A senior industry figure has confirmed an individual is not entitled to receive a government co-contribution amount in relation to money allocated to an SMSF under the downsizer rules.
Accurium senior SMSF educator Anthony Cullen acknowledged this situation could be one of confusion for practitioners due to the conditions laid out in the Superannuation (Government Co-contribution for Low Income Earners) Act 2003.
Specifically, Section 6 of this legislation stipulates an individual will be able to receive a government co-contribution if they make one or more eligible personal superannuation contributions during an income year and 10 per cent or more of the income they receive in the financial year needs to have come from salaries and wages or from self-employment.
Further, Section 7 of the act defines an eligible personal superannuation contribution as one made by the individual, but cannot be a rollover from another fund or a transfer from an overseas pension interest.
“The interesting point with this part of the legislation is subparagraph 2 that basically says it is a personal contribution [where no] tax deduction [has been claimed],” Cullen noted during an online Q&A session last week.
“So [if you can satisfy these conditions, this legislation] would suggest you would be eligible for the co-contribution.
“But when we look at the ATO website, [the regulator] talks about whether the individual has made one or more personal non-concessional contributions and I think that’s very important because when you look at the tax act, a non-concessional contribution excludes [one made under the] downsizer [provisions].”
According to Cullen, the regulator will be able to glean the necessary information from the SMSF tax return where downsizer contributions are reported.
“So when you read the co-contributions legislation, it would appear that, yes, a downsizer [contribution] subject to meeting all other requirements should be eligible for a contribution. However, when you read the ATO website and understand where it gets the information from on the tax return, [it is not possible to receive a co-contribution with respect to the downsizer provisions],” he said.
