SMSF trustees receiving contributions from members over 75 have a very narrow window within which to return them, where they are not allowed, to avoid a breach or contravention, a technical specialist has highlighted.
Heffron head of education and content Lyn Formica said the Superannuation Industry (Supervision) (SIS) Act and ATO guidelines were clear about what should happen with contributions that cannot be received by an SMSF.
“The legislation states that if the trustee has accepted a contribution that it shouldn’t have, it has to return it within 30 days of becoming aware it has accepted something it shouldn’t have,” Formica said during a recent online workshop.
“Taking a look at the ATO’s website it states [in regards to contributions] if we’re dealing with an SMSF, the trustee should be aware of the rules and the day the money is deposited.”
She said this was important for those aged over 75 and gave the example of an SMSF member who deposited $90,000 into their fund on 31 May 2023, intending for it to be a contribution, despite the fact they had turned 75 on 1 February 2023.
“The final date for this person to put in a superannuation contribution, apart from any superannuation guarantee and downsizer contributions, was 28 March 2023, which is the 28th day of the month after they had turned 75,” she said.
“So this is a contribution the trustee has accepted when they weren’t eligible to accept it and has to be given back.
“The ATO would argue the 30 days starts from the day that money was deposited on 31 May.”
She noted the 30-day rule may catch some people out and perhaps the 30 days should start once an SMSF member has been made aware of their error.
“Either way, this is a contribution the trustee should not have accepted and the law says it must be returned to the contributor,” she said.
“The 30 days just determines whether we’ve got a SIS breach or not.
“If we give the money back within the 30-day period, there is no SIS breach. If we give the money back outside the 30-day period, then the auditor may report a contravention of those rules.
“Either way, it is not a contribution and for the 2022/23 financials if the money is still sitting in the fund, I would show it as a payable and not report it as a contribution until the amount is actually returned.”
