SMSFs that receive recontributed superannuation funds withdrawn under COVD-19 early release measures will not be required to measure the arrival or size of those funds, with the ATO tracking their movement, a technical expert has stated.
BT technical services technical consultant Tim Howard said the recontribution measure, introduced as an amendment to the Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 earlier this year, contained a number of conditions, but did not require super funds to match early release withdrawals to later recontributions.
“When this amount goes back into superannuation, it forms part of the tax-free component and will not be assessable on the way, but it will be preserved until the individual is able to meet a condition of release,” Howard said during a technical briefing today.
“The eligibility to use this contribution is based on a fund member meeting contribution eligibility requirements in the first instance, so they would need to meet the work test if aged 67 and above under current rules.
“There is, however, no requirement for SMSF trustees or public offer fund trustees to actually track these amounts.
“As long as the correct lodgment form comes in and the amount is up to $20,000, the funds will accept it and the ATO will track in the backend how much that member accessed and therefore how much they’re able to recontribute.
“Obviously if you don’t contribute it in this certain way, the funds will count towards your contribution cap and if you look to claim a deduction for it, it is going to count towards your concessional cap.”
He said while the measure had a lengthy operating time frame, this could be advantageous for people looking to add extra funds into their superannuation.
“The time frame on this measure is huge and it starts from 1 July 2021 and extends right out to 30 June 2030, so there is nine years that someone could use this type of recontribution,” he said.
“So if a client’s position changes and they are looking to contribute large amounts or trigger bring forwards as they approach retirement over the coming years, there might be opportunity to get in up to an extra $20,000 into superannuation or back into superannuation.”
The ATO said in August that it was able to process early release recontributions, which could not exceed $20,000 based on the two $10,000 amounts the government allowed fund members to withdraw in its response to financial hardship caused by the COVID-19 pandemic.
