How much money can I contribute to my SMSF?

by Charlie Threlfall
SMSF Financial Advisor

A healthy SMSF fund is important for wealthy retirement plans. Having extra funds in your SMSF is likewise a good investment for your future. Once it became your habit, you would have plenty of financial benefits. However, any contribution mistakes would result in costly rates and eradication of your tax advantages.

To ensure that you make contributions correctly, read further as we guide you on making proper contributions. This will help you prevent wasting your savings and costly fees. 

Salary Sacrifice 

Your income salary is a great source of money to contribute to your SMSF fund. The money that you contribute is called “Salary Sacrifice.” It is deducted from your taxable income allowing you to have lesser tax deductions every year. 

However, there is a limit when contributing to your SMSF fund. The amount you contribute to your super determines the number of tax benefits you can avail of. You can contribute before the release of your salary sacrifice but it comes with a limitation. This limit is known as the “concessional contributions cap.” 

Concessional Contributions Cap 

The tax that you contribute to your super fund is the concessional contributions cap. It is equivalent to 15% of the concessional tax rate. This is low and such a good rate of tax. In the year 2017-2018, there are changes in the concessional contributions cap wherein, anyone regardless of age can make contributions up to a maximum of $25,000 each year in superannuation at a rate including: 

l Contributions of the employer (salary sacrifice)

l Own contribution disguised as a tax deduction 

Make sure that you don’t exceed the $25,000 contribution limit. Once you exceed you will be charged the usual marginal 15% tax rate PLUS the 31.5% concession contribution. In total, 45.6% worth of taxes will be deducted from your total contribution. 

Non-concessional Contributions

Besides salary sacrifice, you can also contribute to your SMSF fund through non-concessional contributions. These contributions are from savings or personal pay and are subject to a $100,000 yearly cap. Take note of not exceeding the limit, too. Once you exceed, you will be taxed for a total of 47% in your super fund. 

Moreover, don’t fret if you have that much income for salary sacrifice and enough savings for non-concessional contributions. The Australian government can contribute $500 in your super if you have an annual salary of at least $37,000. This scheme is known as the Low Income Super Contribution. This scheme helps trustees contribute to their SMSF regularly. 

Final Thoughts

You mustn’t exceed the standard $25,000 super contribution. Even if you have a lot of money to contribute, exceeding will result in costly fees thereby wasting your savings. The best way to contribute to your SMSF is payment on a regular basis and with the right amount. This would ensure a long term positive impact than contributing to what is allowed by the rule. If you are still unsure, it is best to talk to your SMSF financial adviser about the possible tax benefits with the proper contribution.

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