Ask Max: Your questions answered

The bring-forward rule, appealing an ATO ruling, splitting property with a SMSF, TTRs, asset allocation, and pension queries.

PORTFOLIO POINT: Max Newnham has spent 30 years working with – and writing about – small businesses and SMSFs. Each week he draws upon this experience to answer the questions of Eureka Report members.

This week:

  • Can you explain the bring forward rule for non-concessional contributions?
  • Can I appeal and income tax ruling by the Tax Office?
  • Are we able to buy a property that is split between our super fund and us?
  • How do I set up a transition to retirement pension?
  • How should I allocate the assets in my superannuation fund to get the best return?
  • What is the pension establishment information our SMSF platform provider is requesting?

Can you explain the bring-forward rule for non-concessional contributions?

I am 62 years old with a SMSF/pension fund, still working and will settle a property sale in October. I am planning to put the maximum of three years’ worth of $450,000 into my pension fund via super. Is that still the rule?

The maximum annual limit on non-concessional contributions is $150,000. For people under 65, that have not exceeded the $150,000 limit in the previous two years, the bring-forward rule can be used to contribute $450,000. When the bring-forward rule is used no further non-concessional contributions can be made for the next two financial years.

If a person gets the timing right there is the ability to effectively contribute $600,000 within two financial years. If the non-concessional contribution limits have not been exceeded in the two previous years, $150,000 can be contributed in the current financial year, and a further $450,000 can be contributed in the following financial year.

Can I appeal and income tax ruling by the Tax Office?

I have received a death benefit as a non-dependent and was taxed at 30%. I did not realise at the time, due to the circumstances, that I should have applied as a dependent. So can I appeal the ruling and reapply and, if not, as a retiree will I be able to claim some of that tax back in the next financial year?

If you have received an incorrect income tax assessment you can request an amendment be made to the tax return that the assessment was based on. For most people income tax assessments can be amended for up to three years from the date the original assessment was issued.

If you paid more tax than you should have this cannot be used to reduce income tax payable in the following year. You can write a letter to the Tax Office setting out the full facts of your case and request that the incorrect assessment be amended. It may be worthwhile seeking the assistance of an accountant to lodge this request on your behalf.

Are we able to buy a property that is split between our super fund and us?

We have an investment home 100% owned by our SMSF. There is no loan on the SMSF investment home. We are planning to purchase another home shared equally between the SMSF, taking loan from bank, and another 50% by us. The home is for investment and will generate rent, which can pay for the interest on SMSF loan. Both myself and my wife are the members of the SMSF. Are we allowed to buy the home split between the SMSF and us for investment purposes?

Theoretically there is nothing stopping your SMSF buying a residential property in partnership with you and your wife, as long as the residential property is purchased from a non-associated person or entity.

Your super fund can use the limited recourse borrowing rules to finance its purchase. These loans often carry a higher interest rate than standard investment loans and can be difficult to take out, depending on the contribution history and total assets in the fund. This is a highly technical part of superannuation law and you should seek professional advice before buying the property.

How do I set up a transition to retirement pension?

I am 57 and considering selling some shares and contributing $450,000 into an SMSF I am planning to establish, maybe with Dixons and starting a transition to retirement pension, hopefully before any changes. My current super is $200,000 in a retail fund. I am self employed earning less than $100,000. How do you actually commence a TTR? Is there a form, do you have to apply to or notify the ATO? I am not sure of the procedure.

If you were using a service provider such as Dixons it would be normal for them to prepare the relevant documentation to support the starting of the TTR pension. This service comes at a cost and, before committing to any service provider, you should look at your alternatives to see who provides the most cost-effective service.

You can also do the documentation yourself. Whenever doing anything in relation to an SMSF the first thing to check is the trust deed for the fund. In some cases the trust deed will stipulate what documentation must be drawn up when commencing a pension and even specifies the forms to be used.

In the absence of the trust deed prescribing the required documentation you can start a TTR pension by the following process:

  • writing a letter to the fund requesting the pension;
  • drawing up a resolution of the trustees of the fund granting the pension;
  • the trustees writing a letter to you as a member acknowledging that the pension will commence, specifying the taxable and tax-free components of the pension; and
  • registering your SMSF for PAYG withholding tax.

How should I allocate the assets in my superannuation fund to get the best return?

I would like to know your opinion on what level of risk I should have for my super fund investments e.g. growth, balanced, fixed interest etc. I am 47 and work in the manufacturing industry and currently earn next to zero return on my super. I have read that we should not expect any great returns on super for the next 10 years and that the “Baby Boomers” have been spoilt with huge property prices and sharemarket returns in the past 30 years that will unlikely never return. So if this is the case, would it not be more sensible to just allocate my super fund into something like fixed interest where I would probably still beat the index? Can you give me other ideas on where to allocate to where there may be growth opportunities?

The possible investment options available to you will be limited by what your super fund offers. The more progressive super funds offer a wider choice of investment options rather than just growth, balanced or conservative. These options can include term deposits, direct property and fixed interest.

It is hard to recommend what options will be best for you without knowing what the investment options are. Most industry super funds have advisers that can help members with this type of decision so you should contact your fund to discuss your options with them.

What is the pension establishment information our SMSF platform provider is requesting?

My wife and I have been drawing an allocated pension from our SMSF for the best part of six years, all accounted for through yearly tax returns, compliancy etc. This year, in order to substantially reduce accounting and compliancy costs we decided to use the services of a SMSF platform provider who is requesting we supply them with a signed “pension establishment document”. Would you please advise if this document is supplied by some authorised body, and if so whom? Or is this a document that is supplied by the SMSF trustees confirming the relevant information of the members’ details at time of retirement.

When you left the previous service provider for your SMSF you should have received a folder containing all the records of your fund. In this folder should be the documentation prepared when your pensions commenced. This would normally take the form of a resolution by the trustees of the fund and a letter confirming the pension.

The letter and the resolution should specify what your super fund pension is made up of with regard to taxable and tax free benefits. This is the information that the SMSF platform provider is more than likely requiring.


Max Newnham is a partner with TaxBiz Australia, a chartered accounting firm specialising in small businesses and SMSFs.

Note: We make every attempt to provide answers to readers’ questions, however, answers are of a general nature only. Subscribers should seek independent professional advice for more in-depth information that is specific to their situation.

Do you have a question for Max? Send an email to askmax@eurekareport.com.au