Compliance, Contributions, Strategy, Superannuation

Excess contribution refund needs approval

Excess concessional contributions refund

SMSF trustees who exceed their concessional contribution cap limit should wait for the ATO to issue a release authority before seeking a release of the excess funds.

SMSF trustees who have exceeded their concessional contribution cap have been reminded of the importance of releasing the excess from their fund to avoid potential compliance breaches, but only after they have been given a direction to do so by the ATO.

Cooper Partners Financial Services director Jemma Sanderson said trustees dealing with excess contributions had two options available to them – they could either release the excess or keep it – but she cautioned that opting to retain the excess amount might lead to implications for their non-concessional cap limit.

“In terms of the way [excess concessional contributions] work, you get the notice from the tax office saying you’ve gone over your cap, they add it back to your income and then you’ve got the option of electing to receive the refund from super or you have to pay it yourself,” Sanderson told delegates at the ASF Audits Technical Seminar 2023 held in Adelaide last Friday.

“You’ve [also] got the option not to refund that excess from super, that is entirely available. However, it has a flow-on effect for non-concessional contributions because the gross excess concessional contribution counts towards the non-concessional cap.

“For a lot of people, that could inadvertently trigger a bring-forward period or be in excess of their non-concessional cap and then has to be dealt with subsequently.”

To that end, she advised fund members to seek a release of any excess funds, but only after the ATO had issued a release authority approving the refund of the excess contribution.

“As a general rule, we get all of our clients to release all of those excess concessional contributions from super in order to make sure that there’s no issues from a non-concessional cap perspective,” she said.

“You’ve got to wait for the tax office to send the relevant release authority through, otherwise you can be in breach of the payment standards and if you’re eligible to access your super because you’re over age 65, that doesn’t give you a credit towards releasing your money later, you’ve got to then release it again, which isn’t necessarily an outcome that you may be after.

“Do not release any of the excess until the tax office has told you to, that’s really important.”

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital