As the end of the month approaches, self-managed super fund (SMSFs) members are being urged to make a double contribution using an unallocated contribution reserve, should they have the cash to spare.
Members could make contributions this month that would be allocated to their July contribution caps, provided the contributions are allocated by 28 July. Their contribution eligibility needed to be satisfied in the year of the payment but wouldn’t need further reference in the year of allocation, which is “handy”, according to the SMSF Alliance, when members were eligible this year but won’t be next year.
Principal and SMSF specialist mentor at the Alliance, David Busoli, said that utilising the strategy was useful for both concessional and non-concessional contributions.
“For concessional contributions, where the caps have been fully utilised under this strategy, the fund can receive tax deductible contributions of $50,000 this year,” he said.
“Remember, though, that next year’s cap will be fully utilised. The strategy is useful where it is known that next year’s personal taxable income will be much less than this year. This may be relevant where a member is retiring at the end of this year or has experienced a year of unusually high income due to the realisation of a taxable capital gain.”
For non-concessional efforts, Busoli said that the “most useful” application of the strategy would be to delay the increase in the member’s total super balance so that an additional $100,000 contribution could be made.
The Australian Taxation Office (ATO) had warned, however, that “‘the intentional use of a reserve to reduce a member’s total superannuation balance to enable them to make non-concessional contributions without breaching their non-concessional contributions’ cap” would be scrutinised.
As such, Busoli said that members “should avoid this one”.