Contributions can play an essential role in a self-managed superannuation fund (SMSF). Your SMSF contributions can be made in two ways – either by cash or an asset (known in the trade as ‘in specie’ contribution).
Typically, your SMSF can accept:
The Australian Taxation Office (ATO) is big on paperwork and record keeping for SMSFs. As a trustee you are responsible for documenting all your contributions and rollovers – including the amount, type and breakdown of components. Generally you’ll also need to allocate your contributions to your SMSF members’ accounts within 28 days of the end of the month in which you received them.
Defining allowable contributions
The ATO has set minimum standards for accepting contributions.
Mandated employer contributions
Always popular with employees, mandated employer contributions are defined by the ATO as, “those made by an employer under a law or an industrial agreement for the benefit of a fund member”. Super contributions absolutely fall within this category.
The good news is you can say yes to mandated employer contributions to your SMSF at any time, regardless of your age or the number of hours you’re working at that time.
By age and circumstance
Your ability as trustee of the SMSF to say yes to accept a non-mandated contribution depends entirely on your age and circumstances. Let’s unpack that.
‘In specie’ contributions
‘In specie’ contributions, refers to transferring assets such as shares or a commercial property direct to the SMSF rather than contributing cash. There are very strict rules on what can and can’t be transferred when it comes to in-house assets – for example, residential property you own cannot be transferred. If in doubt always seek expert advice.
Contribution caps are applied for a number of contributions types made for SMSF members in a financial year.
The two major ones are the non-concessional cap which applies to after-tax contributions and the concessional cap which applies for those contributions for which a tax-deduction has been claimed:
Exceeding your cap
If your total contributions exceed the contributions caps those excess contributions could attract additional tax. You can have excess contributions refunded to you, but if you do not take up that option they will be assessed against your non-concessional cap also and if you have breached that cap extra tax maybe payable. Excess concessional contributions are effectively taxed at the member’s marginal tax rate, plus an interest charge.
The ATO is equally firm on the subject of single contributions. Here’s what they say: “Single contributions that exceed a member’s fund-capped contribution limit cannot be accepted by your SMSF. For a member under 65 years old, the limit is three times the non-concessional cap.”
January 4, 2018
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The information provided on this website, including the material and contents provided in the website publications, are informative in nature only and you should not act specifically on the basis of this information alone. It should not be used as a substitute for legal, business, accounting, tax, financial planning or other professional advice. If expert assistance is required, professional advice should be obtained.
Paul Baggetta is the Founder & Principal of Baggetta & Co. Paul Baggetta has been a Taxation Accountant since 1981, a Financial Planner since 1998, and in 1993 qualified as a Real Estate Licensee, holding a Triennial Certificate (currently not trading) and operated his own Real Estate business for property investment clients for over 5 years as a second business.
Financial planning services are provided by Paul Baggetta as an Authorised Representative (No. 261469) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. Australian Financial Services License No. 223135.
Taxation & Accounting services are provided by Paul Baggetta as a Registered Tax Agent (No.61487008) and is a Member of SMSF Association, FIPA & NTAA.