An SMSF technical expert has warned accounting for a reserving strategy for non-concessional contributions (NCC) is not straightforward and requires careful attention to ensure it is done properly.
In August last year, the ATO introduced form NAT 74851 “Request to adjust concessional contributions”, making the administration and declaration of reserving strategies easier, but the document did not cover NCCs, SuperConcepts technical services and education general manager Peter Burgess said at the latest SMSF Association Sydney chapter breakfast.
“If it’s a non-concessional contributions reserving strategy, you have to go through the old process of asking for discretion to ask for that excess to be reallocated to another year,” Burgess said.
“It’s a lot more cumbersome, we can’t just use this form, and they’ll want evidence of the deed, they’ll want to see the deed where it allows a reserving strategy, and all sorts of things.”
According to Burgess, an added complication existed where all contributions, including the excess component to be directed to a reserve and allocated to a member in the subsequent financial year, had to be reflected in the SMSF’s tax return as allocated in the year the fund received the money.
“So your tax return has to show it as allocated, but your member statements and your financial statements for the fund actually show it as unallocated,” he explained.
“How you make that work is difficult because a lot of these admin spit out all of these things at the same time – you get your tax returns, your financial statements, you get your member statements.
“So trying to it in the tax return as allocated and trying to show it in the other statements as not allocated requires a bit of mental and manual intervention.”