SMSFs cautioned on Division 293 payment blunders
SMSF trustees have been reminded that they must first obtain the ATO’s approval before paying a Division 293 payment; otherwise, the amount will be treated as a loan and need to be repaid, a technical expert has warned.
In an online article, SMSF Alliance principal David Busoli said he has encountered a number of instances of Division 293 being paid by SMSFs without the member first obtaining the ATO’s approval.
SMSFs need to ensure they follow the correct procedure if they are making one of these payments; otherwise, it will be treated as a loan and need to be repaid. It will also raise an audit comment, he warned.
“If a Div 293 liability arises, the trustee will receive an ATO assessment personally for the amount. The assessment notice will give them the choice of either paying it from their personal funds or electing for a super fund to pay the benefit,” Mr Busoli explained.
“Without the election being lodged and accepted by the ATO, the assessment cannot be paid by the SMSF.”
Once the ATO receives the election, via either a paper form provided with the assessment or by the trustee lodging the election via myGov, the SMSF will receive a release authority to make the payment from the ATO, he said.
“Without the release authority, the SMSF cannot make the payment,” he stated.
“You have up to 60 days from the date of your Division 293 assessment to make your election. This does not change the due date for payment, so late payments will still incur interest.”
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
