The ATO has reminded auditors to keep any eye out for non-compliant downsizer contributions and outlined the criteria they need to consider when assessing if a contribution is eligible to use the measure.
In an update on its website, the regulator highlighted the minimum amount of information auditors should be checking for and obtaining evidence about in regards to an SMSF member making a downsizer contribution up to the $300,000 threshold.
It stated that “at a minimum” auditors should assess a member was aged 65 years or older at the time the contribution was made, provided a tax file number and the SMSF trust deed allowed a downsizer contribution to be made into the fund.
Auditors also had to ensure the contribution was made using an approved form that had been signed and dated by the member and the contribution, which could not exceed $300,000 per member, was made at the same time or after the form was received by the fund, and was the only downsizer contribution that had been made by the member.
The ATO noted auditors were not required to check any other downsizer eligibility requirements, but did have to take action where a contribution was incorrectly made into a fund.
“We do not require auditors to check a member has met any other downsizer eligibility requirements as they can rely on the member making a correct declaration on the approved form,” it stated.
“Where the contribution does not satisfy the acceptance rules under regulation 7.04 of the Superannuation Industry (Supervision) Regulations 1994, trustees are required to ensure the contribution is returned by the fund.
“A contravention of regulation 7.04 occurs where the contribution is not returned within 30 days. The auditor will be required to report the contravention to us via an auditor/actuary contravention report, notify the trustees via a management letter and modify part B of the SMSF independent auditor’s report.”
Recently, the SMSF Association sought clarity on the issue of whether a downsizer contribution had to be drawn directly from the proceeds of the sale of a member’s residential property, with the ATO noting an SMSF member could use other assets of the same value as their contributions.
Last year, the ATO also noted a contribution could be made from a partial sale of property, but contributions that fell outside the 90-day window to be transferred into an SMSF were likely to attract penalty action.
