The federal budget measure regarding the scrapping of the work test for people aged 67 to 74 will mean all contribution errors will now attract ATO scrutiny, an SMSF specialist has said.
As per the budget announcement made last month, people aged between 67 and 74 will no longer have to satisfy a work test before they are eligible to make non-concessional contributions to their super fund.
SuperGuardian education manager Tim Miller recognised this move will change the treatment of excess contributions SMSF trustees might make either consciously or inadvertently.
“The biggest caveat of this work test removal is it also means we remove the capacity to make mistakes in a contribution sense,” Miller warned delegates at the recent SMSFPD Digital 2021 event hosted by selfmanagedsuper.
“Right now [if] somebody over 67 who doesn’t meet the work test and contributes [to their super fund], that’s [treated] as a mistake and has to be pulled out [of the fund].
“If this new law goes through and someone over 67 contributes and they had [a total super balance that is greater] than [the threshold preventing them from making contributions], well [that will be treated as] an excess contribution.”
He said this means the individual will be unable to address the situation without being subject to the excess contribution system, whereby the SMSF trustee will have to wait until they receive an excess non-concessional contribution determination from the ATO informing them of what they can do with the excess amount.
According to Miller, the budget measures coupled with other sector issues are providing advisers with an opportunity to strengthen their value proposition in the immediate term.
“The link between the budget, the current laws we’re waiting [to be passed], plus indexation really do provide us with a fairly interesting time of year to be contemplating various strategies,” he noted.
