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New rules shake up contribution mix, survey results

Sep 13, 2018, 15:39 PM

The average contribution to SMSF funds more than doubled as trustees took advantage of new legislation that increased contribution deductibility from July 2017.

Early results from a SuperConcepts survey of 2600 SMSFs shows that average quarterly contributions increased from $3,498 to $8,623 since new rules gave more access to tax breaks for personal contributions. 

“This was a positive rule change that SMSF trustees have embraced with gusto because it was only ever available to the self-employed,” says Phil LaGreca, SuperConcepts Executive Manager of SMSF Technical and Strategic Services. 

“It also shows the value of specialist advice because making a rule is one thing but getting people to know it, understand it and use it is where the professional advice market has really demonstrated strong value.” 

The average benefit payment for the June 2018 quarter showed an increase compared to the prior quarter, but a large decrease to $22,289 from $50,313 for the June 2017 quarter. 

“This again reflects the significant impact of the legislative changes that applied from 1 July 2017 where the capital value of pension accounts is limited to $1.6 million which resulted in a lower level of pension payments being required to be paid,” says Mr LaGreca.

“Nevertheless, some clients still required the same level of cash from their SMSFs so that meant rather than deplete pension accounts by drawing additional payments above the statutory minimum level, they elected to take those amounts out as lump sum payments out of their accumulation accounts. 

“In some cases where there is no accumulation account, these additional payments were still classified as lump sums from a pension account to improve the client’s Transfer Balance Account position.

“Out of all benefit payments, 79% of withdrawals were pension payments and 21% were lump sum payments. 

“The proportion of lump sum payments has progressively increased throughout the year from 10% of all payments as minimum pension levels have been attained,” 

“This reflects the benefits of professional advice where they understand the impacts of taking pensions versus commutations,” says Mr LaGreca.

SuperConcepts undertakes a quarterly analysis of its SMSF client investments to get a closer insight into how SMSF trustees invest and to identify emerging investment trends.

The survey covers 2,600 funds, a sample of the SMSFs SuperConcepts administers and the investments they held at 30 June 2018. 

Funds are administered on a daily basis which ensures data is based on actual investments and is completely up to date. The assets of the funds surveyed represent around $3.2 billion.

The full report is expected in coming weeks. 

Media contact: 
Garth Montgomery
0408 864 851