Provided that a member has a total super balance of less than $500,000 as at the previous 30 June, and is eligible to make concessional contributions, a contribution equivalent to this year’s cap plus any unused cap amounts for the previous 5 years can be made. SMSF members may even make an additional concessional contribution equivalent to next year’s cap, in June, thereby enabling the tax deduction this year by using up next year’s concessional cap. Such a large concessional contribution might be useful in dealing with a one-off capital gain or significant distribution/dividend from a private trust/company but care must be taken.

Individuals whose income exceeds the Division 293 tax threshold of $250,000 will pay an additional 15% tax on concessional contributions, including any contributions made under the catch-up rules, that breach the threshold. This means the tax benefits of making very large contributions may be diminished – but still useful.

The contribution should only be made if the member has sufficient taxable income to support the deduction. If the contribution is in excess of the member’s taxable income, no personal benefit is obtained though the member’s superannuation account will still be subjected to 15% contributions tax on the excess amount. Similarly, the contribution is only worthwhile if the member will save more tax than the 15% contributions tax the super fund will pay on the contribution.

Also remember that, if the member is over 67, they will need to satisfy the work test (unless they’re eligible for the exemption) to take the deduction. If they don’t, the contribution will be non-concessional.

On another matter, you may be interested in using our animated video, SMSF Trustees – Individuals vs Corporate, as an educative tool for your SMSF clients.