ATO, Retirement, Superannuation

Definition of contribution remains vague

The term contribution as it relates to superannuation has not been defined in either super or income tax law, which can be problematic given its importance in preparing members for their retirement, according to a technical expert.

BT Financial Group head of financial literacy and advocacy Bryan Ashenden told delegates at the SMSF Association National Conference 2019 in Melbourne today that contributions are a fundamental aspect of building a super member’s wealth and any missteps can be detrimental to a member’s retirement.

“Isn’t it awesome to know that the word contribution is not defined in superannuation law and it is not defined in income tax law,” Ashenden said.

“The word contributions is defined in the superannuation regulations, but it’s only defined in the sense of saying what contributions include and essentially do not include.

“Which basically means you have to go back to the ordinary meaning of the word.”

He directed delegates to refer to Taxation Ruling 2010/1 to understand the ATO’s view on the definition of contributions.

The ruling stated a contribution is anything of value that increases the capital of a super fund and is provided by a person and whose purpose is to benefit one or more particular members of the fund or all of the members in general.

The ruling also outlines the definition of the purpose as it relates to the member of the fund. It looks at whether there is a connection between the person who has made the contribution to increase the capital of the fund and the fund itself or members of the fund.

“It’s also quite interesting to note as a side point that ruling while it’s about contributions, perhaps the major focus of it is around the deductibility of contributions,” Ashenden said.

“And if you went to the site to download that ruling today, you’ll also get a cover page that says this ruling is currently under review for the 1 July 2017 changes. Now we are 18 months on from the 1 July 2017 changes and it still hasn’t been updated. Don’t know if that’s a reflection of potential election outcomes that the tax office thinks won’t come through.”

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital