Vital compliance steps flagged for contribution deductions
A change in the 2019 tax return means that SMSFs who want to make a personal super contribution and claim the deduction will need to plan ahead, especially where they plan to start a pension shortly after, says a technical expert.
TAG Financial Services partner Brenda Hutchinson said SMSF clients who want to claim a tax deduction for a personal super contribution this financial year should be aware that there were some changes last year which mean it now needs to be included in the tax return.
SMSF trustees that intend to claim a personal super contribution deduction will need to ensure they have supplied the SMSF trustee with a notice of intent to claim and obtain written acknowledgement from the SMSF trustee of the notice of intent before lodging their 2019 individual tax return, the ATO recently reminded trustees on its website.
The ATO said that if a member wishes to claim a tax deduction for personal contributions, they must have made the super contributions to an eligible super fund and given that fund a valid notice of intent to claim, or vary a deduction for personal super contributions from the earlier of the day they lodge the tax return for the year in which you made the contributions, or the end of the income year following the one in which they made the contributions.
Before this inclusion in the tax return, Ms Hutchinson said some trustees were claiming the tax deduction for the contribution but not letting the trustee know, which for SMSFs is obviously themselves.
“They were getting the benefit of claiming a tax deduction in their own name, but the fund was not paying the tax, so they were getting a double dip,” she said.
She also pointed out if SMSF clients are planning to make personal super contributions, claim a deduction for them and then start a pension straight away, then they need to get those forms in before the pension is started; otherwise, it will be invalid.
The ATO has previously said that a notice will be invalid if the person is no longer a member of an SMSF, the member no longer holds the contribution because of a partial rollover that included the contribution, or they have paid either a lump sum or started to pay a super income stream that includes a contribution.
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.