Contribution barriers flagged with defined benefit funds
Members of defined benefit schemes may not be eligible to claim personal contributions as a deduction with a large number of defined benefit schemes exempt from this provision, says a technical expert.
Speaking at a Townsends event, Chartered Accountants Australia and New Zealand superannuation leader Tony Negline said there are a lot of schemes that have exempted themselves from the provision which requires them to allow members to make personal contributions and claim them as a deduction.
“If you have clients who are public servants, military personal, emergency services and so on and so forth, who are contributing to these schemes and you think that they can claim those personal contributions as a deduction, well there’s a high chance they won’t be able to,” said Mr Negline.
“The Commonwealth has exempted all of their defined benefit schemes by the legislation and other schemes can apply to the ATO to also be similarly exempted. So a lot of the state government schemes, I think have written to the ATO.”
While all of the information regarding this is on the websites of these defined benefit schemes, it may take some time finding the relevant information and deciphering it, warned Mr Negline.
“Finding out which schemes have actually dialled out of this provision is very important for your clients who may fit into this,” said Mr Negline.
“You might be thinking well I don’t have any clients in this cohort. Well I think the simple fact is that sometimes I think you’d be surprised.”
They may also encounter some issues with making contributions for the First Home Super Saver Scheme, he said.
Mr Negline said the Commonwealth does not expect its defined benefit schemes to be able to allow members to withdraw amounts under the first home super saver provisions.
“They may change that, but at the moment my understanding is that it is not their intention. So you’ve got goodness how many members of the Commonwealth DB schemes and I guess the state government DB schemes will also be exempted from that,” he said.
“The downsizer contributions; well, I think that’s a working process as to whether or not [members will] be able to make contributions to those particular schemes.”
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.