NCC bring-forward date confirmed

The Treasury has confirmed how the new bring-forward rules will apply for people aged 65 and 66 on or after 1 July 2020.

Last week, the Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 passed through Parliament and achieved royal assent. The bring-forward measures will amend the Income Tax Assessment Act 1997 to enable individuals aged 65 and 66 to make up to three years of non-concessional superannuation contributions under the bring-forward rule.

In a recent update, the SMSF Association said it received confirmation from the Treasury that the More Flexible Super Bill extends the bring-forward arrangements to people aged 65 and 66 for non-concessional contributions (NCC) made on or after 1 July 2020.

“In this regard, an individual aged 66 who makes a $300,000 NCC today under the bring-forward rule would not breach the NCC cap (subject to their TSB and assuming no other NCC contributions have been made in 2020–21),” the SMSF Association said in a LinkedIn update.


“We were pleased to provide this update to SMSF Association members yesterday afternoon, a prompt response based upon member queries about when this measure will commence.”

A recent technical update by Colonial First State also noted that for most clients, there is no urgency to make additional non-concessional contributions before the end of 2020–21, as they can make additional non-concessional contributions in future years. 

However, there are some situations, such as when the client turns 67 in 2020–21, when it may be advantageous to make additional contributions prior to the end of 2020–21, as it is the last year they can trigger the bring-forward rule.

Previously, members under age 65 at any time in a financial year may effectively bring forward up to two years’ worth of non-concessional cap for that income year, allowing them to contribute a greater amount up to $300,000 without exceeding their non-concessional cap. 

Under the new rules, members can trigger a bring-forward period from 2020–21 onwards if they are under age 67 (previously age 65) on 1 July at the start of the relevant financial year.

These changes also complement previous actions by the government to improve flexibility of the retirement system that allowed people aged 65 and 66 to make contributions without meeting the work test.

Source: SMSF Adviser

Bring-forward measures and 6-member SMSF bill passes Parliament

The measures to extend the bring-forward age up to 67 and the bill to increase the number of members allowed in an SMSF have passed both houses of Parliament.

On Thursday, both the Treasury Laws Amendment (Self-Managed Superannuation Funds) Bill 2020 and the Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 passed through the House of Representatives and the Senate.   

The bring-forward measures will amend the Income Tax Assessment Act 1997 to enable individuals aged 65 and 66 to make up to three years of non-concessional superannuation contributions under the bring-forward rule.

Previously, members under age 65 at any time in a financial year may effectively bring forward up to two years’ worth of non-concessional cap for that income year, allowing them to contribute a greater amount up to $300,000 without exceeding their non-concessional cap.

This is known as the “bring-forward rule”. The number of years that may be brought forward into the current financial year is determined by the member’s total superannuation balance at 30 June 2019.

This bill would amend sub-section 292-85(3)(c) of the Income Tax Assessment Act 1997 to allow the bring-forward rule to be used by members under age 67 at any time in a financial year. This amendment would be effective from 1 July 2020 onwards.

This initiative is implemented through three changes where the age at which the work test starts to apply for voluntary concessional and non-concessional superannuation contributions is increased from 65 to 67, the cut-off age for spouse contributions is increased from 70 to 75 and enabling individuals aged 65 and 66 to make up to three years of non-concessional superannuation contributions under the bring-forward rule.

Upon passing the bill, the government had also agreed to two One Nation amendments.

Amendments made by Pauline Hanson’s One Nation party included the removal of excess concessional contributions charge from 1 July 2021 and no deductions for recontributions of amounts withdrawn under COVID-19 early release, where recontribution is made from 1 July 2021 to 30 June 2030.

The removal of excess concessional contributions charge removes the application of an excess concessional contribution charge that applies to any additional tax liabilities that arise due to a member exceeding their concessional contributions in a year, according to Colonial FirstTech.

Meanwhile the re-contribution of COVID 19 early release amounts, would allow a member that released amounts from superannuation under the COVID 19 early release rules to recontribute those amounts without counting towards the non-concessional cap. The amendment also confirmed they cannot be claimed as a tax deduction.

CPA Australia external affairs manager Jane Rennie said allowing members to re-contribute COVID-released super savings will help restore their long-term financial security and mean they are less dependent on government support in retirement.

Another proposed amendment would also increase the cap at which a 15 per cent concessional tax rate applies to superannuation contributions by $5,000 to $32,500 for people aged 67. The cap then increases by $5,000 a year each year until a person turns 71, however this proposal was rejected by the government.

Meanwhile, the six-member bill amends the SIS ActCorporations ActITAA 1997 and SUMLMA to increase the maximum number of allowable members in SMSFs from four to six. This bill also amends provisions that relate to SMSFs and small APRA funds.

These amendments ensure continued alignment with the increased maximum number of members for SMSFs.

The Government said increasing the allowable size of these funds increases choice and flexibility for members. SMSFs are often used by families as a vehicle for controlling their own superannuation savings and investment strategies.

For families with more than four members, currently the only real options are to create two SMSFs (which would incur extra costs) or place their superannuation in a large fund. This change will help large families to include all their family members in their SMSF.

The SMSF Association in its Twitter update that whilst it doesn’t expect this change will lead to a significant increase in the number of SMSFs being established, it will provide greater investment flexibility, choice and lower fees for those in a position to utilise it.

The expansion of members creates different strategic considerations that can be both positive and negative for SMSFs, and preparation will be needed to see if the changes will be a good fit for the SMSF, according to technical specialists.

The amendments apply from the start of the first quarter that commences after the act receives royal assent.

Source: SMSF Adviser

End-of-financial-year essentials for SMSF trustees

As the end of the financial year approaches, it is a good time for trustees to do an annual check-up on their Self-Managed Super Fund.

Here are five key issues to be aware of in the 2020-21 tax year.


Non-concessional (after-tax) contributions are limited to $100,000 (or a maximum of $300,000 if you satisfy the non-concessional contributions bring-forward rule) and concessional (before-tax) contributions are limited to $25,000. These limits will be indexed on July 1 and increase to $110,000 for non-concessional contributions ($330,000 under bring-forward rule) and $27,500 for concessional contributions.

The non-concessional contributions bring-forward thresholds do not increase if you have already triggered a bring-forward period that has not ended by June 30.

To make sure you do not accidentally trigger the bring-forward arrangement, you need to consider all your non-concessional contributions made to all your superannuation funds. Unreleased excess concessional contributions also count towards the non-concessional contributions cap.

Before June 30, it is important to review contribution strategies to ensure you have contributed what you intended to, and ensure you are below the contribution caps.

In the 2020-21 financial year you may also be eligible, subject to your Total Super Balance (TSB), to make larger concessional contributions – if you have any unused concessional contribution cap space from the 2018-19 or later financial years.

Where you have made personal contributions and intend to claim a tax deduction in 2020-21, it is important that you check all employer contributions and salary sacrificed amounts to super to make sure you do not breach the annual concessional contributions cap.

Investment strategy

It is important to understand that an SMSF’s investment objectives and strategy are not set in stone.

Trustees should regularly review the investments of the fund, investment risk, likely returns, liquidity, insurance and cash flow requirements as well as the diversification of investments.

Before any investment decision is made, you should examine the impact it would likely have on the overall portfolio, to ensure you are investing in line with your investment strategy.

Minimum pension payments

To help manage the economic impact of the coronavirus pandemic, for the 2019-20, 2020-21 and 2021-22 tax years, the federal government has reduced the minimum drawdown requirements by half for account-based pensions and market-linked pensions. There is still time to consider and, if required, amend your pension payments for 2020-21.

Where you have continued to receive regular pension payments, it is likely you may have received more than the required minimum amount. Unless you meet contribution eligibility rules, these funds cannot be returned.

Where you have restructured your pension withdrawal amounts, it is important to ensure that you do not underpay the minimum pension payment required. Where this requirement is not met, a SMSF may be subject to 15 per cent tax on pension investments, instead of them being tax free.

Valuing assets

SMSF trustees are required to value the fund’s assets at market value on June 30 each year when preparing the fund’s financial accounts.

Ensuring that member benefits are shown at market value is important when calculating each member’s TSB. This number is used to determine what, if any, non-concessional contributions can be made without exceeding your non-concessional contributions cap, and when determining your eligibility to make catch-up concessional contributions and receive government co-contributions.

If you are starting a pension, it is important to value your pension balance correctly to ensure you do not begin a pension with a balance exceeding the Transfer Balance Cap. For the 2020-21 income year, this cap is $1.6 million and will increase to $1.7 million on July 1, in line with indexation.

Lodgement obligations

All SMSF trustees are expected to work with their tax agent or accountant to ensure that they meet all their lodgement requirements on time.

While the current economic conditions due to COVID-19 may make keeping up to date with your trustee obligations a challenge, access to the ATO’s early engagement and voluntary disclosure service is available to assist you to get your affairs in order.

Missing your annual return lodgement due date could result in the status of your SMSF changing on the ATO’s Super Fund Lookup, which could restrict your SMSF from receiving super guarantee payments, as well as some rollovers.

Written by John Maroney, CEO, SMSF Association

Pension drawdown rate to remain halved for next year

The minimum pension drawdown rate will remain halved for another 12 months after the federal government announced an extension of the COVID-19 relief measure that was due to finish at the end of the month.

A joint announcement on 29 May from Prime Minister Scott Morrison and Superannuation, Financial Services and the Digital Economy Minister Jane Hume stated the extension would apply to 30 June 2022.

“As part of the response to the coronavirus pandemic, the government responded immediately and reduced the superannuation minimum drawdown rates by 50 per cent for the 2019/20 and 2020/21 income years, ending on 30 June 2021,” the announcement said.

“Today’s announcement extends that reduction to the 2021/22 income year and continues to make life easier for our retirees by giving them more flexibility and choice in their retirement.

“For many retirees, the significant losses in financial markets as a result of the COVID-19 crisis are still having a negative effect on the account balance of their superannuation pension.”

The 50 per cent reduction in the minimum pension drawdown rate, from 5 per cent to 2.5 per cent, was first announced by the government in March 2020 as part of a wider set of COVID-19 relief measures that also included early access to superannuation and a reduction in deeming rates.

The early access to superannuation measure ended on 31 December 2020 and no further announcements have been made regarding deeming rates.

Earlier this year, the SMSF Association said it expected the rate to return to pre-COVID-19 levels.

At that time, association deputy chief executive and policy and education director Peter Burgess noted the rate may still return to 5 per cent following a scheduled review by the Australian government actuary and a finding in the Retirement Income Review that retirees were not drawing down on their retirement savings.

Source: smsmagazine.com.au