TSB trap flagged with super fund expenses
SMSF trustees with balances above $1.6 million have been warned against paying for expenses on behalf of their fund due to a trap with the total superannuation balance.
One of the most understated traps with the total superannuation balance, according to Miller Super Solutions founder Tim Miller, is personally funding super fund expenses.
“Previously, it was widely accepted that meeting a fund expense could be treated as a contribution,” explained Mr Miller.
“This is still the case but now the capacity to do so will be linked to a member’s total superannuation balance.”
Mr Miller reminded SMSF practitioners and trustees that the total superannuation dictates an individual’s ability to utilise the non-concessional contribution cap.
“The rules require an assessment of a member’s total superannuation balance at the preceding 30 June,” he said.
If the total superannuation balance is greater than $1.6 million, he said, then the member will not be able to make non-concessional contributions.
Mr Miller said SMSF trustees should also be careful with some of the traps relating to the transitional bring-forward rules and total superannuation balance.
“The bring-forward is triggered in the first year that a contribution exceeds the standard cap and is fixed for the following two financial years. Clients may have triggered the bring-forward prior to 30 June 2017 but not fully capitalised on the limit,” he explained.
“For those clients that did trigger pre-1 July 2017, their capacity to contribute is based on how much they originally contributed and what their total superannuation balance is.”
Where the cap was triggered in the 2015-16 year, the full three-year limit is $460,000, and where it was triggered in the 2016-17 financial year, the full three-year limit will be $380,000, he explained.
“As an example, a 60-year-old client who contributed $400,000 during the 2016-17 year is unable to contribute further non-concessional contributions until the 2019-20 financial year. Then of course any further contributions will be linked to their total superannuation balance,” he said.
“Whilst any individual who contributed in the 2015-16 year is now outside the transitional rules, it’s important to recognise whether the bring-forward rules were applied as there could be a contribution made post 1 July 2017 that is linked to the transitional rules. For example, if a client contributed $250,000 in 2015-16 and a further $210,000 in 2017-18 then their bring-forward resets from 1 July 2018.”