ATO scrutiny over a loophole that has surfaced within the legislation allowing excess non-concessional contributions to be refunded should not worry SMSF members as they would not be breaking any current laws, according to an SMSF commentator.
The regulations currently allow excess non-concessional contributions refunds to be taken from the taxable component of an individual’s existing superannuation entitlements, effectively allowing members to increase their tax-free benefits.
“There was a thought that was presented at the SMSF Association National Conference in Melbourne a few weeks ago that maybe this idea of deliberately putting in large amounts of money, then taking out the excess non-concessional contribution component, resulting in people ending up with a larger tax-free amount may not necessarily be looked at very kindly by the tax office,” Super Central superannuation consultant Tony Negline said at the firm’s latest Bacon Super and Eggs seminar.
“I think in some situations you can always look at things and believe it’s going to be tax avoidance or tax evasion, however you want to frame the term.
“The issue is if you just use the rules the way the government’s designed them, what mischief have you gone into?”
Negline pointed out the legislation also had implications for the preserved components of members’ superannuation entitlements.
“When money is actually taken out of the superannuation system, and certainly with non-concessional contributions, you actually take money out first of all from the unpreserved component, then the unrestricted non-preserved component, and then you take it out from the preserved component,” he said.
“It is an issue for some people, particularly if they have unrestricted money in the superannuation system, but given the number of people in that situation is falling, I don’t necessarily see the preservation component issue as a major problem.”
