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Strategy, Superannuation

New rules have impact on SMSF contributions

The average contribution to SMSFs more than doubled in the June quarter after trustees took advantage of new legislation that increased contribution deductibility from July 2017.

The latest SuperConcepts survey of 2600 SMSFs revealed average contributions rose from $3498 to $8623 in the June quarter 2018, since new rules provided more access to tax breaks for personal contributions.

Commenting on the finding, SuperConcepts SMSF technical and strategic services executive manager Phil La Greca said: “This was a positive rule change that SMSF trustees have embraced with gusto because it was only ever available to the self-employed.

“It also shows the value of specialist advice because making a rule is one thing, but getting people to know it, understand it and use it is where the professional advice market has really demonstrated strong value.”

The analysis also found the average benefit payment for the June quarter increased compared to the prior quarter, but decreased sharply to $22,289 from $50,313 for the June quarter 2017.

“This again reflects the significant impact of the legislative changes that applied from 1 July 2017 where the capital value of pension accounts is limited to $1.6 million, which resulted in a lower level of pension payments being required to be paid,” La Greca noted.

“Nevertheless, some clients still required the same level of cash from their SMSFs so that meant rather than deplete pension accounts by drawing additional payments above the statutory minimum level, they elected to take those amounts out as lump sum payments out of their accumulation accounts.”

He said in some cases where there was no accumulation account, these additional payments were still classified as lump sums from a pension account to improve the client’s transfer balance account position.

“Out of all benefit payments, 79 per cent of withdrawals were pension payments and 21 per cent were lump sum payments,” he noted.

“The proportion of lump sum payments has progressively increased throughout the year from 10 per cent of all payments as minimum pension levels have been attained.

“This reflects the benefits of professional advice where they understand the impacts of taking pensions versus commutations.”

The quarterly survey was based on a sample of 2600 SMSFs administered by SuperConcepts, representing $3.2 billion in assets.

The full report will be released in the coming weeks.

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