Key points
- SMSFs offer flexibility to invest in property, collectables, and private assets not typically available in industry funds.
- Strategies like deferred contributions and downsizer payments help optimise tax and boost super balances.
- Equalising member balances and managing death benefits improves long-term tax efficiency and estate planning outcomes.
There are many ways to maximise your superannuation, whether you have an industry fund or a Self-Managed Superannuation Fund (SMSF). However, an SMSF provides some additional options that are not available in an industry fund. It is also easier to implement and manage some maximisation strategies within an SMSF.
Overall, an SMSF provides greater flexibility and control to maximise your super. In this article we discuss some of the main ways you can maximise super within an SMSF.
What is an SMSF?
A Self-Managed Superannuation Fund (SMSF) is a private superannuation fund regulated by the ATO. In contrast to industry funds, SMSFs can only have up to six members, usually family members, who also act as the trustees. Members jointly manage the fund’s assets and make investment decisions.
Examples of how you can maximise super in an SMSF
Direct property ownership
In an SMSF you can invest in residential or commercial property. This includes the ability to borrow in super to purchase the property. You can even lease commercial property to a related business on commercial terms.
Ownership of certain assets
An SMSF provides greater flexibility than an industry fund in the types of assets in which you can invest. For example, provided you comply with the rules, you can invest in things such as collectables, artworks, private unit trusts or even cryptocurrency.
Deferred allocation of contributions
Members of an SMSF can adopt a “deferred contribution” strategy which effectively allows a member to claim a “double deduction” for contributions in one year, utilising the next year’s concessional contribution cap. This strategy is generally only possible in an SMSF, and careful management is required. However, it can be particularly useful for individuals who may have had a large capital gain or income event in that year.
Unused concessional and downsizer contributions
If an individual meets the relevant criteria, it is possible to utilise unused concessional contributions from previous years.
Further to this, eligible members can make a “downsizer” super contribution from the sale of their home if it has been owned for more than 10 years.
Both strategies have strict criteria, but it is easier to manage these super maximising strategies in an SMSF because you have full control and visibility over the administration of the fund.
Equalising member balances
It can be useful to split contributions between you and your spouse to equalise member balances, which can assist with managing various caps. Further, if one spouse passes away, having relatively equal balances may make it easier to effectively keep the deceased spouse’s benefits in a tax effective super environment as a death benefit pension. This is more difficult to achieve and to manage in some industry funds.
Easier management of death benefit optimisation, contribution tracking and pension strategies
In an SMSF, you don’t have the restrictions that an industry fund may have on how many pensions you can have or on making complex beneficiary nominations. An SMSF can provide freedom and flexibility when it comes to your estate planning and as you are in control, you can easily adapt your strategies to accommodate any life changes.
Expert help for business owners in managing an SMSF
Superannuation is the most tax effective means of saving for retirement, so maximising your super is vital.
With the rules regarding super constantly changing and compliance heavily regulated, expert advice can save you time and money as you maximise your super.
Pitcher Partners Newcastle and Hunter has a specialist superannuation team that understands the ins and outs of maximising super in an SMSF.
We also support clients with managing SMSFs, tax planning, SMSF compliance and administration and technical support. Our online reporting technology gives clients real time information on how their super portfolio is progressing.
Have a question about SMSFs?
We love questions. If you want to know more about Pitcher Partners superannuation (SMSF), business tax and advisory, and wealth management services, please contact us.
