David Busoli, principal for SMSF Alliance, says an “intriguing” case that rested on just 36 cents highlights how critical it is for SMSF administrators and professionals to have the full facts before submitting paperwork to the ATO.
The example involved a three-year non-concessional contribution bring forward that had been triggered by an ATO auto truncation of a personal concessional contribution containing 36 cents.
Busoli said the situation occurred in 2024 when a fund member received employer contributions of $6,576.64 and made personal deductible contributions of $20,923.36 – a total of $27,500.
“The member also made a non-concessional contribution of $110,000 with a view to using the three-year bring forward rule in the following year.”
“This would have been fine if the $27,500 concessional contribution had been sourced exclusively from employer contributions or personal concessional contributions, but the combination has caused an issue as it involved cents.”
Busoli continued that the ATO will only process personal concessional contributions in whole dollars.
“Where cents are involved, they truncate the amount, so the personal deduction became $20,923 reducing the total allowable deduction to marginally below the $27,500 allowable cap.”
“This wouldn’t have been such a big deal if that’s all that happened, but it wasn’t. The ATO website states that a deduction can only be claimed in whole dollars and, if you make a personal contribution in dollars and cents, ‘the residual cents will remain a non-concessional contribution and will count towards the relevant cap’.”
As a result, in this case the member’s three-year bring forward strategy was unintentionally triggered as they were regarded as having made a non-concessional contribution of $110,000.36 in 2024.
“The fund’s accountant, in the absence of any published ATO comment on the issue, applied successfully to the ATO to have this rectified using the de minimis rule. Interestingly, the ATO did not issue any correspondence,” Busoli said.
“However, the tax agent portal now shows the concessional contributions were $27,499.64 (unchanged), the non-concessional contributions were $110,000.00 (removing $0.36 from the original figures and thereby keeping the client within their cap) and the bring forward arrangement was not triggered.”
Moreover, Busoli said, the result was due to the tax agent dealing proactively with this before the planned contribution triggered an excess contribution response.
“In this case, the tax agent, also acting as personal tax accountant for the client, was proactive and able to efficiently access this information and institute rectification.”
“Not all tax agents are this diligent.”
