Q: How is the Total Superannuation Balance calculated for each individual member for an SMSF on June 30th of the previous year?
A: When it comes to calculating a member’s total super balance for an SMSF, it is very similar to what it would be for a standard non-SMSF, like an industry fund or a retail fund, with a couple of tweaks that need to be taken into consideration.
What we’re looking at is the SMSF balance versus the member balances. When it comes to self-managed funds, that can often be a little bit confusing for newcomers or for those that may not necessarily be hands on in the managing their fund. If you look at a self-managed fund and you look at the total value of all the fund’s assets, that is equal to the total value of all the member balances. We’re looking at the net value of the fund assets, so that’s like the assets the fund owns, less any current tax liability. Those total assets equal the total value of the members’ balances inside the fund. Each member of the SMSF has their own separate identifiable member balances within that fund. That’s broken up into accumulation phase and pension phase.
Just as an example, you’ve got the Royal SMSF with total net assets of $1.4 million. There are two members of the fund, there’s Will and Kate. Will has a $600,000 pension phase balance and a $200,000 accumulation phase balance. Kate, the other member of the fund, has $400,000 in pension phase and $200,000 in accumulation phase. If you add those up, it comes to the $1.4 million. The total net asset to the fund equals the total member balances. What we can then look at is each of the total super balances of those separate members.
So, how do we work out the total super balance of the members? It’s the value of their amounts held in accumulation phase plus any amount held in retirement phase, so like pensions, etc. Any amounts that might be rolling around in the super system between funds, let’s just say that in addition to these amounts, Will has requested that his industry fund roll over $100,000 from that fund to his SMSF, but it hasn’t reached this SMSF. Well, we would need to add that amount in rollover to Will total super balance at 30th of June, if it hadn’t quite hit his account yet.
Something else that needs to be included in total super balance for self-managed funds, which is quite different, you wouldn’t see this in the industry a fund or retail fund, is if the SMSF had a limited recourse of borrowing, if the SMSF had borrowed money to acquire an asset. If that’s the case, if the fund borrowed money and those amounts came from a related party, what we call an associate of the fund, and the member has met a condition of relief like they’ve retired, for instance, you need to add their proportionate value back in. I’ll cover that in a second. That proportionate amount of that outstanding loan also gets added in under the total super balance. Once we’ve worked all that out, we can then take off any amount which has been contributed to the fund under a personal injury or structured settlement. I’ll take you through that in more detail here.
I’ve just broken down how those amounts get included. The accumulation phase value, the contributions and also includes things like transition to retirement pensions, because they’re not pension phase values. It’s all of those things recorded as accumulation phase values, contributions, etc. Then you’ve got your pension phase value, which is all of your retirement pension balances at the 30h of June and your share of the outstanding LRBA balance on the 30th of June. Once when you’ve calculated all those, it gives you your total super balance.
Most admin providers or accountants have software that tracks all that, so you can simply ask them. If you’re doing it yourself, that’s what you need to go back and check.
Once you’ve determined what your total super balance is, we then need to look at what it affects. It affects your ability to use the carry forward concessional contribution rules. In In order to be able to make a contribution by a way of using unused concessional contributions, you need to be below $500,000 total super balance on the prior 30th of June. If you want to be able to use to bring forward non-concessional contribution rules, you need to be below the general transfer balance cap. So, your total super balance affects quite a few things, including government co-contributions and spouse contributions. So, you do need to have a good understanding of what your total super balance is. And it’s really important to know what it is at the prior 30th of June, because that’s when most of those things are assessed.
To determine or to find out exactly what your relevant total super balance is, you can use the myGov app or the myGov website. You log in to MyGov, you then go into ATO service. There’s a tab called ‘ATO Service’. You then select Super, which you’ll see there on that little picture. It then drops down your menu. You choose ‘Information’ and then ‘Total Super balance’. This app or this website will then give you your relevant totals of the balance. If you can see there, it gives you other things. It gives you your unused concessional contribution amounts. It gives you balances held in different funds. It’s a good tool to have.
If you don’t have access to it, then you can obviously call the ATO on their super hotline 131 020, answer a few personal questions, and they’ll then give you the information you’re looking for. But understanding your total super balances is really important.
