SMSFs warned on 30 June cut off for electronic transfers
With a significant portion of Australians missing the 30 June cut off last year when making non-concessional contributions, Colonial First State has warned SMSF trustees to organise transfers well ahead of next week’s deadline.
Around one in five or 22 per cent of CFS customers missed the 30 June cut off last year when making non-concessional contributions via electronic funds transfer or BPAY in the final week of the 2015-16 financial year, according to CFS.
“Despite requesting funds be transferred before 1 July, the standard 24-hour settlement period meant payments were delayed,” said CFS.
“If the same were to happen this year, these contributions would be assessed against the new reduced non-concessional cap of $300,000 for people under 65.”
CFS saw a spike in voluntary contributions in May this year, up 89 per cent since April, and surging 166 per cent compared to May in the previous year.
CFS executive manager Craig Day said although contribution rates have been high over the past six months, there is still a risk that some people could be left behind with 97 per cent of CFS customers making non-concessional contributions electronically.
“An electronic contribution is only made when money hits the fund’s bank account. Therefore, a transfer which is made on 30 June that is subject to a 24-hour settlement may not arrive in time,” Mr Day noted.
“While 30 June is the formal deadline before the super cap is reduced, people using electronic transfers to make contributions need to do so well before this date to ensure their super is assessed under the old cap of $540,000 for those under the age of 65.”
Mr Day warned that if SMSF trustees miss the cut off, those making non-concessional contributions of more than $300,000 may be issued with an excess contributions notice by the ATO and may need to take the excess back out of super, or risk having to pay the excess non-concessional contributions tax.