There was a “massive spike” in cash contributions to superannuation funds in the last quarter of the 2016/17 financial year, likely driven by the changes taking effect from 1 July 2017.
According to the SuperConcepts SMSF Investment Patterns Survey June 2017 report the level of member contributions more than tripled in the June 2017 quarter and the level of benefit payments almost doubled.
“Members made the most of the last opportunity to make higher non-concessional contributions before the changes in contribution caps,” says SuperConcepts.
“The significant increase in benefit payments show benefits were drawn to implement both contribution and member equalisation strategies. Some members also withdrew part of their benefits from the super system to remain within the $1.6 million transfer balance cap.”
The average contribution for the quarter increased by more than 350%, from $9,138 to $32,055.
“This shows the significant impact of the 1 July 2017 changes to the contribution rules,” said SuperConcepts.
The average benefit payment for the quarter increased from $27,900 to $50,313.
“The large increase shows that members are both removing monies out of the superannuation system and implementing withdraw & re-contribution strategies to take advantage of the current non-concessional contribution caps.”
With 63% of contributions being made during the final month of the quarter, this had implications for asset allocations.
SuperConcepts found that the contributions led to SMSF holdings of cash increasing significantly in the final quarter of 2016/17, with flow-through implications for overall asset allocations. ‘Cash and short term deposits’ accounted for 19.8% of SMSF holdings at 30 June 2017, compared to 18.0% at 32 March 2017.