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If you've successfully opened your very own SMSF, it's now time to add some money to it. There are three main ways to contribute to your SMSF: you can roll over 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.
In this guide we'll go through how each of these options works, and the benefits of contributing to your SMSF. If you haven't yet opened your SMSF, we suggest you take a look at our six-step guide to setting up an SMSF first.
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Ongoing, variable 1.60% p.a. Available on balances up to $5,000,000.
An SMSF is a super fund that you manage yourself, rather than a typical super fund which is managed for you. If you've opened an SMSF, it's a good idea to roll over 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 or industry fund. There's not much point keeping your old fund active now that you've got an SMSF. If you do you'll be paying two sets of fees which will eat away at your investment returns.
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. 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. In order to receive these payments you'll need to provide your tax file number when registering the fund.
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.
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.
