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Seven Good Reasons For Knowing Your Total Superannuation Balance


It’s important to know your total superannuation balance.

That’s because changes to the super law mean your total balance will dictate whether you can make contributions, how often you need to report, and even whether you might stand to benefit from the changes.

What’s more, the Australian Taxation Office is now looking closely at self-managed super funds with high balances.

Speaking at the Tax Institute’s NSW 11th Annual Tax Forum, ATO acting assistant commissioner Tara McLachlan recently warned: “We recognise with the introduction of the transfer ­balance cap and total super­annuation balance that this does put a sharp focus on that segment of high-balance funds.”

So, first a definition — a member’s total super balance is the sum of all their accumulation accounts and retirement accounts across all their super funds, minus any personal injury (structured settlement) contributions that have been paid into any of the member’s super funds.

A number of SMSF members are incorrectly calculating their total super balances by only counting their super savings in their SMSF and not including their balances in any other super funds they may have.

Here are seven of the key areas of the super law that are affected by a member’s total super balance, as well as those areas that recent budget proposals will affect if they become law.

Non-concessional contributions For an SMSF member to be eligible to make non-concessional contributions, one of the conditions is that their total super balance must be below $1.6 million immediately before the start of the financial year in which the contribution is made. Catch-up concessional contributions From July 1, 2019, if a member did not make any concessional contributions in one year, then provided their total super balance is below $500,000 immediately before the start of the financial year in which the contribution is made, they can use any of the unused limit in the following five consecutive years.

Spouse contributions For a member to be able to make contributions for their spouse and claim a tax offset on the contribution, one of the conditions is that the spouse’s total super balance must be below $1.6m immediately before the start of the financial year in which the contribution is made.

Government co-contributions The government will contribute 50c for every dollar of non-­concessional contributions made by a member into an SMSF. One of the conditions for the entitlement is that the member’s total balance must be below $1.6m.

Transfer balance account reporting If any member of an SMSF has a total super balance of $1m or more, then their SMSF must ­report their transfer balance ­account transactions within 28 days after the end of the quarter in which the event occurs. Where all SMSF members have a total super balance of less than $1m, then their SMSF can report on an ­annual basis at the same time as when the fund’s tax return is due.

Tax exemption on pension income If an SMSF has a member with a total super balance of $1.6m across all of their super funds (as at June 30 of the previous financial year) and the person is in receipt of a retirement pension, then their SMSF can only calculate the tax exemption using the unsegregated or proportionate method. However, if an SMSF has members in receipt of a retirement pension and each of these members’ total super balance is less than $1.6m across all of their super funds (at June 30 of the previous financial year), then the SMSF can claim the tax exemption using the relevant segregated and/or unsegregated method.

Work test exemption for recent retirees In this year’s federal budget, the government proposes that from July 1, 2019, an individual aged 65 to 74 with a total super balance of less than $300,000 will be permitted to make voluntary contributions for 12 months from the end of the financial year in which they last met the work test. It is important SMSF members are aware of how their balances affect their super entitlements so they can maintain their funds’ compliance and perhaps even take advantage of the changes to the super law.

Monica Rule is an SMSF specialist and author of The Self Managed Super Handbook — Superannuation law for SMSFs in Plain English.

www.monicarule.com.au

By Monica Rule

The Australian

9 June 2018

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