Question 1

I have $580,000 in my superannuation account and would like to contribute another $380,000 into it. Will this be taxed or is there any option to avoid paying on this contribution? Thanks.

Because the tax settings within super are so generous, there are caps on how much you can contribute to super each year.

There is an annual concessional cap of $32,500. And a non-concessional cap of $130,000.

Concessional super contributions are payments made into your superannuation fund from your before-tax (pre-tax) income. They are taxed at a low rate of 15 per cent inside your super fund instead of your usual higher income tax rate, making them a tax-effective way to boost your retirement savings.

Concessional contributions are generally made up of:

• Super Guarantee: The compulsory 12 per cent minimum payments your employer must pay into your super.
• Salary sacrifice: Voluntary amounts you ask your employer to pay into your super straight from your pre-tax pay.
• Personal deductible contributions: Money you pay into your super from your personal bank account and then successfully claim as an income tax deduction.

Non-concessional contributions are after-tax money you put into your superannuation fund. The standard annual cap is $130,000. Because you already paid tax on this money, the fund does not tax it upon entry.

For concessional contributions there is something called “carry forward” provisions. This is where you can contribute unused concessional contributions from previous years.

However, as your balance is over $500,000 you are not eligible; therefore you would need to stick to the annual cap of $32,500.

For non-concessional contributions, there is something called the “bring-forward rule”. This allows you to use future years’ contributions in one go.

However, if you do fully use the three years bring-forward rule, you cannot make future non-concessional until this period expires.

You can use the bring-forward rule to contribute up to $390,000 at once if eligible. Please see the table below.

Question 2

I will turn 80 in 18 months. When is the right time to wind up my self-managed super fund and move to either an industry fund or wrap account arrangement. 

I don’t need ongoing financial advice.

The right time to wind it up is when you no longer want the day-to-day responsibility of running the fund. It’s also very important to wind it up while you are still mentally fully functioning.

I’ve seen plenty of cases when the SMSF is wound up too late. Either the individual starts to lose cognitive ability or, if in a couple, the financial decision-maker dies and the partner has no idea what’s going on with the SMSF.

It’s good you are looking to be pro-active.

An adviser or SMSF administrator should be able to assist in closing the SMSF and transferring the funds to an Australian Prudential Regulation Authority-regulated super fund.

Whether you need any ongoing financial advice is a separate question. But if you do simplify your affairs, then you may be correct and obtain advice only when needed.

Craig Sankey is a licensed financial adviser and head of Technical Services and Advice Enablement at Industry Fund Services.

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.