Contributing a lump sum into super
Australians can make two types of contributions each year; concessional contributions, which are taxed at 15 per cent, and non-concessional contributions, which are not taxed.
There is a limit of $35,000 for concessional contributions and $180,000 for non-concessional contributions. However, individuals do have the option of using the three-year bring forward rule that allows taxpayers to contribute a lump sum of $540,000 as a non-concessional contribution if they are under the age of 65.
Using the three-year bring forward rule means individuals cannot make extra non-concessional contributions over the next two years.
Individuals that have accumulated a large sum of money from savings, an inheritance or sale of an asset, and want to contribute the amount to their super, may be best suited to making a non-concessional contribution.
Making a non-concessional contribution means you will not have to pay tax and will be able to transfer the whole amount as a lump sum contribution into an SMSF.
However, for those who are expecting more funds in the future, it may be better to put $180,000 into the fund on year, and another $180,000 in the following year.
For those who have sold an asset, you may have a capital gain and have to pay capital gains tax. Maximising your concessional contributions ($35,000 a year) can lower your taxable income for the current financial year and also reduce your capital gains tax liability.
Those with an SMSF who are self-employed can contribute a lump sum of $70,000 to their fund at the end of the financial year. They can also allocate $35,000 this financial year and $35,000 next financial year to reduce their capital gains liability.