Double Contribution Strategy
As this is June you may like to consider the feasibility of a double contribution using an unallocated contribution reserve. The strategy involves making an additional contribution in June that will be allocated towards the member’s contribution caps in July. (The requirement is that such contributions are allocated within 28 days of the following month, so 28th July) The ATO regard the holding account as a sundry account rather than a reserve, but we tend to refer to it as a reserve through common usage.
It can be used for both concessional and non-concessional contributions. Contribution eligibility must be satisfied in the year of the contribution but does not need further reference in the year of allocation. This can be handy where a member is eligible to contribute this year but will not next year such as when a member turns 75 in June.
For concessional contributions, where the caps have been fully utilised under this strategy, the fund can receive tax deductible contributions of $50,000 this year. Remember, though, that next year’s cap will be fully utilised. The strategy is useful where it is known that next year’s personal taxable income will be much less than this year. This may be relevant where a member is retiring at the end of this year or has experienced a year of unusually high income due to the realisation of a taxable capital gain.
The most useful non-concessional contribution application would be to delay the increase in a member’s total super balance so that an additional $100k contribution could be made into the account. The ATO have stated, however, that ‘the intentional use of a reserve to reduce a member’s total superannuation balance to enable them to make non-concessional contributions without breaching their non-concessional contributions’ cap’ will be scrutinised so you should avoid this one.