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Contribution rules add complications with funds

Your work status, age and previous injections of money can all have a bearing on what you can put away, writes Max Newnham.

Your work status, age and previous injections of money can all have a bearing on what you can put away, writes Max Newnham.

THERE are four main conditions that a super fund must meet to be classed as self-managed. They are no more than four members, each member must be a trustee or a director of a trustee company, no member can be an employee of another unless they are related, and trustees cannot be paid for performing their duties.

In addition to these requirements, and not counting all of the other superannuation rules and regulations, there is another requirement relating to the central control and management of an SMSF.

QI live in New Zealand with my partner. We have about $800,000 invested in Australian shares and are thinking of a permanent move to Australia. I am 62 and my partner is more than 65. Is it possible to set up a joint superannuation fund and transfer our Australian shares into the fund? Alternatively can we set up separate superannuation funds, splitting the shares between the two funds?

AFor a super fund to be classified as an SMSF the central control and management of the fund must reside in Australia. This doesn't mean they must be Australian citizens but they must actually reside in Australia. Trustees can be absent from Australia for up to two years, but they must return at the end of that period and reside in Australia for at least 28 days.

In your situation as you currently do not reside in Australia you could not have an SMSF, however if you moved here you could set one up then. Between now and the time you turn 65 you could contribute up to $900,000 to superannuation. Your partner, if they satisfy the work test, can only contribute up to $150,000 a year. The shares could be contributed as an in specie non-concessional contribution.

QI've been retired for a couple of years, living on personal investments. In May I contributed $156,500 to my SMSF from an investment property sale as this was the amount realised. It was after that I realised the maximum contribution was $150,000. I turned 65 in July and am concerned this may be a tax breach or does calling it part concessional and the balance a non-concessional contribution change the situation?

AAs you made the contribution before you turned 65 your limit, as long as you had not exceeded the $150,000 in any of the previous three years, is $450,000. You also have the option of classing some of the amount contributed, up to the maximum limit of $50,000, as a tax-deductible concessional contribution.

QMy spouse and I have an SMSF which is now in pension mode. She is 66 and I am 71. We have recently sold our private family home and will have access to net proceeds of $900,000. Assuming that we pass the 40 hours work test, both of us still work part-time throughout the year, is it possible for each of us to contribute $450,0000 this financial year before the end of August as an undeducted contribution and start an account-based pension?

A As you are both over 65 the maximum amount you can contribute, as long as you pass the work test, will be $200,000 each. This is made up of the concessional contribution limit of $50,000 and the non-concessional contribution limit of $150,000. The ability to bring forward the next two years maximum non-concessional contribution limits, making a maximum contribution of $450,000, ceases once a person turns 65. If you pass the work test next year you could contribute an extra $175,000 of combined concessional and non-concessional contributions.

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