Meeting a SMSF Condition of Release

Outside of some exemptions which will be covered in a later video, to cash superannuation a member must meet a condition of release.

There are four conditions of release that have no limitations and allow you unlimited access to your superannuation benefits. These are:

  • Reaching preservation age and retiring
  • Attaining the age of 65
  • Terminal Illness
  • Death

Types of SMSF Contributions Explained

Concessional contributions are made into your super fund before tax, and include: employer contributions, such as. compulsory employer contributions. any additional concessional contributions your employer makes. salary sacrifice payments made to your super fund.

Non-concessional contributions are made into your super fund from after-tax income. These contributions are not taxed in your super fund.

Member versus Employer Contributions

Personal super contributions are the amounts you contribute to your super fund from your after-tax income (that is, from your take-home pay).

Employer contributions are the amounts you contribute to your super fund from before-tax income (being super guarantee and salary sacrifice arrangements).

A salary sacrifice arrangement is also commonly referred to as salary packaging or total remuneration packaging. It is an arrangement between an employer and an employee, where the employee agrees to forgo part of their future entitlement to salary or wages in return for increased superannuation contributions.

The low income super tax offset (LISTO) is a government superannuation payment of up to $500 to help low-income earners save for retirement. Further conditions apply.

If you earn $37,000 or less a year, you may be eligible to receive a LISTO payment. This is usually paid directly into your super fund.

Super co-contributions help eligible people boost their retirement savings. If you’re a low or middle-income earner and make personal (after-tax) contributions to your super fund, the government may also make a contribution (called a co-contribution) up to a maximum amount of $500.

The amount of government co-contribution you receive depends on your income and how much you contribute. Further conditions apply.

In-specie contributions are contributions of assets into superannuation that are not cash. This could be shares, units, collectibles and other items. These could be either concessional or non-concessional contributions.

Small Business CGT concessions

In addition to the capital gains tax (CGT) exemptions and rollovers available more widely, there are four concessions that allow you to disregard or defer some or all of a capital gain from an active asset used in a small business – two of which can be put into superannuation.

SMSF Contributions

Firstly, there are two main types of contributions that can be made into super. These are concessions contributions and non concessional contributions. 

In basic terms, concessional is where the money is contributed pre it being taxed and or a tax deduction is claimed for the contribution going into super and then the super fund pays a contribution tax. and non concessional is where there is no tax deduction claimed – either inside or outside of super. Effectively after tax money.  

Types of concessional contributions: 

  • Superannuation Guarantee (made by your employer), are compulsory amounts paid into super, usually on a regular basis 
  • Salary sacrifice contributions – these are voluntary contributions your employer pays out of your pre tax income into your nominated superannuation account 
  • Personal Contributions – these are voluntary and made by you, with a tax deduction being claimed. The money you contribute is post tax money (that is, you have already paid tax on it) 

Types of Non Concessional Contributions: 

  • Personal Contributions – these are voluntary and made by you, with a tax deduction being claimed. The money you contribute is post tax money (that is, you have already paid tax on it)

The main types of Contributions:

  • Superannuation Guarantee 
  • Spouse Contributions 
  • Spouse Contribution splitting 
  • Salary sacrifice contributions 
  • Personal concessional contributions 
  • Personal non concessional contributions  
  • Catch up contributions 
  • Work test exempt contributions 
  • Downsizer contributions 
  • Government co contribution 
  • Low income super tax offset 
  • Small business CGT concessions  – after tax contribution, but with its own cap 

Self Managed Super Fund Downsizer Contributions

From 1 July 2018, Australians aged 65 years of age or older are able to make a $300,000 downsizer contribution” into their superannuation fund, per person, from the sale proceeds of their family home.

This was a 2017-18 budget measure as part of the package of reforms to reduce pressure on housing affordability in Australia and became law on 13 December 2017.

The downsizer contribution is not a non-concessional contribution and will not count toward your contribution caps. The downsizer contribution can still be made even if you have a total super balance greater than $1.6m. It also only affects your total super balance when your balance is re-calculated at the 30th June to include all of your other contributions (if any).

If you sell your home, are eligible and choose to make a downsizer contribution, there is no requirement for you to purchase another home.

To make a downsizer contribution to superannuation, you need to:

  • Be 65 years old or older at the time you make a downsizer contribution.
  • Your contribution is from the proceeds of selling your home.
  • You haven’t accessed the downsizer contribution for another property.
  • The contract date is on or after 1 July 2018.
  • Your home was owned by you or your spouse for 10 years or more prior to sale.
  • Your home is in Australia and is not a caravan, houseboat or other mobile home.
  • The proceeds are either fully or partially exempt from capital gains tax under the main residence exemption.
  • You have provided your super fund with a ‘Downsizer contribution into super’ form either at time of contract or before making your downsizer contribution.
  • You make your downsizer contribution within 90 of receiving the proceeds of sale.
  • The contribution can’t be greater than the sale proceeds of your house.

A few considerations:

  • It can be an opportunity to boost your super and you don’t actually have to downsize… you could buy a more expensive or larger house
  • You don’t need to buy a new home
  • There is no age limit and you don’t need to meet the work test
  • Contributions will count toward age pension tests – income and assets tests 
  • Agent fees, stamp duty, advertising, moving costs, etc can be substantial and should be considered prior to making any decisions on using the downsizing contribution  measure

The above information is general information only and should not be considered financial advice. We don’t know you or your circumstance and strongly suggest seeking appropriate, accredited financial advice before making any decision. This is a guide only.