From just a few years ago, we have moved from a situation where we had almost unlimited amounts of money that could have been contributed to your SMSF but with potential tax issues on the end benefits, over now to a system where there is no tax on your end benefits (over age 60) but with significant restrictions on how much you can get into your self managed super fund.
Maximising concessional contributions
Remember – the limit is $25,000 a year, or $50,000 pa until 30 June 2017 if your already age 50, or turn 50 between now and 30 June 2017. Go over these limits and you’ll have excess contributions tax to contend with of 31.5% on top of the 15% contributions tax.
Salary Sacrifice is where you agree with your employer to give up part of your pre-tax salary in return for that money being paid directly into your self managed superannuation.
The effect of this strategy is that the amount you have ‘sacrificed’ is taxed at a maximum of 15%, instead of your marginal tax rate if that money was taken as salary (up to 46.5%). Note this is only of benefit if your marginal tax rate is over 15%.
Personal deductable contributions
If your not employed, or are self employed (i.e. 10% or less of your assessable income and reportable fringe benefits come from employment activities) then you can make tax deductible contributions. The benefit is much the same as in salary sacrifice – lower tax to pay now on your income, if your marginal tax rate is over 15%.
For either of these above, make sure you don’t forget to check how much SGC your employer (if applicable) is also contributing as it counts towards your limit.
- Maximising non-concessional contributions
The limit here is $150,000 pa, although if your under age 65, you can elect to bring forward two years so that it is counted as $450,000 over the 3 year period.
- Timing the bring forward rule approaching age 65
If you have a substantial amount that you need to get into your self managed superannuation, a key strategy will be to create a timeline of contributions where you use the bring forward provisions to contribute up to $450,000 just before your 65th birthday, and work back from there to maximize your contribution limits. More details in this post: http://www.turnkeyaffiliateprogram.com/consider-self-managed-super-funds/
This is where the Government will match your personal super contribution to your SMSF with a co-contribution up to certain limits. You can get the maximum co-contribution amount of $1,000 if you are earning $31,920 or less per annum. For every $1 of personal contributions that you put in the Government will put in $1, up to a maximum of $1,000.
If you earn between $31,920 and $61,920, the $1,000 maximum is reduced by $.033 for ever $1 in assessable income over $31,920 until it cuts out altogether if your income is $61,920.
Contributions from the disposal of small business assets
If you make a contribution to your self managed superannuation with proceeds from the dispose of certain small business assets, then these contributions may be eligible to be excluded from your non-concessional contributions cap. There is a lifetime limit, known as your super CGT cap. The level of this cap amount is currently $1.155 million for the 2016/17 year, and is indexed annually.