Managing contributions amounts that are greater than the non-concessional cap

Restrictions on non-concessional contributions can mean that a member who has funds in excess of the non-concessional cap (for example through inheritance, bonuses, the sale of a house etc) may be restricted in their planning.

One way an individual can work with the cap on non-concessional contributions may be to invest jointly with a SMSF and progressively transfer the component of the investment that the member holds personally into their super fund. This uses a variation on a strategy in which a SMSF jointly owns assets with its members.

Joint investment by a SMSF and its members is permitted. This can be achieved by either, the fund and the member acquiring the asset as tenants in common or alternatively, a trust could be settled with units being allocated to the fund and its members in the desired ratios.

Discussion regarding the merits of the two alternatives generally resolves around the flexibility afforded by the unit trust in that, if the co-owners wish to change their respective ownership proportions, one would simply transfer units to the other. Unit trusts offer a more flexible means by which co-owners

Utilising the concessional contributions cap

One of the most common ways to utilise the concessional contributions cap is for a client to salary sacrifice. When entering into a salary sacrifice arrangement, the employee must ensure that it is an effective salary sacrifice arrangement. To avoid losing their benefits, it is important to ensure that the clients Superannuation Guarantee payments are based on the total salary package rather than the reduced salary package (i.e. salary after salary sacrifice). Speak to Superfund Works to find out what is an effective salary sacrifice arrangement.

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