A superannuation specialist has advised practitioners not to allow the urgency of reporting a contributions cap breach to the ATO to prompt a rush assessment of their client’s actual situation.
“It may very well be the case you’ve identified an excess [contribution amount] before the ATO has identified an excess [contribution amount] because of the reporting that needs to go through for year-end before that excess is actually picked up,” BT Group advice strategy and technical specialist Tim Howard told attendees of a recent adviser webinar.
“But sometimes, not always, you will find that even though you think you have a problem, you may not actually have an excess concessional [contribution and] you may not actually have an excess non-concessional contribution.”
To this end, Howard pointed out other contribution provisions may actually be used in these situations to extinguish any likelihood of an actual cap breach.
“The main reasons for that might be, from a concessional [cap] point of view, if a client has available cap space under carry-forward [rules].
“[This would be the case] if they have got less than $500,000 in super and they haven’t fully utilised their concessional cap in either the current or five previous years.
“So even though [your client] might have gone slightly over [their concessional contributions cap] or their employer has resulted in them going slightly over [their limit], you might find that their carry-forward cap space can automatically absorb what you perceive to be an excess over the general cap and they don’t find themselves in an excess contribution [situation].”
According to Howard, a perceived non-concessional contributions cap breach can have similar mechanisms invoked to avoid rectification actions.
“From an excess non-concessional [contributions cap] perspective [it is] similar. They might be in a position where they’ve got the ability to trigger the bring-forward [provisions] and they have not done that,” he explained.
“[It would mean] their total super balance is low enough so the contribution that has gone slightly over, or even significantly over, their non-concessional cap may not have resulted in an excess.”
Darin Tyson-Chan
Editor
Darin is the founder and publisher of Benchmark Media, an independent publishing house whose mastheads include financialobserver, selfmanagedsuper and smstrusteenews. He has been covering the financial services space for over a decade and in this time he has worked for a variety of trade publications. Darin has also written for the Money section published in The Sydney Morning Herald and The Age.
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