Strategy, Superannuation

Year-end review critical in 2020

SMSF strategies

Rreviewing SMSF strategies in the lead-up to the close of the 2020 financial year has taken on new significance due to the COVID-19 economic impact.

The director of a mid-tier accounting firm has stressed a review of SMSF strategies is more significant in the lead-up to the end of the 2020 financial year given the current economic environment.

“We always recommend that people take the opportunity to reassess how their super accounts are structured and managed at the end of each financial year. This year it will be more important than ever,” HLB Mann Judd superannuation director Andrew Yee said.

The management of the assets held in the fund’s portfolio is one specific area Yee recommended SMSF trustees need to re-examine given the impact the coronavirus pandemic has had on markets.

“Most people will have incurred capital losses in their superannuation fund as a result of the market downturn, which they may choose to realise in order to offset any capital gains from earlier in the financial year,” he noted.

Trustees should also be reviewing their contribution strategies within an SMSF, among other issues, given 2019/20 is the first financial year some of the new rules governing these actions are applicable, he said.

“They may also need to reconsider some of their strategies, such as making concessional contributions or, for those already in retirement, reducing drawdowns, to try to rebuild their balance,” he said.

“Also, this year is the first year in which people can make catch-up contributions and use up any unused concessional contributions cap from the 2018/19 financial year. This option is available to those whose total super balance is less than $500,000 on 30 June 2019.”

Yee emphasised contributions have to be made well before 30 June 2020 to ensure they will be included as part of the current financial year.

He also urged trustees to exercise caution if they are considering accessing their super benefits early under one of the COVID-19 economic relief instruments.

“Some people may also be considering taking advantage of the opportunity to access their super early, however, people should treat this measure as a last resort,” he suggested.

“There are other government financial relief measures available that should be used first, as accessing super early will have a seriously detrimental effect on savings upon retirement.

“In addition, taking money out of superannuation now may affect insurance cover.”

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