New contributions scheme experiencing ‘timing issues’
An SMSF accounting firm has outlined some of the timing-related issues regarding the new contributions scheme, with the system still relatively new and trustees confused about when excess amounts can be removed.
Speaking to SMSF Adviser, Cooper Partners director Jemma Sanderson said that once the ATO has received an election to release excess contributions and has sent out the release authority, the SMSF trustee only has seven days from the date on the release authority to actually pay it to the ATO before any penalties are incurred.
“By the time it leaves their office, the date time stamp on that to when you receive, get it out to the trustee and get the trustee to actually pay it – that’s an incredibly tight timeframe,” said Ms Sanderson.
“There have been a few instances where the notices have taken their time to get to us, and by the time they go out to the client and back they’ve gone over that time limit.”
This is especially so when a client has been overseas.
“You email them but [the client] ignores it for whatever reason,” she said.
Ms Sanderson said that while the ATO has been lenient in this sort of situation, where the trustee has only been a few days over the deadline, she expects this will not be the case in the future.
“The tax office has just started sending out notices in the past three or four months and are just getting their systems up to date,” she said.
“As people start to become more familiar with the new system they’ll start to become stricter with some of those timeframes.”
Ms Sanderson stressed that staying within the relevant timeframes is very important since breaching the payment rules can mean the fund is subject to the 49 per cent excess non-concessional contributions tax.
The misconception also remains that trustees can simply add contributions into the fund and take them straight back out again in order to change the taxation components of the underlying superannuation benefit.
“You’ve got to put the money in and wait for the release authority, which could be up to 12 to 18 months, so if you put it in and take it out, you may have breached the payment rules,” she said.
“Even if the trustee is eligible to access that money, because they’ve met a condition of release within their cashing restriction, the amount you’ve taken out doesn’t actually give you credit towards the amount you’ve taken out.”
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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.
