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Managing SMSF losses

Carrying forward significant capital losses can be a viable strategy for trustees wanting to offset gains and achieve tax savings in the near future.

This kind of strategy is suitable in circumstances where it is likely that younger members may join the fund or when members are considering switching back to the accumulation phase.

One way SMSF trustees can carry forward capital losses is to set up a small accumulation balance once their assets are realised at a loss.

Funds with assets which support pension and accumulation liabilities can use the unsegregated method to claim ECPI (exempt current pension income), as capital losses on unsegregated assets can be carried forward each year, even when a fund is completely in pension phase.

Trustees that realise losses may also want to consider whether having an unsegregated fund may be more beneficial than a segregated fund. Segregated funds hold separate asset pools specific to members or pension and accumulation balances. Unsegregated funds have one large asset pool and all members share the combined investment returns.

To claim ECPI in an unsegregated fund, an actuarial certificate is required each financial year. Since the fund will have a small accumulation balance, the income earned will not be entirely tax-free. However, the cost of paying a small amount of tax and obtaining an actuarial certificate may be offset by tax savings in the future which are obtained from carrying forward the capital loss.

Posted on 12 September '16 by , under Super.

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Transition to retirement

The transition to retirement (TTR) strategy allows you to access some of your super while you continue to work.

You are able to use the TTR strategy if you are aged 55 to 60. You can use it to supplement your income if you reduce your work hours or boost your super and save on tax while you keep working full time.

  • Starting a TTR pension: To start your TTR pension, transfer some of your super to an account-based pension. You have to keep some money in your super account so that you can continue to receive your employer's compulsory contributions as well as any voluntary contributions you may be making.
  • Government benefits and TTR: The benefits you or your partner receive might be impacted if you choose to opt for this strategy. How and what exactly will change might become clearer upon discussing this with a Financial Information Service (FIS) officer.
  • Life insurance and TTR: In some cases, the life insurance cover you have with your super may stop or reduce if you start a TTR pension – check this before making any decisions or changes.

TTR can help ease your mind as you transition into retirement but it can be a bit complex. Before you choose whether you want to use TTR to reduce work hours or save on tax, or even if you want to use TTR altogether, you should figure out how this will impact all aspects of your finances.

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