We talk about the power of contributions all the time. The following table describes the mix of contributions available to those aged under 75 and who they help the most.
We are committed to helping you and your financial adviser to realise your contribution strategies. The number of strategies above proves that there is more to contributions than what your employer puts in for you. Some won’t be available to you, but the ones that are, can create some big wins.
Our role is to provide the technical support, data and documentation to complete these strategies.
What is the biggest driver of eligibility for contribution strategies mentioned above?
The Government have imposed a type of “means testing” designed to reduce the tax incentives for people with larger Super Balances. If the government puts steps in place to reduce tax incentives, it means that you can save significant amounts of tax.
As your Super balance grows, you will lose the ability to grab the incentives offered.
If you have over $1.9 Million dollars in Superannuation or more, you will be excluded from Non-Concessional Contributions. If you have over $500K in your member balance you will be excluded from Carried Forward Concessional Contributions.
Contribution Splitting helps couples keep their balances roughly equal as they build. If you have two members in your SMSF roughly the same age, keeping both members under the balance caps will allow them to undertake tax effective strategies (like personal deductible) for longer. The personal tax savings can be used to service debt or contribute more to Super.
Many clients ask me why they would contribute to Superannuation if they couldn’t receive a personal tax deduction (non-concessional contributions)? Investing your money in a low taxed environment should provide enough incentive. More importantly, if your Super balance is looking a bit low, but you have lots of personal assets that make you asset rich but income poor, some decisions will need to be made to improve your liquid funds as you run into retirement.
Personal Deductible and Carry Forward Concessional strategies are ones where you can immediately save personal tax. Salary Sacrifice arrangements form part of the Personal Deductible and Carry Forward Arrangements.
In meetings, we have identified a distinct period between the ages of 52 to 58 where people are starting to turn their attention to Super. Predominantly, they have good salaries and have either paid off or nearly paid off their homes. They look at their Super balance and realise that they need to take action to grow their Super. A transition to retirement plan is required to make the most of the final years of their employment and transition any illiquid assets they own in their personal names to liquid assets in Superannuation. They realise they need cash to meet their lifestyle goals, but they are not sure exactly how to go about it.
Financial advisers can really add maximum value as they use their skills to navigate the above strategies and provide a clear vision for your desired outcome.
Recontribution Strategies are available for those who already have access to withdraw money from their Superannuation. This strategy reduces death benefits tax on your non-dependent children (or any other non-dependant) when you pass on. Recontribution strategies are not tax avoidance but tax planning. If you undertake this strategy and pay the associated costs to complete it, you will not benefit at all. Any benefit will be with the people inheriting your Super balance. My general (tongue in cheek) advice recommendation is to spend the money on yourself, you earned it… In all seriousness, if this is a concern, we can run the numbers and help you to realise this plan.
Contributions for Children can turbo charge your children’s Super. Mathematically, medium contributions to Super in early years outperform larger contributions later in life due to the power of compound interest and time. If you do make this call for your Children or even Grandchildren, selecting the right Super fund will be a very important part of this strategy. High fees and poor performance will erode any long-term gains that you hope for your offspring. Again, Financial advisers are able to analyse what types of Super accounts will provide the best bang for buck.
Downsizer contributions are available to the those over the age of 55 who sell their principal place of residence. Downsizer contributions are not dependant on member balances or upper age limits.
If you want to work Supervision Group on the above strategies to get where you need to go, please reach out today. There is never a better time to do so.
