Tax Office outlines process for ineligible downsizer contributions

“If allowed by the trust deed, the fund can either adjust the prior downsizing contributions to nil and report this amount as a non-concessional contribution if the member meets the age/work tests, or adjust the prior downsizing contribution to nil and return the contribution to the member,” it stated.

“Members who no longer have a super interest with the fund, or an insufficient amount being able to be returned, must have their contribution re-reported as non-concessional. This re-reporting must occur even if the contribution was returned because the member did not meet the age/work tests.”

Some or all of the contribution may be an excess non-concessional contribution (ENCC), it said.

“Regardless of the age of the member, if this is the case, the member will receive an ENCC determination,” it explained.

If the member receives an ENCC, the member has the right to apply for commissioner discretion where there were special circumstances or lodge an objection to the ENCC determination.

The ATO said the requirement to return an ineligible downsizer contribution if it cannot be accepted remains, even if the member is in pension phase.

“If a fund can’t return the contributions or can’t return the full amount due to an insufficient amount in the member’s interest, the fund must re-report the amount of the downsizer contribution which they can’t return to the member as a personal contribution,” it said.

“An amount released under these circumstances is treated as a super lump sum as it is a partial commutation of the member’s super interest. Being in pension phase doesn’t prevent a fund from complying with the release authority; however, it may mean the full amount can’t be released.”

Where the member’s available balance is lower than the release authority amount, the fund must release the maximum amount available.