Typically, contribution reserving entails a member or employer making concessional contributions in June of a financial year and retaining the unallocated sum within a contribution reserve account until the commencement of the subsequent financial year. The benefit of concessional contribution reserving means you can bring forward a tax deduction for this financial year, reducing your tax and further contributing funds into Superannuation. If you are expecting a larger than usual tax bill or have a capital gains tax you wish to reduce and you currently have an SMSF or are looking at establishing an SMSF, reserving may be a strategy to look at.

Tax Benefits and Financial Planning:

The allure of contribution reserving lies in its ability to facilitate tax planning strategies. By bringing forward tax deductions for the current financial year, individuals can mitigate tax liabilities and enhance their superannuation contributions. This is particularly advantageous for those anticipating significant tax bills or seeking to reduce capital gains tax burdens. Through careful utilization of contribution reserving, you may be able to reduce your tax bill this financial year. You will also be able to increase your overall Superannuation Balance.

Maximising Contribution Caps:

To fully capitalize on the double contribution strategy, individuals must be cognisant of contribution caps and eligibility criteria. With the recent indexation of contribution caps, stakeholders can now leverage increased limits to maximise their superannuation contributions. For instance, the maximum deduction for concessional contributions has risen to $57,500, presenting an opportunity for enhanced tax benefits. Moreover, age considerations play a pivotal role in determining eligibility for voluntary contributions, underscoring the importance of strategic planning and compliance with regulatory requirements.

Age Requirements and Work Tests:

As individuals navigate the intricacies of contribution planning, age considerations emerge as a crucial factor in determining eligibility and compliance obligations. From age 67 onwards, individuals must satisfy the work test – involving 40 hours of gainful employment in 30 days – or secure a work test exemption to claim tax deductions for personal contributions. Additionally, adherence to total superannuation balance (TSB) thresholds and previous utilization of exemptions are essential considerations in optimizing tax benefits and maintaining regulatory compliance.

If you think this may apply to your situation, please contact Cadre Capital Partners for specific advice on this strategy.