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Care needed to maximise contributions

SMSF trustees need to be vigilant about managing their contributions in the lead-up to 1 July to ensure they get the maximum advantage from the increased non-concessional contributions caps about to be applied, according to an accounting firm’s superannuation expert.

“Despite the relaxation of the rules surrounding excess contributions, people should still be vigilant in the monitoring and planning of their superannuation contributions,” HLB Mann Judd superannuation director Andrew Yee said.

“This is especially the case this year as an increase in the available contributions cap will apply from next year.”

In particular, Yee warned individuals needed to be careful they did not exceed the current non-concessional contributions limit of $150,000 this year.

The reason being a breach of the cap will trigger the three-year bring-forward non-concessional contributions cap at the current amount of $450,000.

“Had you stayed under the $150,000 cap this year, you would have been eligible for the higher annual non-concessional contributions cap of $180,000 or $540,000 over three years from 1 July 2014. That represents an additional $90,000,” Yee said.

“Careful planning will be required as it is pretty easy to inadvertently trigger the three-year bring-forward non-concessional contribution cap.”

He said it was especially important individuals were aware of the change in the caps as maximising the amount of money available to be contributed into super was often the deciding factor when considering the establishment of an SMSF.

“The lump sum non-concessional contributions involved can provide the critical mass needed to make an SMSF a viable option,” he said.

“Furthermore, high-income individuals are not subject to an additional tax on their non-concessional contributions in the same way as concessional contributions.

“For instance, the increase in the bring-forward non-concessional contributions cap from $450,000 to $540,000 may provide enough wriggle room for business owners who own their business premises to transfer the business property to their own SMSF as a large non-concessional contribution.

“Or a couple who already have $200,000 in a retail or industry super fund, and who are deciding both to contribute $150,000 each, will have a total superannuation balance of $500,000.”

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