The federal budget proposal that income generated from excess non-concessional contributions has to be refunded along with the contributions themselves will be difficult for SMSFs to comply with, according to some sector experts.
“I think for self-managed super funds it will be a nightmare to administer,” Strategy Steps director Louise Biti told selfmanagedsuper.
“I don’t know how you would track the actual earnings associated with the excess contributions.
“I think you would have to calculate it as an average return over the fund possibly and that may need an actuarial calculation if the accounting software the SMSF uses doesn’t track it.”
AMP SMSF head of policy and technical Peter Burgess said larger funds might find the process easier to implement, but like Biti he believed self-managed funds would have difficulty with the measure.
“On the face of it, for self-managed super funds, it could be difficult to identify those earnings,” Burgess said.
“I think the larger funds will possibly be able to identify earnings a little more easily because of the way they’re structured.
“So I think the self-managed super fund sector will possibly raise some concerns about the complexity with identifying the associated earnings.”
Multiport technical services director Philip La Greca said problems with the proposed refund system would probably arise even before the income resulting from the contributions cap breach had to be calculated.
“One of the problems is how does the tax office actually know when a contribution becomes excessive?” La Greca said.
“Does the ATO (Australian Taxation Office) know which contribution triggered the excess because these caps are cumulative during the year?”
Biti added even if identification of the earnings was achievable, the end calculation of the revenue number could still cause problems.
“Will it be earnings after the tax liabilities of the fund have been paid, or will it be gross earnings, or will you have to track the actual contributions and how that money was invested?” she said.
