SMSF advisers and accountants should review any determination issued to clients by the ATO to prevent them authorising the release of money from an SMSF where further information may modify or even negate the determination, a technical specialist has warned.
Heffron SMSF technical and education services director Leigh Mansell said SMSF practitioners should be proactive about examining determinations because they are easier to address with the ATO before funds are released from an SMSF as there are no guidelines on how to recontribute incorrect determination payments.
“If you see a determination, it’s always worthwhile having a quick look at it because you don’t want it to go too far down the line where ultimately a release authority gets issued to the fund and the fund has to comply with that,” Mansell said during an online SMSF clinic today.
“If you see a determination and think it’s not right, if it was me I would be on the phone to the ATO or talking to the client’s personal accountant and asking them to call the ATO because it looks like the determination might be based on incorrect information.”
Her comments were made in regards to a case in which an SMSF member received an excess non-concessional contribution (NCC) determination from the ATO.
Assuming the ATO calculations were correct, the member had begun to release the excess from the fund before his accountant noted incorrect information in regards to the total super balance had been used by the regulator.
Heffron client relationship manager Sean Johnston, who co-presented with Mansell, said there were no clearly defined options for SMSF members to recontribute money that exited a fund as a result of an incorrect determination and members should not act until they have spoken with the ATO.
“There’s no provision in the legislation to put that money back in. There’s nothing that says if you’ve acted under a release authority incorrectly, you can just reverse that and put the money back in,” Johnston said.
“What we would do in this situation is approach the ATO first asking if you can put this money back in and can the ATO reallocate it to the period of time when you were allowed to put this money in or when you didn’t have a cap problem, or when it should have been put in because it’s been incorrectly released.”
Mansell said approaching the ATO at the outset may also see the determination negated by any additional information that could be provided regarding its decision.
“If you talk with the ATO, at least you’ve got something recorded with them and the ATO might say don’t worry about the determination because now that you’ve told me a different fact set it might just fix itself up in the wash or something else might happen.”