Auditing, Contributions

Contribution mistakes more likely

SMSF auditors non-concessional contributions work test

Changing the non-concessional contribution regime to operate on an age-based criteria means more mistakes are probable and auditors will be less likely to be able to help rectify them.

The high number of changes to contribution rules in recent years means SMSF trustees are more likely to make mistakes and auditors have less capacity to help them rectify those errors due to the simple age-based measures that are now in operation, according to a technical specialist.

Smarter SMSF technical and education manager Tim Miller highlighted that since 2017 there had been at least 25 changes to the contribution rules, including the double change to the downsizer scheme and the removal of the work test.

“If you’re an SMSF trustee and trying to keep up with all those changes, it’s inevitable that you’re going to make mistakes,” Miller told attendees at the Auditors Institute SMSF Audit Day last week in Melbourne.

“That’s why I still find it prudent from an audit point of view to make sure that we’re on top of the changes that apply to the years we’re auditing, but also what’s coming into the future as well, and particularly when auditing multiple years at once, you might be applying a different set of rules to how those pensions are applied.”

He noted the likelihood of more mistakes occurring had increased because trustees now only had to consider age-based criteria when making non-concessional contributions following changes to the work test and contribution acceptance rules, which began from 1 July 2022.

“The work test rules are fantastic if you’re a trustee because you only have to think about one thing – how old are the members?” he added.

“If you are the member, you don’t have to think too hard at all because you know how old you are and you just have to ask yourself one question – am I under 75?

“If you are under 75, you can accept any contribution for any amount as there is no restriction on how much money can be received by the trustees under the SIS (Superannuation Industry (Supervision)) Act.

“The SIS Act puts an age barrier on it. Everything else is subject to caps, taxation requirements, elections being made or whatever else it might be, but the trustee just has to look at the age component.

“So there is a greater capacity for individuals to get it wrong and trustees will just accept the money, and then there is less capacity for us to rectify those mistakes and many more people will be exposed to the excess contribution regime.”

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