SMSFs significantly ramp up benefit payments

SMSF trustees boosted their benefit payments in the March quarter as a way of taking advantage of the current rules around non-concessional contribution (NCC) caps, the latest SuperConcepts “SMSF Investment Patterns Survey” found.

The survey revealed during the March quarter, the average benefit payment increased significantly from $16,256 to $27,900.

Overall contribution levels also continued to rise in the quarter, increasing from $8548 to $9138.

This continues the trend established in the fourth quarter of last year, where contributions increased by 181 per cent following the federal government’s confirmation that the proposed super changes would come into effect on 1 July 2017.

The rise, however, was a reversal of the historical trend where the first quarter had always been the lowest quarter each year, the survey found.

SuperConcepts technical and strategic solutions executive manager Phil La Greca said the findings clearly demonstrated SMSF trustees were looking to maximise current NCC rules.

Commenting on the new trend that emerged around benefit payments, which almost doubled mainly through the increase in lump sum withdrawals, La Greca said trustees were implementing withdrawal and re-contribution strategies to take advantage of the window of opportunity.

“Strategies include making NCCs into an accumulation account, starting a new 100 per cent tax-free pension and making contributions to a spouse to try and equalise member balances and maximise access to the $1.6 million pension transfer balance cap for both persons,” he noted.

During prior quarters, the split of lump sum withdrawals versus pension payments tended to be around 20 per cent versus 80 per cent, the survey said.

In the first quarter of 2017, the split shifted to 40 per cent versus 60 per cent.

In addition, asset allocations largely remained unchanged as SMSF trustees and their advisers focused on dealing with the opportunities around the upcoming changes.

The current $180,000 after-tax contribution cap and the three-year $540,000 bring-forward rule remain until 30 June.

The quarterly survey covers around 2750 funds, a sample of SMSFs administered by Multiport.

The assets of the funds surveyed represent about $3.2 billion.

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