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SMSF members planning to make superannuation contributions that are intended to be counted in the 2019/20 year need to make sure that they are made by midnight, 30 June 2020. This means:
- Cheques must be received by the SMSF trustee(s) on or before 30 June 2020, and
- Electronic Fund Transfers (ETFs) must be credited to the SMSF’s bank account on or before 30 June 2020.
As 30 June falls on a Tuesday this year, we would recommend that EFTs be placed by Friday 26 June to allow time to hit the super fund’s bank account.
If members wait until 29 or 30 June to make their contributions, it’s safer for them to do so by giving a cheque to the fund trustee (if possible) rather than doing it by EFT. The trustees must present the cheque as soon as possible.
Sometimes members of SMSFs contribute by transferring assets that they own such as direct property, listed shares or units in managed funds into their super fund. Direct property is a little more complex, but for shares and managed funds, the member and trustee need to complete and sign an “off market transfer form” on or before 30 June for the contribution to count in 2019/20.
Only particular assets owned by a member can be contributed into an SMSF eg business real property, listed shares or units in some managed funds. Check with your adviser or administrator first to determine if the transfer is allowed.
As a general rule, a pension is only considered to be “paid” by EFT when the money appears in the recipient’s bank account. Again, to be safe, we recommend SMSF trustees order the EFT on Friday 26 June to be on the safe side.
Alternatively, where SMSFs have a cheque book, a cheque in the member’s hands before midnight 30 June will be a pension payment in 2019/20 so long as:
- there is enough money in the fund’s bank account to cover the payment, and
- the member presents the cheque promptly.
Pension payments cannot be made in the form of a transfer of assets out of the fund into the name of the member. Such transfers are called “commutations” and don’t count as pension payments. Not all members can take commutations from their pension.
It is vital that trustees ensure the minimum pension rules are met by 30 June. The consequences of underpaying can be major, including loss of precious tax concessions that many super funds paying pensions receive.
Equally, failure to get a contribution in in time will mean the person will miss out on intended tax deductions in 2019/20 and potentially cause them to exceed a cap. SMSF members and trustees should leave themselves plenty of time to make sure it’s done correctly.