SMSF owners hold on to your caps By William Buck on 01/06/13 - Mins to read: 3 minutes If you have a Self-Managed Super Fund, you should be keeping a close eye on your contributions throughout the financial year – not just at year-end. There’s always a lot of talk about super contributions towards the end of the financial year. But 30 June doesn’t have exclusive rights on super strategies. In fact, leaving all of your super strategies until the end of the financial year may mean missing opportunities around your contributions caps – some of which can take months to play out. Let’s take a look at one strategy that’s of particular interest for SMSF owners around non-concessional contributions. What are non-concessional contributions? Non-concessional contributions are those that come from your personal savings. Unlike concessional contributions, non-concessional contributions are not taxed at 15% by your super fund. That’s because you’ve already paid income tax on this money when you earned it. The other key difference is that the annual limit on non-concessional contributions is much larger at $150,000, compared to only $25,000 for concessional contributions (which used to be $50,000 for people over age 50 but is now the same for everyone). Importantly, you also have the opportunity to make an even larger one-off contribution by taking advantage of the ‘bring forward’ rule. What is the ‘bring forward’ rule? If you are under age 65, you can potentially bring forward three years’ worth of non-concessional contributions into one financial year – effectively allowing you to contribute up to $450,000 in one year. This could be particularly useful if you sell an investment property, sell your business, or maybe downsize your house and free up a large sum of cash. The key benefit of this strategy is that you pay a maximum of 15% tax on interest or investment earnings inside super, compared to your marginal tax rate outside super. And once you’ve turned your super into a pension account, those earnings will be tax-free. If you have more than $450,000 (and assuming you haven’t already triggered the ‘bring forward’ rule in the past period), there is an opportunity to contribute $150,000 at the end of one financial year – making sure you don’t trigger the ‘bring forward’ rule – and then wait until July when you can then utilise the ‘bring forward’ rule and contribute up to $450,000. Can I transfer assets other than cash? In most cases, non-concessional contributions are made in cash. However, SMSF owners can also make an ‘in specie’ transfer of certain types of assets – such as ASX-listed shares or a commercial property (residential property is not allowed) – as long as the market value of those assets does not exceed $450,000 at the time of contribution. Remember, the penalties for exceeding your contributions caps are harsh. You will pay 46.5 per cent tax on the excess amount, plus any excess amounts will be included in your concessional contributions cap for the year. Could you be getting more wear out of your caps? Even if you don’t have a large amount to contribute to super, you could still use your concessional and non-concessional contributions caps to boost your retirement savings. To ensure you’re managing your SMSF for maximum benefit, and staying within the rules, make an appointment with your financial adviser. Disclaimer Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.