Documentation, Strategy

Members must track contributions

smsf trustees contributions

SMSF members must track their ongoing contributions to ensure they can fully use bring-forward measures without creating an unexpected excess contribution.

SMSF advice practitioners advising trustees to make use of bring-forward contributions measures should ensure they have not forgotten any contributions in the previous three years to avoid triggering a contribution excess, an SMSF administrator has said.

SuperGuardian senior client manager Jason Poser said this not an uncommon set of circumstances, particularly for trustees who have the ability to make multiple contributions into their SMSF, but often failed to keep track of those events.

“When looking back at the three-year history, trustees should be making sure they have not made a contribution they have forgotten about,” Poser said during a webinar hosted by SuperGuardian today.

“I have had a couple of cases in the past 12 months where a member has made a contribution of $25,000 and then gone to make their $300,000 bring-forward contribution in a future financial year and fallen foul of a non-concessional excess situation.”

Also speaking during the webinar, SuperGuardian education manager Tim Miller noted trustees were no longer able to deal with the excess contribution in a simple way and were reliant on an ATO process that could take more than a year.

“The thing we notice is that it is a nuisance factor to deal with that excess contribution,” Miller said.

“The old rules allowed for a refund, under pre-2013 rules, but since that time the refund mechanism goes through the ATO.

“So it is not a case of fixing the excess contribution by writing a cheque, you have to go through the refund process and that can take up to 18 months.”

Poser added this process also meant the ATO dealt with fund members or trustees on a personal basis, outside of their SMSF, and could add to their personal tax burden.

“The excess amount they get from the ATO will go via their personal accountant or to them personally and since they are getting this letter 18 months down the track, it can be a huge surprise to them,” he said.

“All of a sudden their personal accountant becomes involved, the financial adviser is involved, as is the member and the administrator, and even though the penalties are reduced, there is still a big tax component on that excess notice and no one picks up that letter and wants to pay that tax.

“It is a shock factor and it comes so much later that people have often forgotten about the contribution they have made.”

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