SMSF trustees looking to make higher non-concessional contributions before the rule changes on July 1 significantly increased contributions during the last quarter of the 2017 financial year, according to the latest SuperConcepts SMSF Investment Patterns Survey.

In the June 2017 quarter the average contribution amount tripled from $9,138 to $32,055, with 63 per cent of contributions being made during the last month of the quarter.

SuperConcepts Executive Manager Technical & Strategic Solutions Phil La Greca said the last time contribution levels were this high was almost 10 years ago, in June 2009.

Continuing the trend seen in Q1, the June quarter saw a continued spike in benefit payments which almost doubled from $27,900 to $50,313.

Of the benefit withdrawals, 89 per cent were pension payments and 11 per cent lump sum payments. This is a reversal of the March quarter trend which saw 40 per cent of payments paid as lump sums.

Mr La Greca said the large increase in benefit payments as pension payments can be explained in terms of the need for members to meet their minimum pension obligations for 2016/17.

“Benefit payment levels continued to climb as a result of the transfer balance cap of $1.6 million which restricts the amount a person may have in a pension phase. Members implemented withdraw and re-contribution strategies including starting a new 100 per cent tax free pension and making contributions to a spouse to try and equalise member balances and maximise access to the $1.6 million pension transfer balance cap for both persons.”

The large spike in cash contributions, from 18 per cent to 19.8 per cent of total allocations, resulted in a drop in other asset classes, especially Australian equities – from 36.7 per cent to 35.4 per cent.

Looking ahead 

Looking ahead to the next quarter Mr la Greca said, “As contributions start to get invested, we anticipate a lowering of the high cash levels we saw in the second quarter. The $1.6 million transfer balance cap limit also means that minimum pension levels will fall, so again, less cash will be needed.”

The quarterly SuperConcepts SMSF Investment Patterns Survey covers approximately 2,640 funds, a sample of SMSFs administered by Multiport (part of the SuperConcepts group) and the investments they held at 30 June 2017. The assets of the funds surveyed represent approximately $3.1 billion.