By Monica Rule

Timing is crucial!  There are different time periods to take into consideration when it comes to superannuation that can make a big difference to your retirement savings.  Some areas of the superannuation law are based on the beginning of the financial year, and some at the end of the financial year.  Some laws which allow or prevent a particular action depend on your age.  Some limits are based annually, some are pro-rated and some are not.

The best way to keep track of the different time periods is to have good reference material and by maintaining good records.  I have listed some of the different time periods that affect self managed superannuation fund (SMSF) members.

Contributions into an SMSF:  If you are aged 65 to 74, you need to have worked once in a financial year at least forty hours in a period of not more than thirty consecutive days to make non-concessional contributions.  The critical timing issue to consider here is your age on the day you made the contribution and your work status at any time in the financial year before you made the contribution.  You need to meet the work test only once in a financial year, but it must be met before you make a contribution.

Concessional Contributions: The maximum concessional contributions you can make into your SMSF, taxed concessionally at 15%, is $35,000 if you are aged 49 or over on the last day of the previous financial year.   The timing issue here is your age at 30 June of the previous financial year. The limit is an annual limit regardless of when you make the contribution.

Non-concessional Contributions:  The maximum non-concessional contributions you can make into your SMSF that attracts 0% tax rate is $540,000. You must be under 65 at any time in the first year you make non-concessional contributions in excess of the $180,000 annual limit.  The important timing issue here is your age in the first financial year you make the contributions. In addition the higher limit only applies once you exceed the annual limit of $180,000.

Contributions Caps:  The concessional and non-concessional contributions caps are the total amount that you can contribute each year or over three years.  They are not pro-rated even if you made the contribution at any other time during the year and not at the beginning of the year (i.e. 1 July). If the annual caps are also not fully used in any one year, then the unused amount cannot be credited to a future year.  It operates on a “use it or lose it” basis.

Minimum pension payment:  If you are under aged 65 and accessing a pension from your SMSF, you need to pay a minimum of 4% of your pension account balance each financial year. The time period is based on your age and the percentage factor at the commencement of your pension or 1 July of each financial year.  The minimum amount is pro-rated in the first financial year, calculated from the date the pension commenced.

Maximum pension payment:  If you are accessing a transition to retirement pension, your pension cannot exceed 10% of your pension account balance at 1 July or the date the pension commenced.  The maximum limit is not pro-rated regardless of when you commenced your pension.

Tax treatment of superannuation benefit:  If you receive a superannuation benefit after you turned 60, then it is tax-free.  If you receive it the day before you turn 60, then tax is payable depending on the components of the superannuation benefit. Your age on the day you received the benefit is the timing issue to consider here.

For Gold and Platinum members :  Below is an example on how you can make concessional contributions in excess of your annual limit, claim a larger tax deduction and not be penalised by the ATO all based on good strategy and timing.

This article was prepared by Monica Rule. Monica Rule worked for the Australian Taxation Office for 28 years, is a SMSF Specialist Adviser, and is the author of ‘The Self Managed Super Handbook’. Monica is running SMSF Seminars in various states. For more details visit: www.monicarule.com.au.

Build these documents now:

• Self Managed Superannuation Fund
• SMSF - Deed Update
• Investment Strategy for Self Managed Super 14/15
• Build a Company (ELodgement)
• The Self Managed Super Handbook