The imperfect nature of the formal procedure required to be followed with regard to the contribution reserving strategy highlights the need for trustees to understand the difference between a tax agent managing their SMSF matters and one who is responsible for their activities outside the super fund, an SMSF specialist has said.
The situation in question requiring this knowledge arises because the concessional contribution involved will initially be treated as a breach of the fund member’s annual cap. As a result, an excess determination will be issued to the member directly.
“We love to talk about contribution reserving strategies, and you can talk about it to your clients, but we’ve got to keep in mind the practicality of it. I know, as an SMSF accountant and administrator, when I look at a fund and the trustees say they’ve used contribution reserving, I’d have to warn the individual to warn their non-SMSF tax agent, because I only looked after the super fund, they would be likely to get an excess determination,” Accurium head of SMSF education Mark Ellem told delegates at the recent SMSF Professionals Day 2024 co-hosted by selfmanagedsuper and Accurium.
“I also had to tell them I needed to know when they received the determination because that marks the commencement of a statutory period.”
Accurium senior SMSF educator Anthony Cullen noted the situation emphasises the need for different practitioners to communicate effectively with each other.
“What it highlights is we all need to be talking to each other and trying to coordinate things so all required forms and returns are being lodged around the same time to increase the chances that everything will flow through. It’s part of managing the relationship with your client,” Cullen said.
Diversified Financial Planners chief executive Dean Hutchins revealed his practice faced this situation not long ago and it was only able to be rectified when the non-SMSF tax agent granted access to the ATO portal to the SMSF tax agent. After the matter was resolved, the non-SMSF practitioner reclaimed the portal access.
“There was no way we could find any other solution,” Hutchins said.
