STRATEGY
The nuance of 30 June 2021
Changes to the law and threshold adjustments have given certain standard year-end strategies new dimensions for the 2021 financial year, Meg Heffron writes.
MEG HEFFRON is managing director of Heffron.
The end of the financial year inevitably brings a flurry of activity and planning. And let’s be honest, it is particularly difficult to find time for this in 2021 when most SMSF practitioners are still dealing with the fallout from 2020. So what are the headline items that should be exercising our minds as 2020/21 winds down? First some of the obvious things – make sure minimum pensions are paid and get contributions in. But what are the particular quirks this year?
Pensions When it comes to pensions, remember the rule allowing pension payments to be reduced to 50 per cent of the normal level is still in place for
32 selfmanagedsuper
2020/21. However, bear in mind that: • the way the calculation is done is that the normal drawdown rates are halved (that is, 4 per cent becomes 2 per cent, 5 per cent becomes 2.5 per cent and so on). It’s not the normal minimum payments themselves that are halved. This appears esoteric until the way in which rounding works for pensions means the two calculations don’t produce the same answer. And no one wants to underpay their minimum pension. • the halving rule doesn’t apply to defined benefit pensions (complying lifetime, life expectancy or flexi pensions). Make sure these are paid at the normal levels (and indexed if required). • it also doesn’t apply to maximum payments
