SMSFs need to notify ATO before re-injecting COVID-19 funds
Money taken out of SMSFs during the pandemic can be re-contributed without penalty but only if the correct waivers are filed with the ATO at the right time, says a lawyer from Cooper Grace Ward.
However, Scott Hay-Bartlem, superannuation, estates and tax lawyer for Cooper Grace Ward said people who did take money out under the special COVID-19 rules aren’t rushing to put it back into their super funds.
“It’s easy to make the contribution by filling out the waiver without any penalty,” he said.
“But if you fail to follow the formal process, that is where it will be treated as a non-concessional contribution.”
Those who accessed money throughout the two years have until 1 July 2030 to re-inject it to their SMSF without the contribution counting towards their cap limits, Mr Hay Bartlem said.
“You have to have withdrawn super under the Covid early release scheme,” he said.
During the two years the scheme was applicable, a maximum of $20,000 could have been withdrawn in two separate tranches.
“The main problem SMSFs may run into in re-injecting those funds is that they have to give notice to the ATO they are re-injecting the funds and complete the prescribed form. In an SMSF sense this can be tricky because people may not give themselves enough notice.
“The fund must give notification at the time or before the funds are re-injected. Notice can’t be given after the funds are deposited otherwise that will then count towards some other contribution cap.”
However, Mr Hay-Bartlem said he doesn’t think many people will want to put the funds back in.
“They have nine years to put the money back in, and it can be done in any amount they want over those nine years,” he said.
“But I think a lot of people have forgotten about it. There is a lot of talk about whether the government should have let people take it out in the first place, and most of it is probably gone now because the money has already been spent.”
He advises that anyone who wants to re-inject funds into their SMSF ensure they put only the amount they may have withdrawn during COVID-19 or they could face penalties.
“You can’t exceed the amount because the ATO will know about it,” he said.
