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Super Contribution for 2008 financial year: Last date to contribute 30th August 2008 and strategy to pay Zero tax!

 

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August  2008
 Issue 19 of 2008 
 
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Super Contribution for 2008 financial year:

Last date to contribute 30th August 2008 and strategy to pay Zero tax!
 

Super funds contributions are deductible in the financial year when they paid to the super fund. All contributions for 2008 financial year must be paid before 28th July 2008 to avoid paying Superannuation Guarantee levy. If payment is made after 30th June 2008, deduction is available in only in 2008 / 09 year.
 

Many times it is possible that this contribution is not made by the business owner for several reasons such us cash flow or missed due to the failure of advice at the right time etc, below we give you a strategy, where contributions can possibly be made till 30th August 2008.


 

A newly created SMSF under Sec 42 (3) ( c ) of SIS Act gets 60 days
to elect to be a regulated Superannuation Fund. Hence, if a new SMSF elects to be regulated before 30th August 2008, contributions can be made to the fund for the financial year ended 30th June 2008.
 
 
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Contributions Pre 30th June 2008
 
Since the contributions will be dated Pre 30th June 2008, they will pertain to the previous financial year, these contributions can be via a cheque deposited in the newly created SMSF after 30th June 2008. This situation is similar to public offer big funds such as AMP or
Colonial, who are never able to bank all cheques which they receive on 30th June on 30th June - it takes them several weeks to allocate contributions and bank cheques.
 

If the company or individual owns shares, these sha
res can easily be transferred to the SMSF as in-specie contribution after 30th June 2008.
 

However, there is a downside to this strategy, please note that since the fund receipted money's in the current financial year, the contribution will be tested against the contribution caps of 2008 /09 financial year. For example the fund receives contributions in August 2008 for 2008 year of $20,000 for a member below 50 years old; only another $30,000 can be contributed in the current financial year before excess contribution ta
x is triggered.
 

But the upside is that if any tax payable (it is now possible to have
nil tax on contribution due to gearing in SMSF) on these contributions, it will be paid by the super fund not before 28th February 2010 or after 19 months. Due to this timing difference, if contributions are invested in a simple 8% fixed deposit can give a fantastic result of NIL tax in comparison to 30% tax rate for a company (and its owners) and a maximum of 46.5% for a sole trader or a partner business person.
 

If you already have a SMSF and want to avail the benefit of timing difference, there is no regulation to stop you from setting up another SMSF to make use of this strategy, however cost of setting up the fund ($110 if you buy from us) should be compared to the potential tax saving. Later on funds can be rolled over to existing fund and fund closed.
 

Unfortunately employees are not able to use this benefit, as they must salary sacrifice any income in the year of earning.

 

Can a SMSF receive "cash contribution" from a member (say personal contribution) before 30th June 2008 and holds the cash as an asset "Cash on Hand" on 30th June 2008 and deposits the cash on say 25th August 2008 is not tested by the writer, we encourage you to make your own enquiries.

 

If you want to set up a SMSF now, please click here, trust deed is
emailed to you instantly after payment. If you have any further queries on this strategy, do not hesitate to contact us on [email protected] or phone our technical department on 02 9638 2807.


   


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www.trustdeed.com.au provides online service for creating, storing & managing legal documents for Companies and Trust deeds for SMSF, Family, Unit & Hybrid Trusts, click here for more information.

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if you are an advisor, financial planner, accountant or a solicitor, we can offer you to create one trust deed on our system for free. This offer is valid provided you purchase 10 or more new SMSF deeds or update 10 SMSF trust deeds for your clients. To claim your first free trust deed, first  register on our website www.trustdeed.com.au and phone our office on 02 9638 2807 for a promotional code.
 
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New or update your existing SMSF Trust Deed for $110 You can keep the trust deed up to date for the next five years for only $165.

Our SMSF trust deed has been prepared with input from accountants who have over two decades of experience in setting up structures for their clients and have combined knowledge of auditing and lodging tax returns for more then 2000 SMSF's, their practical experience is an invaluable contribution.

For further questions on our trust deed, ring 02 9638 2807 or email [email protected]

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