Executive Manager, SMSF Technical & Private Wealth
|
Total Super Balance on 30 June 2021 |
Set number of years for bring forward rule to apply |
Amount of non-concessional contributions that can be made during the set period |
|
Under $1.48 million |
3 years |
$330,000 |
|
Between $1.48 million and $1.59 million |
2 years |
$220,000 |
|
Between $1.59 million and $1.7 million |
1 year |
$110,000 |
|
More than $1.7 million |
nil |
$nil |
As an example, if a person who is under 67 years old and has a total super balance of $1.3 million on 30 June 2021 if they make a non-concessional contribution of greater than $110,000 during the 2021/22 financial year they will trigger the bring forward rule and can then contribute up to $330,000 at any time during the 2021/22, 2022/23 or 2023/24 financial years.
A word of warning for anyone who has triggered the bring forward rules in the 2019/20 or 2020/21 financial years. Once the bring forward rule has been triggered in a year prior to indexation there is no access to the increase until the set period has ceased. For example, if a person triggered the bring forward rule in the 2020/21 financial year and they were entitled to access the 3 year rule they would only be entitled to three times the standard non-concessional contribution for the year in which the trigger occurred, which is $300,000 ($100,000 x 3).
Don’t forget that the minimum pensions are based on the opening balance of the pension on 1 July in the financial year or pro-rated on a daily basis if it commences during the year. In many cases the exact balance may not be known on 1 July but it is good to make a reasonable estimate to start drawing a regular amount which can be adjusted later in the year when more accurate figures become available.
The 50% reduction in the minimum pension percentage continues for the 2021/22 financial year.
Here are the reduced percentages:
|
Age |
Minimum Pension percentage for account based and transition to retirement income streams for the 2019/20, 2020/21 and 2021/22 financial years |
|
Under 65 |
2.0% |
|
65-74 |
2.5% |
|
75-79 |
3.0% |
|
80-84 |
3.5% |
|
85-89 |
4.5% |
|
90-94 |
5.5% |
|
95 or older |
7.0% |
Apart from making contributions and adjusting pensions in superannuation it may be a good time to review the fund’s investment strategy, any death benefit nominations and have a health check of the fund’s trust deed.
A review of the fund’s investment strategy should consider whether the fund’s investments are in line with the nominated asset allocation ranges or consider any new investment classes. This could include crypto currency or artworks and collectables.
When it comes to binding death benefit nominations, where there has been any change to a person’s circumstances an amended nomination could be considered. This could occur where a person’s dependants have changed or a loved one who is nominated has passed away. Also, a person may wish to change their nomination from a 3 year lapsing nomination to a non-lapsing nomination or to change the types of benefits payable to their dependants from lump sums to pensions or a combination.
Review of a trust deed always is a sticky issue but is essential if it has been in place for many years and has become worn out. Making sure it is up to date is important so that current types of contributions can be accepted and current types of benefits can be paid by the fund.
Estate planning is not a set and forget strategy. Any estate plan should be regularly reviewed so that it meets a person’s wishes and any change in the family’s situation. Even where an individual is not impacted by indexation of the caps from 1 July 2021 a couple with a combined amount in super of more than $1.7 million could have an estate plan which may require review. This may be due to the restricted amount that can be retained in super on the death of a partner.
Before we know it, this financial year will be a fading memory and the next year will be off and running. Why not make a new year’s financial resolution to get things in order as soon as possible so that contributions, pensions and the fund administration are in the best shape.
