A sector expert has reminded practitioners a contribution deemed to have been made to an SMSF by another party on behalf of a member will generally be treated as a concessional contribution.
Accurium senior SMSF educator Anthony Cullen noted this rule will be relevant in situations where there is a transfer of assets by way of an in-specie contribution from a family trust to an SMSF.
“You have to be very careful as to how you go about implementing a strategy like this because if it is seen that the contribution has come directly from the family trust, it will be caught under the provision of a contribution on behalf of somebody else,” Cullen told attendees of an Accurium technical webinar hosted today.
“And so even though the intent might be for it to be a non-concessional contribution, it’s going to be a concessional contribution from the receiving fund’s point of view.”
He warned if the transaction is not carried out properly, it may result in the worst possible scenario where the family trust is not allowed to claim a tax deduction for it and the contribution will be counted towards a particular member’s concessional contributions cap.
However, he confirmed there are methods by which this type of contribution can be made that will allow it to be treated as a non-concessional contribution as intended.
“It’s all about the paperwork you put in place and making sure, from a family trust point of view, that distribution is made to the beneficiary of that trust, but [noting the recipient in question] has instructed you as the trustee of the family trust to direct the payment directly to the SMSF,” he explained.
“So you need that paperwork to show the contribution is coming from the member beneficiary and not from the trust itself.”
