An SMSF specialist has reminded practitioners of the proper procedure required to inform the ATO fund members are using a contribution reserving strategy for the current financial year, pointing out the reporting obligations are clumsy and need patience to see them come to fruition.
Accurium head of SMSF education Mark Ellem recognised there is no way to alert the regulator to this strategy on either the fund annual return or the individual member’s tax return. As such, this situation may lead to members receiving an excess contribution determination.
“When you fill out the SMSF annual return, the instructions specifically say you’ve got to include the contribution in the year it is received. So if you’re using a strategy this year of contributing $27,500 and another $30,000, then the amount that is going to be reported in the member section of the SMSF annual return as personal contributions will be $57,000,” Ellem told delegates at the recent SMSF Professionals Day 2024 co-hosted by selfmanagedsuper and Accurium.
“The tax office then waits for the individual to lodge their personal tax return to see if they’ve claimed any deductions for superannuation contributions. The difference between the total contributions and those where a deduction is being claimed is the non-concessional contributions amount.
“When those two returns are lodged and the ATO matches them up, the individual’s concessional contribution will be acknowledged as being over their annual cap of $27,500.”
In order to rectify this determination, he explained the SMSF must complete a request to adjust concessional contributions for the member and forward it to the ATO.
When the ATO receives the request to adjust concessional contributions, it will allocate the $30,000 into the following financial year, he noted.
Further, he said advisers and their clients must be patient and understand there is a time lag between the lodgement of this form and the annual return.
To this end, he suggested the most prudent method with regard to furnishing the request to adjust concessional contributions.
“As a former practitioner, I feel the best way to lodge that request with the ATO is to scan it, upload it and lodge it via taxation online services,” he said.
“Don’t put it in the post because you won’t get a receipt number and that will make any follow-up with the ATO difficult.
“But if the ATO hasn’t received that form yet, don’t panic.”
