SMSF members splitting a personal deductible contribution with another member need to execute the process in the right order, with hasty action limiting the ability to claim the deduction and make the split, according to a technical expert.
BT Technical Services technical consultant Tim Howard said the process around making a personal deductible contribution was more complex than the splitting application, but it had to be carried out in full before the latter was started.
“This process is different and more complicated, but we need to be aware of it because you might need to get it done on time and correctly before moving to doing the contributions split,” Howard said during a technical briefing today.
“An example with a simple client may be where they put in $27,500 and they split 85 per cent of it to their spouse in the current year.
“We have to make sure they get the notice of intent [to claim a deduction] in and accepted by the trustee before we lodge the splitting application with the trustee.
“Similarly, if you have a client looking to do a full rollover from their fund in the current year and they’ve put a personal contribution in the current year and want to claim a deduction for that, then we need to make sure they lodge the notice of intent before the split and before the rollover to the new fund.”
He said the notice of intent to claim a deduction was a central document in the process as it interacted with the ability of a fund member to split an amount and the timing of its lodgement was important.
“The approved form from the ATO is generally accepted, but it does have to be given to the super fund by the earlier of when the tax return is lodged for the contribution and the end of the following financial year,” he said.
“So where you have situations where someone lodges their return, maybe a client does it online this week because they want to get their refund quickly, that will close them out and they will lose the opportunity to claim the deduction from last year.”
He also noted moving too fast to withdraw funds or start a pension from the fund will also hamper the ability to make the deduction.
“The fund still needs to hold the contribution and if you start an income stream with any of it with the current fund, there is no ability to claim any reduction, while if you make a rollover, there is an ability to claim a partial deduction with the amount that is left,” he said.
