Practical Systems Super SMSF specialist Bob Locke told SMSF Adviser that since the expansion of the deductible contribution rules to employed professionals in 2017, making one-off contributions had emerged as the more popular option among newer clients looking to put more of their earnings into super.
“Employed clients looking to start making additional concessional contributions tend to opt for the personal concessional route as it is more flexible and can effectively be back-dated if they start partway through the year,” Mr Locke said.
“I have also seen situations where some who have not used salary sacrifice before have made personal contributions towards year-end to take them to the maximum concessional limit and help offset tax on other income such as dividends or capital gains.”
Deductible contributions were previously only available to those who earned less than 10 per cent of their income from employment. However, from 1 July 2017, this was expanded to employees, meaning they could make additional personal contributions at any time rather than a fixed salary sacrifice arrangement with their employer.
However, Mr Locke said the firm’s more established clients had still stuck with the salary sacrifice route following the introduction of the changes given the ease in doing so.
“Most of my clients who were previously using salary sacrifice have continued with that because of the discipline aspect and the fact that arrangements were already in place,” he said.
For those clients that were contemplating a mix of salary sacrifice and personal contributions, Mr Locke said it was key for advisers to take note of the concessional cap which had to include all the client’s contribution types.
“The important thing is to remember that total concessional contributions should not exceed the cap of $25,000 and this cap includes superannuation guarantee contributions by the employer, salary sacrifice contributions and personal deductible contributions,” he said.
