5 new year’s resolutions for your SMSF

Is it too conservative? Not conservative enough? Are more members approaching retirement and perhaps considering how their super will provide them an income in the years ahead, as opposed to focusing on growth alone? What are your fund’s asset allocations across the different asset classes? Is it time to revisit these in light of the changing economic environment and higher interest rates?

These are all important questions to ask yourself and other SMSF members at least once a year. The answers will help you review your investment strategy to make sure it’s right for all members.

2. Resolve to rebalance

Once you’ve reviewed and possibly revised your investment strategy, you may need to rebalance your portfolio so it is in line with your strategy’s stated asset allocations.

Last year was a volatile year for most asset classes. Equities saw big ups and downs and the initially unexpected rises in interest rates also impacted cash and fixed interest.

Go through all your investments and make sure they tally with the allocations outlined in your investment strategy.

Rebalancing is also something that will be easier if you keep on top of it on a regular basis. This doesn’t mean selling every time something grows in value and exceeds your stated allocations in your investment strategy – as the transaction costs would soon add up – but keeping a monthly tally of how market movements are affecting your asset allocations is one way of keeping on top of it.

3. Resolve to keep insurances in order

As an SMSF trustee you are required to consider the insurance requirements of the members in your fund. Members do not need to have insurance in their SMSF – unlike most members of APRA-regulated funds – but if they don’t have insurance, they need to explain why in their fund’s investment strategy.

This explanation can be as simple as a one-line statement (see our investment strategy templates here) but it’s also a good idea to regularly review whether or not you want to have insurance in your SMSF. If you have new members who have moved from larger funds, their insurance requirements and needs may be different to other members and will need to be considered separately.

4. Resolve to educate yourself on regulation changes

Are you on top of all the rules and regulations that apply to SMSFs and how they might apply to the members in your fund?

One very important change, that you may be able to take advantage of this year, is the reduction in age at which you can access the downsizer contribution – from 60 to 55. The age was earlier reduced to 60 from 65 on 1 July 2022. (See more below)

Covid lockdowns may be starting to seem like a distance memory, but there are still some temporary rule changes designed to ease the pain of COVID-19 that you need to keep on top of. These include documenting:

• Pension reductions due to COVID-19. If any members have taken advantage of the reduced pension minimums, this must be documented so the auditor can see why the normal minimum was not withdrawn in the 2019–20, 2020–21, 2021–22 and 2022–23 financial years.
• Early release of super due to COVID-19. If any members withdrew money under the early release of super measure, they can still recontribute that amount as a non-concessional contribution (NCC) and it won’t count towards their NCC cap. These recontributions can be made between 1 July 2021 and 30 June 2030.

The thing to be aware of with all these temporary measures is not just to stay within the rules but document your actions so you can be seen to be following the rules.

5. Resolve to boost your balance

In the interests of getting completely financially fit, make 2023 the year to focus on boosting your super balance.

You can check your individual concessional (tax-deductible) contribution limits and the contribution amount you may be able to carry forward via the ATO in your myGov account under the super tab. Make a resolution to salary sacrifice, sell off some assets or do whatever you have to do to reach your contribution limits.

If you have cash to spare once you have used up your concessional contributions limit ($27,500 in 2022–23), you can still make non-concessional contributions up to the annual limit of $110,000 in 2022–23 or up to $330,000 using the bring forward arrangement.

Also, as highlighted above, you may also now be eligible for the downsizer contribution if you are aged 55 or more (there is no upper age limit). That means you may be able to make a super contribution of up to $300,000 (and up to $600,000 for a couple) into your super account from the proceeds of the sale of your home if the total contributed doesn’t exceed the proceeds of the sale.

The downsizer contribution doesn’t count towards any of your normal contribution caps. You do need to have owned the home for 10 years or more and it needs to be in Australia and not a caravan, houseboat or other mobile home.

After a difficult 2022 for investors, boosting your SMSF balance should be your most important resolution for 2023 so your SMSF will meet the retirement needs of members. But if you add the above four resolutions to your annual list as well it will certainly put you on the right path to making your super as financially fit as possible.