SMSF trustees, in many cases, are still not following the correct ATO procedures for the release of non-concessional excess contributions, resulting in illegal early access in some situations, according to one technical officer.
IOOF technical services manager Julie Steed said one of the areas concerning the release of excess non-concessional contributions in which she continues to see problems is where trustees are arranging the refund of the excess contributions without going through the proper ATO release authority process.
Ms Steed said it is often a case of people identifying the excess when preparing their annual accounts, hearing the law has changed, and then making a withdrawal straight away without the ATO’s release authority.
“I think it’s going to be a bit more time before it becomes bedded down, before people have the knowledge that you can’t just refund excess contributions,” she said.
“[SMSF trustees] have to go through the proper process of having the ATO identify they have an excess, [the ATO] sending the trustees and the members the relevant release authorities and members actually acting on those release authorities in accordance with the rules.”
If trustees simply refund the money without waiting for the release authority then that would “technically be illegal early access”, Ms Steed warned.
“So in exactly the same way as if I take money out of the superannuation fund without having met a condition of release, just to pay for anything, this would be in exactly the same boat.”
The second problem Ms Steed said she is seeing among trustees is where they do not understand that there are tight timeframes involved in the process of arranging the release.
“We’re seeing instances where members see quite an official letter from the tax office, and they put that in the 'too hard' basket until they get around to contacting their adviser. So by the time they do that, the timeframe for making their elections has then passed,” she said.
“What they [also] fail to understand is that if they don’t go through the release process, then they may still have an excess contribution, which is then taxed at 47 per cent.”
SUBSCRIBE TO THE SMSF ADVISER BULLETIN
07:20Property spruiker activity on the rise, adviser warnsBy Miranda Brownlee
07:00Govt urged to clarify ‘structured settlement amounts’By Staff Reporter
24 Oct 2016Compliance risks flagged with LRBA bank documentsBy Miranda Brownlee
24 Oct 2016Evolv announces new SMSF audit offeringsBy Staff Reporter
21 Oct 2016Super funds accused of fee delaying member transitionsBy Staff Reporter
21 Oct 2016ASIC spot checks, shadow shopping imminentBy Katarina Taurian
- view all
Property spruiker activity on the rise, adviser warns
The number of property spruikers preying on SMSF trustees and practitioners has increased in the past year, with spruikers attempting to ent...read more
Govt urged to clarify ‘structured settlement amounts’
A trustee lobby group has called on the government to provide a more precise definition of ‘structured settlement amounts’ within the pr...read more
- view all