What type of contributions can a SMSF accept?

SMSF can accept contributions from all sources including:

• superannuation guarantee contributions (employer compulsory contributions)
• from your employer where you have salary sacrificed
• your personal contributions
• Government (Government co-contributions, low income super contribution, low income superannuation tax offset)
• transfer/ roll-over from other superannuation fund.

Who can contribute to superannuation?

Your or your employer can contribute to your SMSF. SMSFs can accept contributions from members, employers on behalf of the members and Government, such as low income super tax offset.

Can contributions from my employer be paid into my SMSF?

Yes. Most Australians can now instruct their employer to pay their compulsory superannuation contributions into their SMSF.

You will require an Electronic Service Address (ESA).

What is SuperStream and does my SMSF be SuperStream ready?

SuperStream is the standard for employer contributions data messaging. The information relating to employer contributes must be sent electronically using the SuperStream standard by the employer to the SMSF.

To be able to accept employer contributions, the employer will require an Electronic Service Address (ESA) for your SMSF. Please contact us to obtain the ESA for your SMSF.

Your SMSF does not require a SuperStream ESA if it if is not accepting employer contributions.

What is the difference between concessional and non-concessional contributions?

Contributions are concessional where a tax deduction has been claimed on the contribution – employer contributions (including salary sacrifice contributions) or personal contributions made by a member and the member claims a tax deduction in their personal income tax return. They are contributions made into the SMSF before tax.

Personal non-concessional contributions are after-tax contributions made by the member, and a tax deduction is not claimed on the contributions by the member. These are contributions made from after tax monies.

What is the work test?

The work test is met when a person has been gainfully employed for at least 40 hours within 30 consecutive days in a financial year.

Gainfully employed means you were employed or self-employed for a gain or reward. Managing passive investments and voluntary work would not meet the test.

When is a contributions received by the SMSF?

Contributions are determined on a ‘cash’ basis. A contribution only counts towards a financial year’s cap once the payment is received by your SMSF. For electronic transfers, it is not when the payment is sent, but when the payment is received by the SMSF.

You need to ensure your SMSF receives all your contributions by 30 June.

When is the non-concessional contributions bring-forward rules trigerred?

The bring-forward rules are trigerred in the year you exceed the annual non-concessional contributions cap. You can contribute a maximum of three times the annual non-concessional contributions cap amount in the year you trigerred the bring-forward rules and the following two years. Transition rules apply if you trigerred the bring-forward rules in the 2016-17 or 2017-18 year.

Can the SMSF return contributions that exceed the cap?

The ATO takes the view that contributions generally cannot be returned to a member because they regret making them or they or their agents made an error in their decision to contribute. This is especially true for personal contributions.

Where the super guarantee contributions is from an (unrelated) employer and that that employer was under a mistaken belief that it had a legal obligation to make the contribution, and subsequently sought recovery of the mistaken payment, the SMSF may return that amount in accordance with the law of restitution. However, the trustees should ensure that have sufficient evidence to support the re-payment – for example, letter from the employer.

What happens if I exceed the concessional contributions cap?

The ATO will issue you an excess concessional contributions determination and amend your individual tax return to include the excess amount as assessable income reduced by a tax offset equivalent to 15% for the tax already paid by the SMSF.

You will be issued with a Notice of amended assessment. The liability to pay the tax is the individual’s liability and payable using their own money.

You will have 60 days in which to make an election from the issue date of the assessment or determination to release the 85% of any excess concessional contributions. Once the election is made, the ATO will issue a release authority to the SMSF. The SMSF will need to release the money to the ATO, where it will be offset against the tax liability before the remaining balance is refunded to the individual.

There is also an excess concessional contributions (ECC) charge is applied to the additional income tax liability arising due to excess concessional contributions. The ECC charge is an interest charge to recognise that the tax is collected later than normal income tax.

Can I claim a tax deduction for my personal super contribution?

From 1 July 2017, you can claim a tax deduction for personal super contributions once you have completed and provided to the SMSF the Notice of intent to claim or vary a deduction for personal super contributions form, and receive an acknowledgement letter of receipt of the notice from the SMSF.

What is the difference between salary sacrificing and claiming a deduction for personal super contributions?

They both achieve the outcome of the contribution being before-tax contributions – concessional contributions. Some employers do not provide the ability for employees to salary sacrifice contributions. From 1 July 2017, the ability to claim a tax deduction for personal super contributions will ensure those employees who cannot salary sacrifice is not disadvantaged.