Contribution safety nets removed

work test removal

SMSF trustees will receive minimal guidance and no red flags about voluntary contributions after the removal of the work test.

SMSF trustees will not be notified of the removal of safety mechanisms that rejected voluntary contributions where a member did not meet the work test, with the ATO only providing minimal guidance, according to an SMSF technical expert.

Heffron SMSF technical and education services director Leigh Mansell said the removal of the work test will also remove the automatic rejection process that currently exists and may trap voluntary contributions.

“The super laws currently state that where people who are 67 to 75 don’t make the work test, a fund is not allowed to accept voluntary contributions,” Mansell said during a webinar today.

“That can be useful in cases where a client has made a contribution and has not met the work test yet and if the fund accepted the contribution, it could blow the non-concessional contribution cap.

“However, moving the work test out of the super law removes that safety mechanism and if contributions go in, they are going to be accepted by the fund and there is no way that you can get them back out again.”

She said the danger applied to non-concessional and downsizer contributions, but recent feedback from the ATO indicates it would not be making changes to its documentation or the tax returns of members or their funds to notify them of this shift.

The issue of changes to the notice of intent to claim has been raised in industry stakeholder discussions with the ATO, which stated it would only be changing information on its website about the work test and when an SMSF member can claim a tax deduction, she said.

“Industry people go to these meetings and fire questions to the ATO and recently they have been about that given the responsibility for dealing with contributions is moving to the ATO, will it make changes to the member’s personal tax return or anything else,” she said.

“The ATO has said it has no intention of changing any forms or the notice of intent requirements, which would require a law change anyway.

“What they do intend to change was the wording on their website to make it clearer that you will need to meet the work test to be eligible to claim a tax deduction, but apart from that there are no more changes planned that we are aware of.”

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