Individual members are responsible for evidence that they meet the work test rules
It is up to the individual to ensure they have satisfied the work test or the work test exemption, and they must also be prepared to provide that evidence to the ATO if the regulator decides to investigate their claim, says one of the country’s leading SMSF advisers.
In the most recent Accurium SMSF technical update and live Q&A, head of education for Accurium, Mark Ellem, said it’s up to the individual member of an SMSF to ensure that if they need to satisfy the work test or work test exemption.
He also reminded members they can only use the work test exemption once, and only as long as they are gainfully employed in the prior year and their prior total super balance is less than $300,000.
“We know the work test has been moved out of the SIS regulations, out of the contribution acceptance rules for those aged 67 years up to 28 days after the end of the month in which they turn 75,” he said.
“And it has been put into the Tax Act for those people the same age, 67 through 75, 28 days after the end of the month they turned 75, for the purposes of claiming an income tax deduction.”
He said as well as providing a Notice of Intent to the trustee of their fund in regard to making those contributions within the relevant time period, the trustee of the fund has to also provide the acknowledgement that the trustee has received the contribution intention.
“The trustee is not concerned with whether or not the member has met the work test because all the trustee of the fund is concerned about is whether they can accept the contribution, and of course, the work test has been removed from the contribution acceptance rule,” he said.
“The individual will have to make sure they satisfy the work test where they have to in that age bracket, so in case of an audit by the ATO on their personal tax return, not only can they provide a copy of the acknowledgement back from the trustee that the notice of intent was valid, but also they can prove to the ATO that they satisfied that work test.”
Mr Ellem said a member claiming a personal contribution, who has satisfied the work test and made a Notice of Intent to their trustee, will then have to complete the relevant form, ensuring they tick the ‘yes’ box if they have satisfied all the criteria.
“The member will tick the yes box or a no box to the question of ‘I have provided a Notice of Intent to the trustee and received an acknowledgement from the trustee that the notice is valid’,” he said.
“I will give everyone a heads up, that if you tick the ‘no’ box, then don’t bother putting in an amount in that claim for personal contribution.”
He said while the trustee of the fund may not care about whether the individual has met the work test for the purposes of the contribution acceptance rules, they will care whether or not the individual provides them with the Notice of Intent, and that the Notice of Intent is valid for the purposes of whether or not that personal contribution is included as assessable income of the fund.
“If the contribution was made to an APRA-regulated fund, the valid notice would be acknowledged and reported by that fund to the ATO,” he said.
“If it was a contribution to an SMSF, it’s not going to be in the prefilled report because the SMSFs are not required to report to the ATO that it has received a Notice of Intent and provided a valid notice of acknowledgement.”