The change to the work test rules to take place on 1 July will effectively eliminate the ability for unintended errors to take place when making non-concessional contributions for individuals under the age of 75.
“[After 1 July 2022] if you’re over the age of 67 [and under the age of 75], any non-concessional contribution that you make that you weren’t entitled to make, because of your total superannuation balance or the like, is actually going to be [treated as] excessive and you’ll actually have to go through the ATO process of receiving your excess non-contribution notice and refunding [the amount] through the ATO system,” SuperGuardian education manager Tim Miller told attendees at the selfmanagedsuper SMSF Professionals Day 2022 held in Sydney recently.
Under the current rules, if the trustees of a super fund accept a contribution they were not by law able to do, for example, if a member over the age of 67 allocated monies to the fund without satisfying the work test, the amount could be refunded to the member without penalty, Miller noted.
“So [from 1 July] the whole idea of saying ‘you’ve made an error, [we’ll] return that money’ won’t wash it and if the trustees pay that money back themselves, then they’ll have to answer to the auditor in that regard,” he said.
On a more positive note, he pointed out the individuals making a potential contribution error will in all likelihood be over the age of 65, meaning they will have met a condition of release and will not have any incorrectly refunded money treated as an illegal early access of superannuation.
Further, he revealed a recent Administrative Appeals Tribunal ruling demonstrated ignorance of the change in legislation will not be accepted as a valid reason to escape penalty.
“I’d just like to highlight the SQQM v FCT case because that’s a case where the tax office and the Administrative Appeals Tribunal basically said that not understanding the law is not a reason to be able to have contributions reallocated to another financial year,” he said.
“In this instance the person had ill health and all sorts of other conditions as well and claimed they weren’t aware of the [relevant] law change and the tax office basically said tough luck.”