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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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The ATO reported that 45% of working Australians were not aware that they had multiple super accounts in 2016. Having multiple super accounts is particularly common for individuals who have had more than one job. If this is you, it is important to identify and manage your super accounts because having more than one can be costly as a result of account fees from multiple funds.To combat this, you may want to consolidate your super, which moves all your super into one account. Not only does this save on fees, but it also makes your super easier to manage and keep track of.

Before consolidating your super, it is important to do the following:

Research your funds' policy
Compare your active super accounts so you can make the right choice about which one you should close. Things to assess include:

  • Exit fees
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Check employer contributions
Changing funds may affect how much your employer contributes, as some employers contribute more to certain funds. Check your current accounts to see if changing funds will affect this. Once you have selected a super fund, regardless of whether you choose a new super fund or one of your existing ones, provide your employer with the details they need to pay super into your selected account.

Gather the relevant information
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