Advisers must harness strategies to properly manage and maximise contributions in SMSFs to enable their clients to get the best possible outcomes for retirement.
SMSF contributions could take many forms and therefore using the right strategy could be a powerful tool, the SMSF Academy managing director Aaron Dunn said at the FPA Professionals Congress in Sydney last week.
“When we think about contributions we must think about these things as not just being physical payments, so the cash payments we tip into the fund,” Dunn said.
“But there are a whole range of other ways in which items may be characterised as a contribution.”
He said the majority of discussions in the industry were around whether it was worth pushing clients past contribution caps at the moment and he believed there were some situations where it could be useful, particularly with clients who had taxable income of less than $50,000.
“Effectively the cap will take them up to that amount, so you could salary sacrifice through to $50,000,” he said.
“They would be no worse off when that income came back and was assessable, so this may be relevant for those that are older and have the ability to contribute – those low-income earners and those that may be using transition-to-retirement strategies where the large majority of their income is obviously non-assessable, non-exempt income.”
As well as using contribution caps as much as possible, advisers needed to also be aware of the different level of taxes that might now apply, in addition to circumstances where clients were in excess contribution positions, he said.
“We’ve got a mechanism to deal with the concessionals now, but we have no respite in respect to our non-concessional amounts,” he said, adding it was vital to know the strategies available to manage that rule.
“It may be through the de minimis rule if you have a client that triggers it earlier, it may be that you reserve that amount because of the fact that it was made in June, it may be that it was fund capped and we actually have the ability to return that amount.
“The changes [to excess contributions] is a great opportunity to go back and refine some of the strategies you have with your clients to make sure that they’re maximising their contributions into super and to ensure that they’re ultimately building into the value of their own retirement.”