SMSF Strategy Guide: Online Library

Concessional Contribution Strategies

SMSF Education
Smsf strategy guide: Online library

30 June suspense account strategy

BACKGROUND

The strategy known as the 30 June suspense strategy applies where you
want to:

  • make a concessional contribution (or an employer wants to make a
    contribution for you) prior to 30 June, and
  • you would like to claim the tax deduction in that financial year, however you are already at your contribution cap limits?

One way is via a contributions suspense account pre and post the 30 June period.

HOW IT WORKS

Basically a concessional contribution can be made to the fund’s suspense account prior to 30 June, and claimed as a tax deduction in that year.

However the amount is not credited to your member account until (at the latest) the 28th July, which is in the new financial year and when the amount will be counted as a contribution.

This way, the contribution will be counted against the later financial year’s contribution caps. A very neat solution.

EXAMPLE

Bill is 59 years old and wants to make a $15,000 concessional contribution to his self managed super fund and claim it as a tax deduction this financial year, as he is winding down work and will have a lower income next year. This means the deduction will be more valuable to him this financial year when he is earning more.

Unfortunately he has already used up all of his $25,000 concessional contribution cap limit this year.

So is there a way for Bill to get what we needs ?

This is what he does.

  1. Bill contributes to his SMSF this financial year in June, and will claim the deduction this financial year. It will be treated as an assessable contribution in the SMSF this year and hence will add to the income of the super fund this year and be taxed as such this year.
  2. Bill will provide the SMSF trustee(s) with notifice of his intent to a tax deduction for the contribution amount.
  3. The SMSF administrators don’t allocate these contributions to Bill’s member account this financial year, but instead will allocate them to a ‘suspense account’ in the SMSF. This has the effect of delaying the contribution being counted against his concessional contributions cap until next financial year.
  4. In July before the 28th, the contribution is then allocated to Bill’s SMSF account, where it will be counted as a concessional contribution in that new financial year. This means he has a full $25,000 cap to play with again.

Note that the contribution isn’t added to the assessable income of the fund in the new financial year as it was already counted in the previous year.

As usual, check your trust deed that you are not prevented from doing this strategy. Note also that there may be some practical nuances around how this strategy is implemented in terms of SMSF accounting software. Check with your SMSF administrator that they can do it.

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