Making the Most of Taxation Concessions

Concessional superannuation contributions can attract taxation deductions for the payer, subject to the limits that are in place. Non-concessional contributions do not attract taxation deductions for the payer, and these are also subject to limits.

It is important to understand the limits and benefits of both types of contributions. It is also important to understand that these contributions are taxed differently when received by the fund, and there are differences in the taxation implications for the recipient when the different types of contributions are paid out of the fund.

Amounts accumulating in a complying superannuation fund are taxed at 15% on earnings and 10% on capital gains. Superannuation funds that pay pensions can qualify for taxation concessions that reduce or eliminate tax on earnings.

These concessions for pension-paying SMSFs are not unlimited; there are maximum amounts that can be used to pay a pension.

SMSF Pensions

Superannuation fund trustees should understand the way taxation impacts the fund’s earnings and be able to compare overall after-tax returns when members receive pensions. It should be noted that a member does not have to be retired before they can receive a pension from their SMSF.

Rands Advisory Group and its accountants are not licensed financial planners and cannot advise on making contributions or paying pensions. We can, however, provide the taxation knowledge required to assess the options available.