SMSF adviser logo
subscribe to our newsletter

Tips for reducing tax for your SMSF clients

By Greg Einfeld
18 August 2015 — 2 minute read

There are some effective – and often basic – strategies to reduce or eliminate the tax payable on the taxable component of an SMSF that practitioners are not taking advantage of.

Nomination of beneficiary

By nominating a spouse, minor child or financial dependent as a beneficiary, the family can avoid the payment of tax on a lump sum death benefit.

One common trap is nominating the estate as a beneficiary, and as a result having superannuation passed on to adult children upon the member’s death. Members looking to leave assets to their adult children would be better served by leaving a higher proportion of their non-super assets to the children, and all of their super to their spouse.

Delay TTR commencement

If a member is looking to commence a transition to retirement (TTR) pension in their late 50s then they might choose to delay this decision until age 60. The benefit of doing so is that they won’t be taxed on the pension payments made from the super fund. This strategy is particularly useful for members who are still working or have other taxable income outside super. If their taxable income is less than $37,000 then it often makes sense to commence the pension sooner because the incremental personal income tax is negligible.


With a re-contribution strategy, lump sum or pension payments with a high taxable component are taken out of the fund, and replaced with non-concessional contributions which are tax-free. It is important to keep in mind contribution caps and TTR maximum pension payments. It is also important to ensure that the non-concessional contribution coming back into the fund is quarantined from any taxable component in the accumulation balance, otherwise the benefit of the re-contribution will be lost. Multiple pensions can be useful in this situation.

Multiple pensions

Operating multiple pensions within one super fund can provide a great way of reducing the taxable component. If a member aged under 60 withdraws above the pension minimum in a given year, then the excess withdrawal can be taken from the pension with the highest tax-free percentage. Conversely, if a member aged over 60 withdraws above the minimum then the excess can be taken from the pension with the highest taxable percentage. This ensures that the minimum tax is paid before age 60, and the taxable component can be reduced after age 60. Multiple pensions also work well in conjunction with a re-contribution strategy.

Lump sum withdrawal

This is a suitable solution for members who have just received the shocking news that they only have a short time to live, and whose spouses are no longer alive. They can withdraw all their assets from super and their children can avoid any tax upon death. Of course there is a catch – if they live longer than expected then, due to contribution caps and age limits, they might not be able to get the money back into super. So this is not a strategy to rush into.

What if your SMSF client hasn’t tracked their tax components?

SMSF trustees who haven’t tracked their tax components are going to have issues in the future so it’s vital the SMSF practitioner and the trustee go back and calculate the components as soon as possible. If no information is available in the future then the general assumption would be that the entire fund is taxable, an assumption that could be detrimental to your client.

Greg Einfeld, director, Lime Actuarial


Get the latest news and opinions delivered to your inbox each morning