Review asset value to cut TSB

asset value TSB

SMSF members who have exceeded their TSB may be able to get under the threshold by revaluing real estate assets within the fund.

SMSF members who have exceeded their total super balance (TSB) cap may still be able to make a non-concessional contribution (NCC) by re-examining the value of an asset within their fund, according to an SMSF specialist adviser.

SMSF Alliance principal David Busoli said under the current TSB rules if a member was over by a dollar, they were restricted from making an NCC, but, conversely, if they were under the cap by the same amount, they could make an NCC of $100,000.

Busoli added there were a number of ways SMSF members could reduce their TSB, including making a withdrawal prior to the end of the financial year, splitting a contribution with a spouse or revaluing assets within the fund.

“The third option can be particularly significant,” he said.

“Asset valuations must be at market value for financial reporting purposes, but the TSB is based on net realised values.

“If, for example, the fund holds a piece of real estate, it would be expected that the difference, after selling costs, would easily be in the order of 5 per cent. It is therefore possible to retrospectively revalue a fund asset for total super purposes.

“For example, a property valued at $1 million at the previous 30 June for accounting purposes could be revalued to $950,000 for total super purposes.”

He said a member using this strategy could only take the reduced value to the extent of their share in an asset, and it was less effective where the amount above the TSB exceeded $70,000 as it was unlikely an asset would decrease in value by more than that amount.

“This strategy is dependent on the value of the asset, which has to be revalued each year, and with real estate the cost of sales are well established,” he said.

“It can also be used in more than one financial year as the TSB is tied to net values each year and can be combined with the other strategies mentioned to reduce the TSB so a member would be eligible to make a NCC.”

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