Considered WealthIssue 12 - SMSF Wealth Newsletter - May 2018
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The maximum amount of superannuation that can be claimed as a tax deduction for the 2018 financial year is $25,000. The work test will need to be met for members between the ages of 65 to 74 to make a concessional contribution and claim a tax deduction. Superannuation funds can only accept mandated (Superannuation Guarantee) employer contributions for members over 74. The maximum amount of non-deducted contributions is lower than previous years at $100,000, provided that the member's Total Super Balance is under $1.6 million. The "bring forward" rule allows some members to contribute up to $300,000 utilising 3 years of the cap. Contributions are deemed to be made when the funds reach the superannuation fund's bank account. So plan ahead to ensure payments are received before 30 June. |
Retirement-Meeting A Condition Of Release
Generally, a member must satisfy one of the conditions of release to cash preserved benefits from their superannuation fund. Turning 65 years of age is one condition of release. Another is retirement for members over their preservation age, but under 65 years of age.
Date of birth |
Preservation Age |
Before 1 July 1960 |
55 |
1 July 1960 – 30 June 1961 |
56 |
1 July 1961 – 30 June 1962 |
57 |
1 July 1962 – 30 June 1963 |
58 |
1 July 1963 – 30 June 1964 |
59 |
After 1 July 1964 |
60 |
For those over their preservation age but under age 60 to gain access to their superannuation, the member must cease an arrangement of gainful employment and intend to never be gainfully employed for more than 10 or more hours a week.
For members older than 60 but under 65, the member must cease an arrangement of gainful employment, but there is no requirement to never intend to return to the workforce.
For company directors to rely on this condition, they need to ensure that a sufficient retirement declaration has been made when ending a directorship. It is also important to confirm that they were both an employee and gainfully employed, and there has been a legitimate termination of employee status.
Employee Status
The meaning of an employee for superannuation purposes includes company directors who are entitled to payment for the performance of their duties.
Directors are generally not entitled to be paid for their services unless its specifically permitted under the company's constitution or it has been approved in a shareholder resolution. It is important to review a company's constitution or records to confirm whether the directors are entitled to any payment to confirm whether they qualify as employees.
It is not enough to confirm that the constitution entitles the director to remuneration. Members will need to show remuneration has been paid, or they have received some other form of gain or reward for the performance of their duties.

Termination of Employment
There is added difficulty where a person is both a director and an employee of a company. If a person resigned their directorship but remained an employee, they need to ensure they ceased to have any involvement in managing the company's business activities, otherwise the ATO could conclude that no termination occurred.
Significant consequences can occur for cashing benefits from your SMSF prior to meeting a condition of release. Penalties for breaches to the SIS (Superannuation Industry Supervision) Act, including breaching the sole purpose test or preservation standards may apply. Anti-avoidance provisions may also apply where a member has obtained a tax benefit by entering the tax-free pension phase prior to meeting a condition of release.
Please contact our office if you believe you have met any conditions of release as soon as possible.
Disclaimer:The information provided in this newsletter does not constitute advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements or circumstances. Brentnalls is not a partnership or a joint venture. Instead, the business of Brentnalls SA is independently owned and operated and it is an independent member of the Brentnalls Affiliation of Accounting Firms. Individual member firms do not accept responsibility or liability for the actions or inactions of any other individual member firm. |