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SuperStream may affect year-end strategy

SuperStream contribution strategy

The SuperStream system could have a significant effect on the common contribution reserve strategy should it be applied more broadly to SMSFs.

The popular strategy of employing a contribution reserve to maximise tax deductions in one particular financial year could potentially be more restrictive should the SuperStream system apply to more than just SMSF rollovers, a technical manager has said.

Currently, SMSF members can make a concessional contribution between 1 June and 30 June and claim the deduction for it in the current financial year as long as the contribution is allocated to the relevant members within 28 days of the following month.

“One of the key issues of SuperStream was that APRA (Australian Prudential Regulation Authority) contributions need to be allocated within a much shorter time frame, so [an SMSF wouldn’t] have that 28 days following the end of the month in which they are received [should there be a full SMSF engagement with SuperStream],” SuperGuardian education manager Tim Miller told attendees of a recent technical webinar.

“So if we’re talking about a three-day turnaround or something like that, then it’s going to encroach fairly significantly on that end-of-year strategy.

“That’s one of the key issues people need to be mindful of.”

According to Miller, this contributions reserving strategy has already caused angst among SMSF trustees for a variety of reasons, even when they are conscious of the current time constraints, and should SuperStream eventually apply to these types of transactions, the situation will become more challenging.

“Ever since the introduction ultimately of the contributions reserving concept, which really stemmed back to the 2007 super reforms, there have always been issues around the timing [involved] and there continue to be issues even in the world we operate in now with electronic transfers and fast banking,” he noted.

“There are always issues around when contributions are made and so the whole idea of making a contribution on 30 June is still so risky from a strategic point of view because they could fall over or take time to [be recorded in] the bank account and therefore be triggered into the next year.

“In the current environment we can [make the contribution in] June and then allocate by the end of July, but if we ever move to a shorter allocation time frame, then it’s going to be problematic.”

The SuperStream system will apply to certain SMSF transactions from 1 October.

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