Administration, Compliance, Contributions

Second splitting request not allowed

Contribution Splitting Splitting application Concessional contribution SMSF

SMSF members only have one opportunity to make an application to split a concessional contribution with a spouse in a given financial year.

A technical expert has reminded practitioners SMSF members are only permitted to lodge one splitting application for a concessional contribution in a particular income year.

BT Financial Group advice strategy and technical specialist Tim Howard noted under the superannuation rules trustees cannot accept a second application, ruling out any possibility of correcting an error that may have initially been made.

To illustrate his point, Howard used an example of a fund member who had made a $27,500 concessional contribution to their superannuation account in the previous financial year.

Subsequently, the individual submitted a splitting application to have 50 per cent of their eligible contributions to be allocated to their spouse in the current financial year.

Upon reflection, the individual submitted a second splitting application to revise that amount to 85 per cent of their eligible contributions, which Howard acknowledged was unlikely to be accepted.

“You cannot revise it. You cannot provide a second notice. The trustee is only required to accept one splitting notice per year,” he told attendees of a webinar he hosted today.

“Once the first one has been accepted, there’s no ability to revise it up to that 85 per cent, which is what the client wanted to do.”

He warned advisers and accountants not to assume these rules operated in the same manner as those governing personal deductible contributions.

“This is different to our timing around claiming deductions for personal super contributions,” he said.

“[For example], we can revise those notices down, we can make additional contributions and lodge a second notice of intent in relation to additional contributions if we are still within the prescribed time frame.

“But the [trustee can] only accept one [contribution splitting] notice per year.”

As such, he stressed the significance of grasping the contribution splitting rules as he predicted this strategy will become more popular in the future.

“[Contribution splitting] is occasionally considered, but perhaps undervalued [when it comes to] the ability to hedge against any legislative changes that might be on the horizon and that are not even announced yet,” he noted.

“In super, there is a degree of merit that standardising or equalising balances in super might provide a degree of protection around what might be rule, limit or cap changes in the future.

“It is also particularly helpful for spouses who might be higher income earners.”

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital