A senior superannuation executive has confirmed the ATO has corrected an anomaly within its processes that saw it question the validity of tax deductions claimed on personal contributions made by SMSF members.
Specifically, the regulator was challenging the tax treatment of these contributions because it had not been able to sight a notice of intent from the member to the fund trustees expressing their desire to claim a deduction for these monies.
However, Colonial First State head of technical Craig Day pointed out, unlike public offer funds, SMSFs are not obliged to report this notice of intent to the ATO.
“[There was correspondence on the ATO community forum] saying: ‘Wat’s happening here?’ When I brought that up [with the regulator], I got a call from the ATO saying ‘we’ve fixed that up’,” Day told delegates at The Tax Institute National Superannuation Conference held recently.
“And to be honest I haven’t seen a single issue and no calls coming through to us [now on this subject] so it certainly seems if you are claiming a tax deduction [for personal contributions] on your tax return and [the ATO] can see that you’re a member of a self-managed super fund, it will not cause you a problem.
“So that is good work from the ATO.”
He took the opportunity to remind practitioners to recognise the limits imposed on claiming tax deductions for personal super contributions and reminded them not to negate the associated benefits of the strategy for their clients.
“[These] deductions cannot create a tax loss [for an individual] so it’s limited to their taxable income. But we don’t want to drive it down to zero unless we’re someone like a non-tax resident,” he noted.
“We want to drive it down to no more than [the individual’s] effective tax-free threshold. Otherwise [the person will be] paying contributions tax when [they] shouldn’t be paying any contributions tax at all.
“Keep in mind here that the effective tax-free threshold just increased. Why? Because of the stage three tax cuts. Why? Because the 19 per cent rate [was reduced] to 16 per cent, therefore that low-income tax offset [applies to] more income.”
