An SMSF reserve is any monies or assets inside your SMSF that are not yet part of any Member’s Account. Reserves form part of the net assets of the Fund. Reserves are calculated as the total value of your SMSF minus the total value of all Member Account Balances.
The SIS Act allows Trustees to maintain reserves provided that the Fund’s Trust Deed does not prohibit the use of reserves. The main reasons for creating reserves and types of reserves are as follows:
The ATO issued some guidance on using reserves for contributions and also issued a form to note the unallocated concessional contributions.
A reserving strategy is when an SMSF keeps unallocated funds in the Fund and do not allocate it to Members. Superannuation Warehouse does not use Reserving strategies and all income is allocated to Members at the end of the year using a weighted average daily Member balance. The result is that the Member balances at the end of the year will agree to the total assets held by the SMSF at the end of the year.