Contributions from employment
Your employer is required to pay your super fund 10.5% of your yearly salary. This applies even if you own your business - ie you as your employer will need to pay your SMSF 10.5% of your salary.
If your normal wage is $87,000 for the year you will contribute $9,135 to your SMSF each year. If you are under 50 you can contribute a maximum of $30,000 each year from your normal employment income. If you are 50 + you can contribute a maximum of $35,000. Note this drops to $25,000 on 1 July 2017.
If you own your business you have the option of increasing your contributions on top of the wage you are paying yourself. So on top of the $8,265 you contribute you can pay an extra $21,735 (assuming you are under 50). This is a great way to save yourself tax inside your business and increase your super empire.
If you are an employee you can request your employer reduce your wage and contribute to your SMSF instead.
A fun fact: If you are 35 and have a balance of $100,000 in super now, and you contribute $25,000 for the next 30 years (assuming compounding returns of 5.7%) you will have $1,756,204 when you are ready to retire! This compares to $870,116 if you didn’t put extra money into super each year
Contributions from you personally
A lot of people don’t realise this but you have the option of paying your SMSF money from your personal savings or inheritance etc.
Before 1st July 2017 you can contribute to your SMSF $180,000. If you haven’t contributed in the last 2 years you can actually put in $540,000 (if you are under 65).
From the 1st July this limit is decreasing substantially. You will only be able to put in $100,000 each year or if you haven’t contributed in the last 2 years $300,000. Note: If you have more than $1,600,000 in your SMSF you can’t put any more money in.
You might be thinking why would I want to do this?
Having this money outside your SMSF means any income you earn will be taxed at your normal tax rates - ie this could be 49%. Compare that to 15% in your SMSF, and 0% if you are in pension phase. These savings are every year!
If you are pooling your money into Super to be able to purchase your business premises as an example you may need a top up to ensure you can afford the investment
Rollover existing super
If you are just starting out with your SMSF you can also build your balance by rolling in all of your existing super funds. A lot of people have multiple super funds with balances in them which means you will be paying multiple fees and potentially multiple insurances. You can rollover all your existing balance as well as any other people’s balances that are members of the SMSF (ie your spouse)
Selling your business
A great opportunity exists when you sell your business to contribute a lump sum of money to your SMSF. You can contribute up to $500,000 per person (lifetime limit) into your SMSF tax free. Yes that is correct, you pay no tax on the $500,000 in your business and no tax in your SMSF.
This concession gets even better if you have operated your business for more than 15 years. Under the Small Business concessions you can contribute up to $1,415,000 from the sale of your business. Again this is tax free which is a enormous saving.
Contributing existing assets
You can also roll existing assets into your SMSF. This could include the premises that your business currently operates from, direct shares, term deposits, cash etc. The only assets you can’t roll in is residential property.
You can do this to boost your Super empire and make these assets more tax effective as discussed above.
Summary
As you can see you have a number of options to start increasing your SMSF balance - ie your Super Empire. It all starts with ensuring you have a rock solid plan in place for your business, personal and super assets.