Ivy Growth Partners and our SMSF clients have one common goal: to improve their return. So let’s look at a few clever SMSF and tax strategies we can help you implement before 30 June this year
Strategy 1: Claim a tax deduction for personal super contributions
Did you know you may be able to claim a tax deduction for making contributions to your personal superannuation? You will need to notify your super fund of the amount you wish to claim as a deduction before 30 June (or the date you lodge your individual tax return, whichever occurs first). Make sure you have a valid notice of intent (in writing) by your super fund. This strategy only takes a bit of pre-planning to make potentially big tax savings.
Strategy 2: Make after-tax contributions to your super
You can make after-tax contributions to super which could come from your personal savings, transfer of personal investments, an inheritance, or the sale of investments.
For FY19 the maximum personal after-tax contribution is $100,000 for over 65s (or $300,000 over a fixed three year period, if you are under 65).
This strategy allows you to make substantial contributions to super and build up your retirement savings. Those with a total superannuation balance of $1.6 million or more will not be able to make after tax contributions.
Strategy 3: Beware of excess contributions tax
The ATO imposes a limit on the contribution amounts you can make (tax deductible and non tax-deductible), so caution should be taken to avoid ‘excess contribution penalties’.
Check with Ivy Growth Partners before you make a large contribution, to save you money and time dealing with excess contributions tax.
Strategy 4: Draw your superannuation pension
If you receive a pension, make sure you are being paid at least the minimum pension this financial year. If you don’t take your minimum pension, the pension account will cease and the assets that support this pension are deemed NOT to be in retirement phase for the whole year – and your fund will lose its tax exemption on earnings! Please contact us here if you think this applies to you or you need someone to check for you.
Strategy 5: Pay your SMSF fund expenses
For SMSF members in the accumulation phase; tax deductions for expenses are usually not significant, but it’s important to ensure expenses are actually incurred or paid before 30 June 2019 to be deductible in the current financial year.
Strategy 6: Rebalance the accounts between you and your spouse
The end of financial year is a good opportunity to rebalance pension accounts between spouses. Provided you have available contribution space and are eligible to withdraw, rebalancing funds will ensure that super balances are as even as possible and the $1.6m transfer balance cap is maximised per member.
Strategy 7: Split your contribution
Although this strategy can wait until the new financial year, it does require some planning before 30 June.
You can split up to 85% of your concessional contributions with your spouse, after the end of each financial year. This tax strategy is useful when one spouse is approaching the $1.6 million transfer balance cap.
Strategy 8: Make a contribution to your Spouse’s super fund
If you have a ‘low income spouse’ (a person with an assessable income’ up to $40,000) you may wish to make a contribution on their behalf, and claim a tax rebate of 18% on the first $3000 of contributions made, which is up to $540. This isn’t much, but better than nothing!
Strategy 9: Pay next year’s contribution early
Provided your superannuation fund trust deed allows it, you may be able to make up to two contributions of the maximum concessional amount in the financial year – one for this year, and one reserved for next financial year.
Under Superannuation Law, contributions must be allocated to members by the 28th day of the month following the contribution. So effectively you could make the maximum concessional contribution, and make a second contribution for up to $25,000 in June, and allocate that second contribution on or after 1 July 2019.
Under this strategy, you don’t get to make any more contributions than anyone else, you are just paying next year’s contribution early (in June) and bringing forward the tax deduction available into this financial year. This might be very useful if you have large taxable income this year, for example due to a large capital gain realised during the year.
Strategy 10: Use the First Home Super Saver Scheme (FHSSS)
This strategy is worthwhile if your children or grandchildren are saving to purchase their first home. The Government allows individuals who are saving for a deposit on their first home to utilise superannuation to build up their savings.
Under this new scheme, a First Home Saver can contribute up to $15,000 p.a. (to a maximum of $30,000 in total) to their superannuation, in addition to their standard contributions, and then draw this money out to purchase or build their first home.
Assuming you contribute an additional $10,000 a year to superannuation via salary sacrifice, in 3 years you could withdraw approximately $25,892 to put towards the purchase of a first home, and together with their partner could have a combined deposit of around $51,000.
Strategy 11: Make ‘Downsizer’ Contributions
Retirees over 65 can contribute $300,000 each to superannuation following the sale of their principal residence. This scheme came into effect 1 July 2018 and applies to sales entered into on or after that date.
Provided you have owned your house for over 10 years, you are permitted to contribute up to $300,000 each to superannuation (up to the total value of your sale) within 90 days of settlement, in addition to your other contributions.
This scheme is particularly appealing to retirees who do not currently receive the Age Pension because they are over the Assets Test limit, or if one or both of you have less than $1.6m in pensions.
Ready to save money and improve your return? Ivy Growth Partners can help you implement any of the above tax strategies before 30 June 2019.
If you have any questions about any aspect of your superannuation tax planning, please feel free to give us a call to arrange a time to meet so that we can discuss your particular requirement in more detail.