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Enhanced Guide to Super Balance Caps, Super Contributions, and Tax Incentives for SMSF Clients

Introduction
Managing a Self-Managed Super Fund (SMSF) effectively requires a comprehensive understanding of various caps, contributions, and tax incentives. With recent updates and ongoing changes, it’s crucial to stay informed. This article delves into these aspects, including the latest on the Total Pension Balance (TPB), to optimize your SMSF retirement planning.

Super Balance Caps: Total Superannuation Balance (TSB), Transfer Balance Cap (TBC), and Total Pension Balance (TPB) here’s a recap for the un-initiated.

1. Total Superannuation Balance (TSB): Your total superannuation accounts’ sum as of June 30 each year. It influences your eligibility for various contributions and benefits.
2. Transfer Balance Cap (TBC): Limits the amount transferable to a tax-free retirement account. The TBC is a lifetime cap indexed periodically.
3. Total Pension Balance (TPB): A new measure effective from August 1, 2023, with a cap of $1.9 million. It specifically refers to the total amount you have in retirement phase pensions.

Super Contributions: Concessional and Non-Concessional
1. Concessional Contributions: These include employer contributions and personal contributions with a tax deduction. The cap for 2023/2024 is $27,500.
2. Non-Concessional Contributions: Made from after-tax income, these have a cap of $110,000 per year, with the possibility of bringing forward future years’ caps under certain conditions.

Concessional Contribution Catch-Up Limits
Unused concessional caps can be carried forward for up to five years, provided each member has less than $500,000 in super as part of their TSB at the 30th of June.  

Super Splitting
Allows for splitting certain super contributions with your spouse, which importantly count towards your partners cap and are  importantly, credited to their contribution caps, provided they are  under preservation age, regardless of working status, or between preservation age and 65 years of age and has not permanently retired from the work force. This is often a strategy used by couples, where on partner is older than the other, allowing increased low tax savings for retirement for the partner who reaches age 60 first, aiding in tax-effective retirement planning.

Hardship Withdrawal Conditions for Super
Accessing super early is permitted under specific conditions like severe financial hardship or terminal medical conditions.

  • You have received eligible government income support payments for a continuous period of 26 weeks.
  • You are not able to meet reasonable and immediate family living expenses.
The minimum withdrawal is $1,000 and the maximum is $10,000 if you meet the above criteria.
 

Other Tax and Super Incentives
• Government Co-Contribution: For low to middle-income earners contributing to their super.
• Spouse Contribution Tax Offset: An offset for contributing to a spouse’s super.

Category

2023/2024 Figures

Total Superannuation Balance (TSB) Cap

Indexed Annually

 

 

Transfer Balance Cap (TBC)

Indexed Annually (Lifetime Cap)

Total Pension Balance (TPB)

$1.9 Million (Effective Aug 2023)

Concessional Contribution Cap

$27,500 p.a.

Non-Concessional Contribution Cap

$110,000 p.a.

Carry-Forward Concessional Cap

Up to $27,500 p.a. (5-year limit)

Hardship Withdrawal Conditions

Specified by ATO guidelines

Conclusion
With the introduction of the TPB and continuous updates in superannuation regulations, it’s vital for SMSF trustees and members to stay informed. Leveraging these caps and incentives can significantly enhance your retirement strategy. My SMSF suggests you, obtain professional advice to navigate these complexities effectively.

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