SMSF members who have exceeded the total super balance (TSB) threshold of $500,000 associated with the carry forward concessional contributions cap provisions can still qualify to use the measure through recording more accurate values for the fund’s asset values, an SMSF specialist has highlighted.
SMSF Alliance principal David Busoli reminded practitioners concessional contributions of up to $30,000 can be made in 2024/25 by fund members, alongside any unused portion of their concessional cap over the previous five years. This can translate into a maximum total of $162,500 for the current income year.
He noted to be eligible to use these catch-up contributions the member must have a TSB of less than $500,000 as at 30 June 2024 but also that this figure could be adjusted downwards, should the member have exceeded it, due to differences in the reporting of fund values.
“If the member is marginally over this cap, this may be rectified by retrospectively lowering their total super balance,” Busoli said.
“This can occur as SMSF accounts are generally reported at gross valuations thus overstating the total super balance, which is based on net values.
“So, for example, the amount of a member’s balance that is referrable to direct real estate can readily be reduced by at least 5 per cent when selling costs are considered. Lodging a transfer balance event notification with the ATO will lower the member’s 30 June 2024 total super balance accordingly.”
Busoli pointed out any contributions will be applied to the current year’s concessional cap first with any excess amounts then apportioned to the oldest unused carried forward cap.
Further he suggested taking advantage of the carry forward rules can help a contribution splitting strategy.
“Though this feature is usually used to enhance after tax wealth in a year of significant income, including taxable capital gains, it can also enhance an account equalisation strategy as the full after-tax contribution amount can be split to a spouse, generally in the year following the contribution,” he explained.
“It may also be considered as an accessibility strategy where the split is made from a member who is below preservation age to one who is not.”
