SMSF trustees have been reminded they are not obliged to inform the ATO they have used a contribution reserve in the current financial year, but should wait until their tax return has been submitted.
Smarter SMSF chief executive Aaron Dunn said members who have made a concessional contribution and directed it to a reserve in the current financial year should be reporting them as two contributions in different financial years, despite receiving the deduction for this year.
“This is one of an SMSF’s greatest assets and this is where we can use a contribution reserve to ensure that we cannot only make a contribution in respect to this year, but it will allow for us to make a contribution in respect to the following year, but get the deduction at the time in which the contribution has been made,” Dunn said.
“So in simple terms, if we had a $27,500 amount that we made in the current year, we could also make the payment in June for a further $27,500 and give us a $55,000 deduction in this year, but the allocation of those is amortised in the 2021/22 year and the 2022/23 year.”
He noted it is a manual process and therefore a lodgement request is required to be filed with the ATO in order to make adjustments to the concessional contributions forms, and that did not have to take place at the time the contribution has been paid.
“The form needs to be done at the time the tax return is being lodged with the ATO,” he said.
“Again, just a little tip there to remember about timing because the ATO has nothing to match it with until it has the information reported to it through the SMSF annual return.”
Dunn has previously warned members to appropriately time the payment of contributions in order to avoid being denied tax concessions on reserved contributions.