Non-Concessional Contributions

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Simpsons, 25th May, 2021.

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  1. Simpsons

    Simpsons Well-Known Member

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    Oz
    John Smith is a member of his own SMSF. He wishes to have all his pension to be as a tax-free component. He fits all the description to be able to do non-concessional contributions for his circumstance.

    He currently has $95k in accumulation phase as of 30th June 2020 (last financial year), which is mixed between taxed and tax-free components. He also has $200k in pension phase (being $100k in 2 different pension accounts) which are all as a tax-free component.

    He wishes to withdraw and re-contribute on 1 July 2021, but is unsure exactly what his accumulation phase balance will be on 1 July 2021, but it will be a lot higher than $100k. He has not made any non-concessional contributions in the 2020/2021 financial year.

    If he were to withdraw $200k and re-contribute $200k (making use of bring-forward provisions) on 1 July 2021 then start a 3rd account based pension, would there be any issues with this? Could he nominate that all funds in accumulation phase be used for withdrawal, then anything extra to be taken from the pension phase accounts?

    This is being done to make sure everything in accumulation phase be withdrawed, as there's no way to know what the balance would be on 1st July 2021, until the tax returns are done by the account about half a year later.
     
  2. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    How old is John ? What conditions of release does he fulfil ? Once he has 100% tax free it may be a simpler issue to reset the two old pensions to a single pension comprising all amounts. In order to perform the strategy as you appear to suggest, the fund accounts will need to be completed to determine the accumulation balance prior to 30 June 2021 incl earning and share of tax etc and each pension balance then its simple to complete the recontribution and achieve 100% tax free perhaps. This is straight forward with modern smsf software and would bring forward much of the 2021 year work to say 25th June so accurate member balances at that date is known. Then the final few days of the fund can be completed later - simple. An actuarial certiifcate is needed anyway. Then in 2021-22 matters would be simpler. TBAR reporting etc all needs to be completed as part of this process.