The ATO is currently incorrectly challenging the ability of SMSF members to claim a tax deduction for personal superannuation contributions due to an error in its procedures.
Individuals wanting to claim a tax deduction for personal superannuation contributions must lodge a “Notice of intent to claim or vary a deduction for personal contributions” form (NAT 71121) to the super fund trustees before they are able to do so.
This notice of intent must be submitted either before the member lodges their tax return for the financial year in which the contribution was made or before the last day of the following income year, whichever is earlier.
Further, an acknowledgement a notice of intent has been received must be communicated by the fund trustees to the member involved.
However, the issue has arisen because the rules governing the treatment of these notices of intent are different for Australian Prudential Regulation Authority (APRA)-regulated funds and SMSFs with regard to required interaction with the ATO.
“From an SMSF perspective there is no requirement to report to the ATO that [the fund] has issued a notice of intention acknowledgement to the member,” Colonial First State head of technical services Craig Day told delegates at the SMSF Association Technical Summit 2023 held on the Gold Coast last week.
“I come from large fund land [and] large fund land has different rules. We are required to report the fact that we have acknowledged a notice of intention [to the ATO] within 10 days of issuing [the acknowledgment].
“Why do we have to do that? So when the client goes into their pre-filled tax return on [the ATO’s] aligned services it shows up the fact that they’ve claimed a tax deduction.
“[But] what’s happening at the moment is the ATO is actually challenging [these types of] deductions [with regard to SMSFs] because it is not seeing a notice of intention being reported.
“There is no requirement for SMSFs to report [the acknowledgement to the regulator], but the ATO can’t see the fund is an SMSF.
“So it’s actually challenging [them saying:] ‘Hang on, there’s no notice of intention reported for you [the SMSF member] so therefore you haven’t received an acknowledgement so therefore your contribution is not deductible.’
“No, it is [because] there is no requirement for SMSFs to report that.”
Further, there is evidence some accountants have been unwilling to claim a tax deduction for an SMSF member because it is not on the pre-filled tax return.