Ask the Expert: Super optimisation – how to go the extra mile with your contributions

There are opportunities to make further contributions to super. But some care needs to be taken in how you go about it. Photo: Getty/TND

• Question 1: I look forward to your articles, Craig. I am retired, comfortably, lucky to have a defined benefit (DB) pension. I’m aged 65, own my own home and have zero debt.  I also have around $1.7 million in an industry super fund, all in an accumulation fund. I have never had funds in the pension phase.
  I manage to save money on my DB pension but have been placing savings in super rather than leaving it in the bank. I would like to continue to do this now that the work rule does not apply until age 75. Can I contribute more funds to my accumulation fund? Cheers, Warren  

Thanks for the feedback and well done on putting yourself in a great financial position.

You are correct in that the ‘work test’ has been abolished for most super contributions, which was applicable for individuals between the ages of 65 and 74.

But once you have a ‘total super balance’ of $1,700,000 you cannot make any further aftertax (non-concessional) contributions.

However, this figure is indexed by CPI and the ATO has confirmed that this figure will rise to $1,900,000 from July 1, 2023.

This may give you an opportunity to make further contributions to super. But care needs to be taken as your defined benefit pension should also be counted within your total super balance as well as your industry fund of $1,700,000.

You can log onto MyGov to see what the ATO has recoded as ‘your total super balance’. It is only the balance as at the previous June 30 that needs to be considered before making a contribution.

The only other option is to make a personal tax-deductible (concessional) contribution to super. These contributions can be made regardless of your total super balance.

However, if you have no other assessable income to claim the tax deduction from, then this will be disallowed. The other impediment to making tax-deductible contributions is that is requires a work test to be met from age 67 onwards, therefore this option may not be applicable for yourself.

As your super balance has been growing there will be a point where surplus funds will just have to be saved outside of super. Still, it’s a nice problem to have.

• Question 2: I am considering ending my SMSF. There’s plenty there to get by on, but how to do it? What are the implications? Just so if or when I decide to go ahead I have some knowledge when I talk to an accountant.

Some people love running their own SMSF, it’s almost like a hobby, whereas others tire of it, and it becomes a chore.

There may be other reasons why people close them, such as a death of a member, low balance, or change in investment approach.

In any event, anyone with an SMSF should have an exit plan.

Broadly, the steps to close a SMSF are as follows:

1. Check your SMSF trust deed, which should specify any specific requirements about winding up the fund
2. Withdraw or rollover all super (leaving an amount to pay final tax or expenses,  if required). You will need to select an industry or retail fund to rollover to.
3. Appoint an SMSF auditor to complete the final audit
4. Complete and lodge the final SMSF annual return
5. Pay any outstanding tax
6. After all liabilities have been settled and requested refunds are received, close the fund’s bank account.

The ATO has a detailed winding up your SMSF page, including a checklist, which is handy when speaking with your accountant.

• Question 3: I am 69. I have $699,000 in my super account and receive a pension of $45,000 annually. I also earn about $10,000 a year and own my home, valued at about $1.3m. Am I eligible for any age pension?

If being assessed under the income test you would be eligible for a part age pension, but your level of assets is too high, and it’s the test that gives you the lowest payment that is applied. In this case nil.

In order to receive a part age pension, a single person can have assets up to $634,750 as at April 2023 (this does not include your home which is not counted at all under the income or asset test).

This figure is indexed, so once/if you start sending down some of your super, you may be eligible for a part age pension down the track.

• Question 4: Is all of the Centrelink Age Pension taxable? My payment summary shows a taxable component which is less than what I received during the financial year.

Most of your age pension payment is taxable. However, there are some supplements that get paid with the age pension which are not.

This would explain why the taxable component is a bit lower than your overall payment.

Craig Sankey is a licensed financial adviser and head of Technical Services & 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.

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