SMSFs warned on pitfalls of last minute contributions

In the last minute budget panic, SMSF trustees have been urged to consider all their contribution options, as payments made electronically now may not technically be ‘received’ by their fund by the time of the federal budget tomorrow night.

DBA Lawyers director Daniel Butler says there could be a last minute panic to ensure contributions are made by the May federal budget, and SMSF trustees may want to consider making the contribution with a cheque book rather than electronically due to the potential delays.

“With the speculation of changes in this year’s federal budget on 3 May 2016, many are wanting to make sure they can contribute under current law and not risk what might be announced as a change of law as of 7.30pm on budget night,” Mr Butler said.

“Not getting your contributions in on time may result in lost opportunities.”

However, with the various methods of making contributions, he said, it can be difficult to know if the contribution will be received on time.

“Generally, regardless of how a contribution is made, it is taken to be received by the superannuation fund when the contributor has done everything necessary to make the payment to the fund trustee,” Mr Butler said.

“In cases such as cash or cash equivalents the time of receipt is when the cash is received. However, in circumstances such as EFT, BPay or in-specie contributions, the timing or receipt of contributions can become difficult to ascertain.”

Cases such as Liwszyc v Commissioner of Taxation [2014] FCA 11, Mr Butler says confirm that where a contribution of funds is made by way of an electronic funds transfer, the contribution will be considered to have been made when it is received by the superannuation fund.

Mr Butler said particular care is needed when transferring via electronic systems or with in-specie transfers.

“Surprisingly, the old cheque book can prove handy when a contribution must be made at the last minute as the contribution is made when the cheque is received by the SMSF trustee and there are sufficient funds available to cover the amount,” he explained.

In TR 2012/1, the ATO states that if funds are transferred by giving the superannuation provider a money order or bank cheque on which payment is made, the “contribution is made when the money of bank cheque is received by the superannuation provider, unless the order or cheque is dishonoured”.