SMSF contributing to nonworking spouses super

Discussion in 'Superannuation, SMSF & Personal Insurance' started by thydzik, 18th Nov, 2019.

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  1. thydzik

    thydzik Well-Known Member

    Joined:
    18th Jun, 2015
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    Perth
    Hi All

    I am working and my wife isn't.
    I would like to contribute to my wife's super about $50k,
    What's the most tax effective way to do this?

    So far from researching, it looks like if I nominate contribution splitting and bump up the concessional contributions to the max of $25k per year, I can reach $50k by 4 years, and it won't be such an initial financial impact.

    Thoughts?

    Thanks.
    Travis
     
  2. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    1. Spouse splitting each year of 85% of your concessional contributions. You can also split 85% of the past year (2019) provided no pensions have commenced.
    2. Non-concessional contribution from savings. Immediate.
    3. Concessional contribution provided your wife has assessable income of $37K approx OR MORE. Remember a concessional contribution of up to $25K per person cannot create a tax loss for that taxpayer.

    A salary sacrifice arrangement that pushes up your contributions and then after the year has ended is 85% split may take several years to effect.
     
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  3. thydzik

    thydzik Well-Known Member

    Joined:
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    Location:
    Perth
    thanks Paul, appreciated.

    If I go above the $25k concessional contribution, how is that taxed?
    It seems it is really difficult to get the figure exactly, if you are changing the salary sacrifice percentage mid year, and working of a percentage.

    Edit: from reading, it looks like you will just have to pay your marginal tax rate on any amount you exceed the $25k by. problem is you need to may interest on this amount as well.

    There is also
    "If you have a Total Super Balance of less than $500,000 on 30 June of the previous financial year, you can utilise any unused amount of your cap for up to 5 years to make a ‘carry-forward contribution’"
     
    Last edited: 18th Nov, 2019
  4. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
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    Posts:
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    Location:
    Sydney
    Dont exceed your cap. Thats why an excess tax applies. There is never a benefit.

    If you receive a bonus or a typical salary review etc make sure you under-target the $25K cap. You can always adjust the last two months etc

    The catch up rule is now available for you provided your balance is eligible. At present the catch up only refers to the shortfall in the 2019 year - The first of the possible 5 years. I tend not to mention this rule as many misunderstand it and they should carefully check eligibility. It involves financial advice.

    eg $21K contribution = $4K carry forward. Your 2020 cap is $25K + $4K = $29K
    However watch out for mistiming of when employers contribute. With media focus on unpaid super its not uncommon to find arrears being caught up eg 5 or 6 quarters in a year. Or a employer who just pays 5 quarters one year and 4 another. That isnt an exception to the cap.
     
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