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Key saving years benefit from contributions map

SMSF practitioners can employ three key contribution strategies for clients aged 45 to 65 to get the most out of their super concessions in this life-cycle phase.

“These are the things you take advantage of tactically when you have clients who meet particular criteria,” Heffron SMSF Solutions head of customer Meg Heffron told the SMSF Association National Conference in Adelaide today.

“During the key saving years, it’s all about maximising tax concessions, managing non-concessional contributions and thinking about access because they’re concerned about locking too much away in super.

“This is a massive age bracket, 45 to 65, and the people within this group are potentially a really diverse bunch, but at some point during this period, they start thinking about super and putting more money in.”

Heffron said during that phase, SMSF trustees were watching out for opportunities to maximise concessional contributions.

“The obvious one is to salary sacrifice and when and if it’s available, take the opportunity to take a personal tax deduction,” she said.

“This is often a missed opportunity that I see, where you might have someone retiring, winding up their work affairs, getting some advice on putting money into super and they want to sell their investment property and put the proceeds into super.

“But what a shame they don’t wait and sell it in the year that they can take a personal tax deduction.”

She highlighted that there was also an opportunity with the changeover date to a higher concessional cap.

A member under 50 could only contribute $30,000, but transitioned to the increased $35,000 cap from age 50 and over.

In addition, advisers could defer the allocation of contributions for the SMSF, known as contribution reserving, where relevant, Heffron said.

“It effectively allows for two years’ worth of tax deductions at once: you contribute $30,000 twice in one year, get both the deductions this year but not have an excess contributions problem because you’ve deferred the allocation to the following year,” she said.

“But the thing to remember is that it’s not a double deduction, it’s a bring-forward.”

Trustees aged 45 to 65 were also starting to think about non-concessional contributions (NCC), which was another way to pump up their super, she said.

Here, the opportunities were to keep large NCCs separate from taxable super as it could form part of a more effective re-contribution strategy later and provided flexibility in future withdrawals to optimise estate planning and minimise personal tax, she pointed out.

She also said to think about using the bring-forward rules to achieve a better result for the fund’s tax-free component.

Lastly, if people were still worried about superannuation access, contribution splitting was an option, she added.

“The younger end of that spectrum is still concerned about accessibility because someone who is 45 today can’t get their super until 60 and that’s a real passion killer when it comes to putting more money into super,” she said.

She used an example where a husband was older than his wife and therefore would access his super earlier, the wife could split her concessional contributions to him, which could then be turned into a transition-to-retirement income stream (TRIS) sooner.

“It means the family feels much less exposed to the fact that we’re locking more of the wife’s super up when it could be turned into a TRIS. It feels much safer,” she said.

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