SMSF advisers and members have been reminded lodging a notice of intent (NOI) is only the first step in claiming a personal deductible contribution, with a trustee acknowledgment and properly completed tax return required to complete that process, according to a technical specialist.
Colonial First State head of technical services Craig Day highlighted the confusion around this process in a recent podcast released by the firm, stating: “I’ve lost count of how many podcasts and articles we’ve done on this topic and yet it remains one of our most common areas where advisers seek our help.
“We usually focus on the importance of lodging a valid NOI with the super fund, but for personal deductible contribution strategies to work as intended, the client’s tax return lodgement plays a critical role and this is quite often overlooked.”
Colonial First State senior technical services manager Linda Bruce added that after lodging an NOI, SMSF members had to wait until it was recognised by their fund trustee.
“The SMSF trustee must acknowledge the receipt of a valid NOI without delay, in accordance with the tax law requirements, but unlike large retail or industry funds, SMSFs are not currently required to report the acknowledgement of the valid NOI to the ATO,” Bruce said.
She pointed out SMSF members would not see that NOI as a pre-filled item in their annual return, unlike members of large retail or industry funds who lodged an NOI, so they had to be certain the trustee had received that notice.
“In this scenario, before the member lodges their tax return, it’s essential the SMSF trustee has acknowledged the NOI and the member of the fund has a copy of that acknowledgement. Once the tax return is lodged, it’s generally not possible to correct the errors, even if the trustee still holds the contribution,” she noted.
Further to this, SMSF members also had to claim their personal deductible contribution correctly in the tax return after lodging the NOI.
“It sounds silly, but we have seen cases where clients made maximum non-concessional contributions and also made additional personal contributions they intended to claim as a tax deduction,” Bruce said.
“They lodge the valid NOI and receive acknowledgement from their super fund, but when they lodge their tax return, they forget to include the deduction in the tax return.
“The issue here is a personal super contribution is treated as a non-concessional contribution by default until such time as that contribution is claimed as a tax deduction after the tax return is lodged.
“In this scenario, if the member overlooks the deduction in the tax return, the personal super contribution will be treated as a non-concessional contribution by the ATO, which may cause them to breach their non-concessional contributions cap.”
