into the super fund’s account by 30 June 2010. To reduce your taxable profit you must ensure that all super is paid by 30 June 2010 including mandated employer contributions where relevant, otherwise the deduction may only be claimed in the following year which may not be the best tax outcome for you or your business.
Property owned in your SMSF
In order to comply with the super rules it is important that if your SMSF owns a commercial property that you operate your business from that the market rent is paid into your SMSF by 30 June 2010 from your business. This must be done because all transactions must be at market rates between you and your SMSF.
Unit trust distributions and your SMSF
If your SMSF owns units in a unit trust the profit distributions that an SMSF is entitled to should be paid to it at the end of each year. The ATO allows the money to be received by the SMSF after the year end accounts are complete to determine what the profit entitlement is to your SMSF. Therefore, if we have specified the amount that needs to be distributed to your SMSF from the unit trust please ensure the income is distributed to it by 30 June 2010.
Life insurance in super
You should be aware that having your life insurance in super means that the premiums are tax deductible in your super fund. This is one way of ensuring that you can afford to have life insurance. The problem arises if the life insurance is paid to a non-dependent which is usually adult children. There will be tax of 31.5% on the payout. Please speak to us if you would like assistance in dealing with this issue as there may be planning opportunities in not structuring your life insurance effectively as we want to avoid potential disasters.
Super contribution limits
The concessional super contributions cap for 2010 (the contribution that can be deductible) is $25,000 if you are under 50 and $50,000 if you are over 50.
The non-concessional (non-deductible contributions) super contribution cap for 2010 is $150,000 or $450,000 in advance of 3 years. The $450,000 contribution can only be made if you are under 65. The non-concessional contributions rules came in from 1 July 2007. Therefore, if you contributed $450,000 in the 2008 tax year then you can contribute $450,000 in the 2010/2011 tax year, assuming you are under 65.
Disclaimer - The material contained in this newsletter does not constitute advice. DPL is not responsible for any action taken in reliance on any information contained in this newsletter. Anyone reading the newsletter should not act upon material contained in this newsletter without appropriate consultation.
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