Non-concessional contributions cap & the “bring forward” rule
Legislation to allow those turning 66 and 67 to trigger the non-concessional “bring forward” arrangements is still before the Senate [Treasury Laws Amendment (More Flexible Superannuation) Bill 2020]. With Parliament not returning until early February 2021, Meg Heffron summarises the options for those turning 67 in early 2021 here.Join our newsletter
Increasing the maximum number of members of an SMSF
Legislation to increase the maximum number of members of an SMSF from four to six is also still before the Senate [Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020]. The earliest possible start date for this measure is now 1 April 2021.
Due date for completion of SMSF financials
In a welcome move, Treasury has withdrawn its proposal to require SMSF trustees to complete their financial statements at least 45 days before the due date for lodgement of the SMSF Annual Return.
2020/21 Federal Budget proposals
Exposure drafts of legislation to give effect to the Government’s 2020/21 Federal Budget proposals have now been released (eg SG contributions to “stapled funds”, best financial interests duty, annual performance test for some non-SMSFs etc). Submissions close 24 December 2020. Given many of the measures have a 1 July 2021 start date, we expect Bills will be introduced to Parliament soon.
Non-arm’s length expenditure
The ATO is still to finalise their view on the situations in which SMSFs will be considered to have non-arm’s length income (NALI) because the expenses of the fund are lower than they would have been in an arm’s length situation [LCR 2019/D3]. We expect the ATO will be seeking to release their final view before the transitional rules of PCG 2020/5 (covering expenses of a general nature) expire on 30 June 2021.
In its Mid-Year Economic and Fiscal Outlook (MYEFO) the Government also dangled a tantalising snippet for those with legacy pensions (such as lifetime, life expectancy or market linked pensions).
The actual wording was:
“The Government is amending the law to ensure that retirees who have commuted and restarted certain market-linked pension, life expectancy pension and similar products are treated appropriately under the transfer balance cap.
The measure will enable retirees with these products who have been unable to commute amounts in excess of their transfer balance cap to undertake the necessary partial commutation. The measure also ensures appropriate tax outcomes for these retirees given their prior inability to comply with the transfer balance cap rules. “
Unless the measure is far wider than this wording suggests, we expect it is unlikely to bring much joy to many of the members still running these pensions. We have long argued that the Government should allow legacy pensions to be converted to simple account-based pensions. This would provide a simple solution to the many problems that these pensions present given that the law has changed profoundly in the 13+ years since these pensions were actively used in SMSFs. Instead we suspect the Government plans yet more tinkering that will provide relief to only some members. That would indeed be a lost opportunity.