BT head of financial literacy and advocacy Bryan Ashenden said with the new financial year having now started, it is necessary to re-determine a member’s ability to make non-concessional contributions by determining their total super balance (TSB) at 30 June measured to the $1.6 million.
Mr Ashenden noted that the ASX 200 index fell by 11.3 per cent for the 2019–20 financial year.
“[However], very few member balances would be invested exactly in line with that index, so may not have fallen to the same extent,” Mr Ashenden said.
A member’s TSB is also pivotal for determining an SMSF’s eligibility for other types of contributions and measures.
Townsends Business & Corporate Lawyers special counsel, superannuation, Maria Siu reminded SMSF professionals that the TSB determines whether an SMSF can use the segregated asset method to calculate exempt current pension income.
“This happens if, at any time in the financial year, the SMSF has at least one retirement phase income stream and, as at 30 June of the previous year, there was a member of the fund who had a TSB above $1.6 million and was receiving a retirement phase income stream from the fund or any other provider,” Ms Siu explained.
“If this condition has been triggered, all the assets of the SMSF will be disregarded small fund assets and must use the proportionate method to calculate ECPI.”
The TSB also has implications for the government co-contribution and the spouse tax offset.
“The government co-contribution will not be available if the member’s TSB of the previous year (TSB-PY) is at or above $1.6 million, even if all the other eligibility criteria have been met. This is the same for the spouse tax offset. If the receiving spouse’s TSB-PY exceeds the $1.6 million limit, the offset will not be available,” she noted.
The total super balance also impacts a member’s ability to carry forward unused concessional contributions. This measure is only available, she said, if the TSB-PY of the relevant member is less than $500,000.
