Accepting contributions to an SMSF

As a trustee of a self managed super fund, you can only accept contributions as per the conditions specified in the law, and pay benefits by meeting the SMSF trust deed criteria.

Some reasons for the members of an SMSF to contribute to that SMSF are:

  • Compulsory superannuation on behalf of their employer
  • Tax offsets to contributors and concessional tax on investment earnings within the SMSF
  • Benefits in retirement
  • Insurance payments (such as payments to life and disability insurances)
  • Asset protection
  • Financial security for the dependents of the member.

AGE RESTRICTION IN ACCEPTING CONTRIBUTIONS

Members under 65 years of age

There are no restrictions and the trustee can accept all types of non-mandated contributions. Trustee can also accept personal contributions if Tax File Number of the member is provided.

Members aged 65 or over but under 70

All types of non-mandated contributions are accepted and

  • contributions are mandated employer contributions (generally, such contributions are made as part of an award or superannuation guarantee contributions); or
  • a work test must be satisfied (i.e. the member must have worked at least 40 hours in 30 days in the current financial year).

Members aged 70 or over but under 75

Members can only contribute employer and personal contributions. They must be employed.

Members aged 75 or over

Only mandated employer contributions can be accepted.

Contributions made on behalf of a spouse of a member are subject to similar rules except they cannot be made after the spouse turns 70.

You should note that compulsory superannuation support under the Superannuation Guarantee scheme is not payable where an individual worker is:

  • earning less than $450 per month
  • under 18 years old and working 30 hours or less per week
  • a non-resident who works outside Australia
  • a resident paid by a non-resident and who works outside Australia.

TYPES OF CONTRIBUTIONS

There are two types of contributions. We have provided more information about each of them.

Concessional Contributions

For the Contributions made by employer or individual to the superannuation fund, contributions tax is payable by the superannuation fund.

Since 2 July 2007, the amount of concessional (i.e. tax deductible) contributions that can be made by without incurring excess contributions tax are limited by a concessional contributions cap. Currently, the concessional contribution cap is $25,000 per annum.

From 1 July 2018, you can 'carry-forward' any unused amount of your concessional contributions cap. These unused concessional contributions can be used on a rolling basis up to five years. After five years, amounts carried forward that have not been used will expire.

The financial year 2019-20 will be the first year in which you can access unused concessional contributions.

You will only be able to carry forward the unused concessional contributions cap if your total superannuation balance at the end of June month of the previous financial year is less than $500,000.

Non-Concessional Contributions

The maximum non-concessional (i.e. after-tax) contribution that can be made for a member before incurring excess contributions tax is $100,000 per annum. This limit is subject to indexation. From 1 July 2017, non-concessional contributions can only be made if the total superannuation balance of the member is less than $1.6 million.

If the member is under 65 years of age at the start of a financial year, she can bring forward two years’ worth of payments to contribute up to $300,000 in one tax year. A total contribution of $300,000 could also be split up over three years, into varying amounts.

As an example, non-concessional contributions could be made as follows:

Scenario Year 1 Year 2 Year 3 Total Contribution
1 $100,000 $100,000 $100,000 $300,000
2 $300,000 $0 $0 $300,000
3 $100,000 $200,000 $0 $300,000

ROLLOVERS

Rollover means a transfer of superannuation monies into your current SMSF. Except in the case of certain transfers from overseas funds, these are not contributions and therefore do not count towards the contribution caps.

You can make contributions in the form of an asset other than money, and that is known as In-specie (asset) contributions. Generally, you must not intentionally acquire assets from related members of your fund. However, there are some exceptions in the nature of assets to this rule which include:

  • listed shares and other securities
  • business real property.

You must ensure that specific rules are satisfied such as “Arm’s length Investments” and “Market Value”.

In-specie contributions may have Capital Gains Tax consequences for the contributor, as well as possible stamp duty implications. The tax treatment of the contribution within the super fund can be the same as a monetary contribution and we recommend you to consult a tax adviser.