SMSF Contributions and Rollovers
Self-managed super fund trustees can accept SMSF contributions and rollovers for its members from various sources. However, some restrictions apply and are dependent on the member’s age and caps on the contributions.
Proper documentation of contributions and rollovers is necessary. Documentation should include the type of contribution, its component breakdown and they should be properly allocated to the members’ accounts in 28 days of the end of the month when you have received them.
I. Accepted SMSF Contributions
There are some standards to be followed in accepting SMSF contributions, and the trust deed might have more rules about it. A contribution may be allowable and depends on:
- If the member has tax file number, if he does not have one, contributions cannot be accepted.
- The type of contribution. Mandated employer contributions, like super guarantee contributions from a member’s employer
- Member’s age. Non-mandated contributions cannot be accepted for members 75 years or over.
- If the contribution exceeds the member’s fund-capped contribution limit.
Assets are usually not accepted as contribution from a member but there are exceptions. If contributions will be received from employers, an electronic service address is needed to receive the associated Superstream data.
Member’s Tax File Number
When a new member joins the fund, the TFN should be submitted to ATO. This can be done when you register the fund or when a new member joins the fund.
If the member has not given his or her TFN:
- The fund cannot accept contributions from them, like personal and eligible spouse contributions
- The fund might have to pay extra tax on some contributions made to members’ accounts.
- The member may not be allowed to receive super co-contributions
- Administrative delays may occur because ATO is unable to identify the member from the information provided.
Employer Mandated Contributions
Employer mandated contributions are contributed by an employer according to the laws and industrial agreement for the benefit of a fund member. These include super guarantee contributions. These are accepted SMSF contributions for members at any time, whatever their age may be or the number of hours they work.
These contributions include:
- Contributions by employers over and above their super guarantee or award obligations
- Member contributions: made by or on behalf of the member like personal contributions, super co-contributions, eligible spouse contributions and those made by a third party, like an insurer.
Non-mandate contributions can be accepted if:
- Members are under the age of 65. All types of non-mandated contributions can be accepted if the member has given ATO their TFN.
- Members are aged 65 or over but are under 70 years old. Non-mandated contributions can be accepted with the TFN provided and the member is gainfully employed on a part-time basis.
- Members are aged 70 or over but under 75. Only employer contributions and personal contributions may be accepted. TFN is also necessary and the member must be employed on a part-time basis. For a member whose turning 75, the contribution must be received not later than 28 days after the end of the month that the member turns 75.
- For members aged 75 or over, non-mandated contributions cannot be accepted.
Contributions like super co-contributions and employer contributions can be accepted at any time if they relate to a valid contribution period for a member.
II. Contribution Caps
Contribution caps limit the amount that can be contributed to a member’s account in each financial year. These caps are annually indexed. If a member’s total contribution exceeds his contribution cap in a year, he will be liable for additional tax.
Fund-capped contributions limit
The SMSF cannot accept single contributions that exceed the member’s fund-capped contribution limit. The limit depends on the member’s age at the start of the financial year. For members aged 65 and over but are under 75, the limit is the non-concessional contributions cap for the year. For members aged 64 or under, the fund-capped limit is three times the non-concessional cap for the financial year.
Fund-capped contributions excludes personal contributions that a member intend to claim as income tax deduction, contributions from structured settlement or personal injury payment, any amount that relates to a directed termination payment and super co-contributions. The fund must return any excess amount in 30 days.
Concessional contributions are contributions to your SMSF that are included in the SMSF’s assessable income. They are taxed at a ‘concessional rate of 15%, otherwise known as the ‘contributions tax’.
Common types of concessional contributions include employer contributions like the super guarantee and salary sacrifice contributions. They also include contributions made by members which the members claim an income tax deductions. They are also subject to yearly caps.
Starting July 1, 2017, concessional contribution cap is $25,000 for individuals regardless of age. For members aged 49 and over the cap increased to $35,000. In 2013 to 2014 excess contributions were no longer taxed. If a member exceeds the cap, it is included in the member’s assessable income. The tax charged will be a marginal tax rate.
These are SMSF contributions that are not included in the SMSF’s assessable income. This includes personal contributions made by members where no income tax deduction is claimed.
Starting July 1, 2017 the yearly cap was at $100,000 for members 65 and older but under 75. Members will also have the option of contributing up to $300,000 over a three-year period depending on their total superannuation balance. Non-concessional contributions that exceed the cap starting July 1, 2017, excess contributions are taxed by 47%. The members are liable to pay the tax and should have their fund release the tax amount.
Non-concessional contributions also include excess concessional payment for the year but do not include structured settlements, personal injury orders and super co-contributions, or capital tax gains.
Receiving a rollover
ARA-regulated super funds check in our system in confirming if the person requesting a rollover is a member of the fund. Therefore, we advise that your fund membership details are updated in the ATO’s system and notify them of any changes.
Rollovers from a different fund will not be included in the assessable income. Unless, the rollover amount is inclusive of an untaxed element.
If it contains an untaxed element, it should be included in the assessable income of the fund up to the untaxed cap amount in the financial year where the rollover occurred.
Should the untaxed element exceed the untaxed plan cap, the originating fund should then withhold tax on top of the marginal rate plus Medicare levy. This now-taxed amount is then added to the tax-free component of the rolled-over amount.
Making and Reporting a Rollover
Rolling over members’ benefits to another super fund there is a need to:
- Confirm that the receiving fund is compliant with ATO laws,
- Complete Rollover benefits statementor a Death benefit rollover statement and provide the completed statements to the receiving fund with the payment or within seven days. A copy should also be given to the members within 30 days and the SMSF should keep copies of the records within a five year period.
In the SMSF annual return, all member contributions should be included even if they were rolled out to another fund later.
Reporting Rollovers of Transfer balance caps
Transfer balance cap reporting and rollovers
ATO encourages the report of rollovers as a commutation through the TBAR. This is when a member rolls over the amount into an APRA-regulated fund. It will then starts an income stream once the rollover takes effect. If it is not reported at the time it happens, double-counting of the income stream might occur.
IV. Personal Contributions and Deductions
If eligible, a member can claim an income tax deduction for SMSF contributions they make. A member who intends to claim a deduction should notify the other members of the intent. However, the notice may become invalid if the person is no longer a member of the SMSF, the SMSF no longer holds the contribution because of a partial rollover, and the SMSF has paid a lump sum or has started to pay income streams that include the contribution. In these instances, the member is not allowed to claim a deduction for the personal contribution made.
Acknowledging Valid Notices
Valid notice should be acknowledged and should include: the date the fund received the notice, any subsequent variations received by the fund, member account and fund details and total personal contribution amount that covers the notice which include the amount the member intend to claim as a deduction and the dates when the SMSF contributions were made.
The process ensures members in claiming deductions they are entitled to.
When dealing with SMSF, whether it’s contribution, rollover or investment, it’s best to hire an SMSF auditor so that you are always sure that you are following the rules and regulations that are set forth.
Kingston Knight Audit are the Auditor Melbourne experts to contact when dealing with your trust account audit, SMSF Audit, financial statement audit, and internal audit requirements. Contact us today, Kingston & Knight Audit offers a free telephone consultation to establish how we can best help you achieve the assurance and compliance you require.