Slow processing of forms electronically lodged with the ATO to inform it of the use of a contribution reserving strategy have added to execution problems, an SMSF technical specialist has stated.
Heffron head of SMSF technical and education services Lyn Formica said the strategy, which allows a contribution to be made in June at the end of the financial year, and a deduction claimed against it, but allocated in July at the start of the new financial year, requires a notification form to be lodged with the ATO.
“A common problem with this strategy is the documentation. You need a deed that allows you to defer the allocation of a contribution,” Formica said during a presentation at the Heffron Super Intensive Day in Sydney today.
“We need a trustee resolution to accept a contribution in the SMSF, but defer the allocation of it, and then another trustee resolution to subsequently allocate that contribution in July.
“We also need our normal deduction notices and the special ATO form [NAT 74851], which tells it you have employed this strategy because the SMSF is going to report more than $32,500 worth of concessional contributions and it’s going to look like you have got an excess.
“The form tells the ATO to move the excess to the following financial year, but the problem is you can’t get the ATO to process the form.
“If the form is not processed, it’s going to look like your client has got an excess concessional contribution and the ATO will issue an excess determination.
“You will have to object against it because the excess concessional contribution is going to count towards your non-concessional cap and make other problems.”
She said the ATO now allowed the electronic lodgement of NAT 74851, but this had not improved the speed of processing those forms, and funds may now be having to lodge objections.
“I was really hoping that given they amended the portal to allow you to lodge the form online meant they realised what their problem was and were going to process this form a lot quicker,” she added, noting none of the practitioner attendees had any success with lodging the form via the portal.
“We still need to work out who to talk to at the ATO to work out why they are not processing that form quickly.”
Jason Spits
SENIOR JOURNALIST
Jason is a senior journalist with Benchmark Media and writes for the selfmanagedsuper website and magazine and smstrusteenews website. He has covered financial services since 1999 and has written about life insurance, superannuation, investment management and financial advice, in both a freelance and in-house capacity, and also did a brief stint as a media manager for an industry association. He has been the editor of trade titles Money Management and Financial Standard, and was most recently senior journalist with life insurance title Riskinfo.
Articles by Jason