SMSF Strategies


Maximise super contributions

Super members face the challenge of trying to maximise contributions into the concessionally-taxed super system while not falling into the potentially costly trap of overshooting their contribution caps.

If you are in a position to contribute to contribution caps and you don’t, you have lost a tax-planning opportunity, If you don’t use it, you lose it. This is because any unused portions of the annual caps do not rollover to the next financial year.

For 2014-15, the concessional (before-tax) contributions cap is $30,000 for members under 49 at the beginning of the financial year or $35,000 for members aged 49 or older. The standard cap on non-concessional (after-tax) contributions is $180,000 (or $540,000 if averaged over three years by eligible members).

Concessional contributions comprise salary-sacrificed and compulsory employer contributions as well as personally deductible contributions by the eligible self-employed and eligible investors.



Contribute proceeds from sale of certain small business assets

Contributions of proceeds from the sale of small business assets that qualify for particular small business capital gains tax (CGT) concessions – the so-called 15-year ownership or the retirement exemptions – do not count towards the non-concessional (after-tax) contribution cap if within a lifetime limit. The indexed limit for 2014-15 is $1.355 million.

This strategy may provide a means for eligible vendors of small businesses to rapidly boost their super savings while minimising or eliminating CGT from the sale.



Split super contributions with lower-balance spouse

Fund members can ask their super funds to transfer or split up to 85% of their concessional (before-tax) contributions into their spouse’s super account. Significantly, SMSFs are generally well-placed to implement super-splitting strategies this late in the financial year because of their inherent flexibility.

Stuart Jones of Thomson Reuters comments in the Australian Superannuation Handbook that contribution splitting may assist fund members to “equalise their total superannuation balances to guard against a future government possibly seeking to introduce a cap on tax-free fund earnings for pension assets”.

No tax currently applies to super fund earnings backing pension payments (including a transition-to-retirement pension) while superannuation pension payments are tax free for members aged over 60.



Offset CGT with contributions

If you have sold an investment for a capital profit this financial year, you may have an extra incentive to maximise your concessional (before-tax) contributions before July 1.

Keep in mind eligible super fund members – including the self-employed and non-employee investors – can claim deductions for their concessional contributions. In turn, the deductions may offset the CGT on the capital gain.



Value SMSF assets as at June 30

SMSF trustees are required to value fund assets at market value as at June 30. Trustees can no longer use historic valuations.



Make sure pension-paying SMSF pays minimum annual pension

Funds that fail to pay the minimum pension risk losing the tax-free treatment of fund assets backing super pension payments. The minimum pension payable, depending upon a pension member’s age, ranges from 4 -14% of assets in your pension account.

This is a particular trap given the rapid ageing of Australia’s population. Rice Warner Actuaries estimates SMSFs hold more than half of the total superannuation dollars invested in superannuation retirement products.



Arrange for salary-sacrifice contributions for next 12 months

Super matters to think about include whether to make higher salary-sacrificed contributions in the 12 months ahead. Under tax law, arrangements to salary-sacrifice super must be in place before the income is earned.



Set longer-term plans to make super balances between spouses as even as possible

Making balances as even as possible between spouses may provide a defence against the possibility that a future government will introduce a cap on the currently tax-free treatment of fund assets backing super pensions. Generally, this needs to be a longer-term strategy to be really effective.

Apart from spouse contribution splitting (discussed in strategy five), strategies to help even balances include maximising contributions for lower-balance spouses and, if eligible, practising a withdraw-and-recontribute strategy.

As the name implies, the withdraw-and-recontribute approach is a two-step strategy. First, super is withdrawn as a pension or lump sum from the super account of the spouse with the bigger balance – if the spouse has legal access to his or her super. Second, the money is contributed as a non-concessional (after-tax) contribution into the super account of the lower-balance spouse.

About Shartru Capital group

The Shartru Capital group is an Australian boutique investment and advisory firm. Shartru Capital is a significant investor in a number of businesses including Shartru Wealth Management.

Shartru Wealth Management is the financial advice and licensee business within the Shartru Capital group.

Whether looking for the right investment strategy; advice on superannuation funds – including DIY #Superannuation or Self-Managed Superannuation; personal insurance or how to get started with your first home loan, age care or estate planning – Shartru Wealth Management can help.

We work in partnership with our clients to provide financial advice to help you meet your individual financial goals and objectives. We encourage our customers to build sustainable futures. That’s why we offer financial planning advice to ensure our customers prosper over the long term.

Shartru Wealth has licensed representation in Sydney, Newcastle, Belmont, Brisbane, Tasmania, Melbourne & surrounds, Perth and the Sunshine Coast. For a full list of Financial Advisers licensed through Shartru Wealth Management please click here

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Disclaimer: Published by Shartru Wealth Management Pty Ltd. ABN 46 158 536 871 AFSL 422409. The advice is general advice only and we have not considered your personal circumstances. Before making any decision on the basis of this advice you should consider if the advice is appropriate for you based on your particular circumstance

By | 2020-01-09T23:56:33+00:00 January 9th, 2020|blog|0 Comments