If you've successfully opened your very own SMSF, it's now time to add some money to it (if you haven't, take a look at our six-step guide to setting up an SMSF first). There are three main ways to contribute to your SMSF: you can rollover your current super balance into your new fund, have your employer contribute the super guarantee into your SMSF and you can personally make your own contributions too.
SMSF rollover rules
If you've opened an SMSF, it's a good idea to rollover your existing super balance into your new fund. Rolling over your super is also known as consolidating your super and is the process of bringing your super balance over from your old fund or funds to your new fund.
You would have opened a super fund when you started your first job or your employer would have opened one for you, likely a retail super fund or industry super fund. You may not want to keep your old fund active now that you've got an SMSF. You can if you want, however, if you do you'll be paying two sets of fees which will eat away at your investment returns.
Follow these steps to rollover your super into your SMSF
- Check everything is up to date. Your SMSF must be registered with the ATO, and all member details need to be up to date. If they're not, your super fund cannot transfer your super into your new fund.
- Complete the rollover request form. This form requests that your super fund transfers your entire super balance (or part of it) into your SMSF account. Each member of the SMSF needs to complete their own form in order for their super balance to be rolled over. You'll find the form on your existing fund's website, along with instructions on how to send it to them (usually via email or in the post).
- Your super fund will action the form. Your previous fund will then transfer your superannuation balance into your SMSF, usually within a few business days. You'll receive a rollover benefits statement from your old fund within 30 days confirming the rollover of your balance.
Now that your super balance is in your SMSF account you can start investing it. If you're unsure of where to start, read our guide on how to develop an investment strategy for your SMSF here.
Because you've already paid tax on the balance in your previous super fund, you won't be taxed again when it's rolled over into your SMSF. Also, rolling over your exiting super balance does not count towards the contributions cap (there are limits as to how much you can contribute to your super each year, more on this below).
Your employer can contribute the compulsory superannuation guarantee into your SMSF like they would any other super fund. They'll pay you your super into an SMSF cash account, which is like a bank account that holds your SMSF cash until you choose how to invest it. The super guarantee is the percentage of your annual earnings that your employer is required by law to pay into your super. The current super guarantee is 9.5%, and this is set to increase gradually over the new few years.
SMSF members can receive employer contributions at any time and at any age into their SMSF cash account. In order to receive these payments you'll need to provide your tax file number when registering the fund.
Here's what you need to give your employer
- Your tax file number (they should already have this if you're an existing employee)
- Your SMSF's Australian Business Number (ABN)
- The BSB and bank account number for your super account
- The electronic service address you received when registering your fund. If you don't have an electronic services address yet, your fund's accountant or tax agent will be able to provide you with one
If you cannot provide this information, your employer will be forced to direct your super payments to their chosen default super fund, where it'll be held in your name until you're ready to roll it over into your SMSF.
Self managed super fund (SMSF) cash accounts
You can make personal contributions to your SMSF on top of those paid by your employer if you wish. These will either be classed as concessional (pre-tax) or non-concessional (post-tax) contributions.
Because concessional contributions are paid to your super before you've paid any tax on that money, these contributions are taxed at the lower super tax rate of 15%. As this tax rate is likely a lot lower than the tax rate that would normally be charged on that income (which could be as high as 45% depending on which tax bracket you're in), it's beneficial to make these pre-tax contributions.
You're only allowed to make up to $25,000 worth of concessional contributions into your SMSF each year. Concessional contributions include those made by your employer as part of the compulsory super guarantee, as well as income you've chosen to salary sacrifice into your super.
For example, let's say you earn $200,000 annually and your employer pays you $19,000 in super (9.5% of your earnings). You're only able to contribute an additional $6,000 in concessional contributions each year.
Non-concessional contributions are any contributions you make into your SMSF above the annual $25,000 contributions cap. You're still able to contribute more than $25,000 to your super, it just won't be taxed at the lower concessional rate of 15%.
If you're under 65 you can contribute up to $300,000 in non-concessional contributions over a three-year period, provided your total SMSF balance is below $1.4 million. If your SMSF balance is more than $1.6 million you're not able to make any more contributions.