SMSF trustees can maximise the tax deductions they receive from their contributions for the current financial year through the use of an unallocated contribution account (UCA), according to a specialist deed provider.
“Double concession contributions can be made for the financial year ending 30 June 2014,” SuperCentral said.
“To do this requires the use of an unallocated contribution account and there must be paperwork supporting the strategy.”
The current concessional contributions cap for individuals under 59 years of age is $25,000. This level will increase to $30,000 for the 2015 financial year.
To maximise the tax deduction for contributions in the 2014 financial year, individuals must make a contribution before 30 June made up of the still unused portion of the $25,000 cap plus the full concession limit of $30,000 for the 2015 financial year. For instance, if a member has made concessional contributions totalling $20,000 to date, they would have to make an additional contribution of $35,000 before 30 June to facilitate this strategy.
According to Super Central, the $35,000 contribution had to be allocated to a UCA immediately. Then, before 30 June, $5000 must be allocated to the specific member’s account.
The remaining $30,000 then must be allocated to the member’s account before 28 July as per the Superannuation Industry (Supervision) Act rules, it said.
Taking that course of action would then allow the member to claim a tax deduction for $55,000 of contributions in the 2014 financial year as opposed to the standard deductions on $25,000 worth of contributions, the deed specialist said.
SuperCentral pointed out the SMSF must have the supporting paperwork in place to allow the strategy to be employed.
“The trustee’s resolution in establishing the UCA, and the resolutions in transferring concessional contributions to the UCA and transferring them from the UCA is required to show the process was undertaken in the correct order and within the correct time frames,” it said.
“Unfortunately, the trustee may have to muster and provide copies of the relevant documents to the ATO to demonstrate what happened with the contributions.”
Trustees also had to be mindful of reporting the contributions properly in the fund’s annual return, it warned.
