Trustees should consider splitting their previous year’s contributions to a spouse in order to lower their total superannuation balance (TSB) for the current financial year, an SMSF technical expert has said.
Heffron managing director Meg Heffron said the option of splitting a member’s previous year’s contributions to a spouse was one of a few effective ways of reducing a TSB at 30 June while remaining compliant.
“Don’t forget, the total TSB doesn’t just have to be the number on the member statement for somebody in an SMSF. There are things we can do to change that number,” Heffron said at the SMSF Association 2020 National Conference on the Gold Coast today.
“The ATO knows this – they have a special form that allows us to send information to them when we’ve got a situation like this.
“Don’t forget, we’ve always got the option of splitting the previous year’s concessional contributions to a spouse.”
She also pointed out the opportunity for trustees and advisers to reduce a fund’s TSB by allowing for factors not always included in financial statements, such as deferred tax, realisation costs and valuations that would apply if an asset had to be sold immediately.
“We can allow for deferred tax, we can allow for the costs of selling all the assets that we would need to sell if we were to pay that type of super balance out today, we can allow for an evaluation that reflects the fact that we need to make a sale. All of those things can be used to report a lower value than the number on the member statement,” she noted.
While making the most of one of these opportunities to lower a TSB might not benefit larger funds, she said it had the potential to make a big difference to funds with a balance just above $1.4 million that were looking to make non-concessional contributions.
“And, of course, we can always think about taking money out just before 30 June in order to sneak below one of these thresholds,” she added.
“Nine times out of 10 it makes no sense to take money out in order to buy the right to put it back in again. But sometimes it does – if you’re just over and you want to sneak below the threshold, there might be a lot of value in taking some money out. It gives you far greater contribution opportunities in the following year.”
In January, the SMSF Association said the range of TSB thresholds in use was too complex and should be streamlined to make it easier to determine what thresholds were applicable for trustees.