Top Ten SMSF Strategies

Written by Karen Dezdjek

If you have an SMSF, you should speak to a Financial Adviser to see if these ten smart strategies could apply to you.

1. Consider commencement of an Account Based Pension as soon as you are eligible

This aids in maximizing the amount held in pension phase from a Transfer Balance Cap perspective as income generated and growth of the assets do not count towards the Transfer Balance Cap.

2. Take any excess over the minimum pension as a lump sum

For members with an accumulation and a pension account take excess pension withdrawals from the accumulation account to create a more favourable ECPI for the following year. For members in full pension mode consider taking excess pension drawings as a commutation to create additional room in the Transfer Balance Cap of the member.

3. Run Multiple Pensions

Allows a member to crystalise taxable and tax-free components. When excess pension drawings are taken allocate to the pension with the highest taxable component. Maintaining balances with the highest tax-free components will be of benefit when a death benefit payment is made to a non dependant.

4. Utilise the Recontribution Strategy

Where eligible, this allows a member who has a pension balance with a high taxable component to withdraw a lump sum and recontribute this amount as a non-concessional contribution and commence a new pension. Alternatively, if the member has a balance in excess of $1.6 million withdraw the excess and re contribute for the spouse if they have a lower balance (assuming they are eligible to receive contributions).

5. Pay Life Insurance from a Pension account with a nominated reversionary

When proceeds are received from a life insurance payout and the pension has a reversionary nominated the proceeds will form part of the original pension account. The balance that is assessed for Transfer Balance Cap purposes will be the balance at the date of death. Therefore, any amount received after this date no matter how large will not be assessed from a Transfer Balance Cap perspective and will all be maintained in a tax-free environment.

6. Implement Spousal Contribution Splitting

For couples with inequitable balances an eligible a member can receive 85% of their spouse’s prior year concessional contributions. Advantageous for members who wish to equalise their members balances who may not meet a condition of release for a recontribution strategy.

7. Register the fund for GST

Voluntary registration for GST means that a fund can claim back 75% of the GST on ongoing advice, administration and brokerage fees. This is suitable for a fund that does not hold commercial property and has significant eligible expenses that incur GST.

8. Consider segregating Assets

A fund can no longer segregate for tax purposes if a member has more than $1.6 million. However, a fund may still segregate from an investment perspective which will enable high growth assets to be allocated to the pension account. This is beneficial from a Transfer Balance Cap perspective and assist in ensuring the pension will last the members lifetime.

9. Utilise the Downsizer Contribution

Members who sell their family home are now eligible to contribute up to $300,000 each. Beneficial for members who are wanting to top up their balance in a tax-exempt environment and haven’t previously been able to contribute as they did not meet the work test.

10. Consider the benefits of Reversionary Pension Nominations

Assess whether members in pension mode would benefit from a reversionary nomination. The amount attributed to the Transfer Balance Cap will be assessed on the date of death and the fund has twelve months use of the deceased’s Transfer Balance Cap. This enables the fund to realise any potential capital gains in a higher tax-free environment. In addition, any growth in a deceased member balance in the following twelve months will not count towards the reversionary pension recipients own Transfer Balance Cap.

To discuss any of these strategies in further detail please contact Karen Dezdjek:

Email Karen Dezdjek or call her at 03 8825 4743.

 

The information in this article contains general advice and is provided by ExpertSuper™ Pty Ltd as an authorised representative of Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this article. Please refer to the FSG (available here) for contact information and information about remuneration and associations with product issuers.This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this article. Information in this article is current at the date of this article (3 Apr 2019) and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.

By | 2020-04-23T02:02:31+00:00 October 7th, 2019|SMSF|0 Comments