Beware of the contribution tax changes, warns Cavendish
SMSF practitioners should be wary of using the new rules around excess non-concessional contributions as part of a client strategy given the time constraints associated with the provisions, warns Cavendish.
Speaking at the Lifespan Financial Planning 2015 Conference in Sydney last week, Cavendish Super SMSF specialist mentor David Busoli said while the new provisions provide a “neat way of cleaning out the taxable components from a fund” when the non-concessional contribution cap is breached, practitioners and trustees need to be careful.
“[The new legislation] means that you can make excess non-concessional contributions, apply to receive the excess amount and the excess amount will come from the taxable portion, not the tax exempt portion that you’ve made as a consequence of the non-concessional contribution,” he said.
Mr Busoli said the new rules, however, only allow an SMSF practitioner or trustee 30 days from when the trustee is first advised that the contribution has exceeded the non-concessional contribution cap, to apply to receive the excess amount.
“If your trustee happens to be overseas or you don’t get around to it [in the 30 days], then it will become an actual breach of the non-concessional cap and you’re going to be up for the tax, which this year is at 49.5 per cent,” said Mr Busoli.
“So be very wary of using this.”
Mr Busoli also said he considered the new legislation a “bit too good to be true” and expects there could be adjustments to the new provisions further down the line.
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 has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.