SMSF & additional contributions - paperwork required

I've been reading up about making additional contributions to Super, as my husband's income has been irregular over the last financial year, and he is well below the $25,000 cap.

We are looking at making a post-tax contribution from our savings and it appears that we need to submit a form that tells the super fund that we plan on doing so, in order to ensure that a deduction can be claimed - I'm not sure if this paperwork is for the super fund's benefit, or the ATO's.

However, if we manage our own SMSF, do we have to fill in and submit the Notice of intent to claim or vary a deduction for personal super contributions (NAT 71121), and then have our super fund (us) write back to ourselves to say we've received notification?

 

Yes - before you lodge your personal tax return (or do something else with the contributed funds, such as start a pension or roll it out).

 

Yes. The ATO can ask for it. I have been asked several times. (The ATO have data on contributions so it a risk if there is a mismatch at their side) And if its not dated prior to the lodgement they can be pedantic and cancel the deduction claimed. The way to act is worded is the cause of that approach. Its says that a deduction can be claimed after that process is completed.

As a tax practice we ensure every client seeking to claim a super deduction provides that notice. More than 50% havent got it when we ask. Sometimes the taxpayer finds they cannot get the notice. Reasons include - They have started a pension after the contribution, made a partial or full rollover or their total contributions exceed $25K....eg Employer contributed $20K and the client contributed $20K.

Our SMSF software auto generates the notices and its a normal part of the client SMSF services. Poorly worded or undated notices may not comply.

 

Thanks @Paul@PFI. So does it have to be in order of:

1. Lodge notice of intention submitted to fund for intention to apply for deduction;
2. Wait for approval from fund; then
3. Make actual transfer of funds into super account; and finally
4. Give all documentation to accountant at tax time

 

1. Make contribution (it must occur first or there is no contribution !!)
2. Lodge notice of intention to apply for deduction;
3. Wait for confirmation from fund; then
4. Lodge

2. can occur before 30 June !! I have seen people wait and then lose the deduction. Do it as early as possible but when the KNOWN deduction is confirmed. I say that since a concessional contribution has a trap. A taxpayer CANNOT make a concessional contribution that exceeds their assessable income. Eg Mary has taxable income of $12,000. her maximum concessional contribution and deduction is $12,000. However due to her marginal rate that makes no sense.

 

I understand one other small trap is the contribution has to be received by the fund before the end of the financial year.

 

Just wondering if it has ever happened where a person has made a concessional contribution and an employer has decided to be generous, aka abiding by the law, and made an SG payment which combined exceeds the concessional cap. I suppose it's possible although I haven't heard of it occurring.

Apologies for the thread drift.

 

Regularly and very common. Many people try to manage their caps to the $25K limit and realise too late that on 29 June the employer paid a fifth quarter of super into the fund so they get a tax deduction bought forward.

Excess contributions tax occurs. The ATO dont consider it a reason to object to the excess contributions tax. Plenty have asked and been denied.

 

How is it best to deal with this situation if you want to maximise to getting as close to $25k as possible but have no idea if an employer will do a surprise and contribute excessively? If it ends up being just over $25k (let's say $500), can the person say that the extra $500 was a non-concessional contribution even if the person made a $2k single transaction into their SMSF? ($1.5k to be concessional and the other $500 to be non-concessional)

 

Talking to the employer is one option I guess. Ideally it'd be great if the employer let staff know beforehand if and when payments were going to be made.

 

Super and tax laws dont require that and its too onerous to expect that will ever be the case. Speaking to the employer may be better but in a large organisation that wont work. The greater concern is employers who report super on payslips and then dont pay it. The new payroll STP system will make this easier for the ATO to detect in real time

 

No. Employer contributions ARE concessional. But if they contribute less and you personally top up you could elect to only claim to the very limit of $25K and leave the balance as non-concessional. Take you you havent exceeded the NCC cap however.

 

With the EoFY fast approach this Sunday, I trust those who wish or can make additional superannuation contributions (concessional or non-concessional) have already done it.

And the employer doesn't also make one in the event it causes you to break the concessional cap.

 

Hi @KayTea

Easier and tidier to have your SMSF accountant co-ordinate for you.

 

Does this scenario cause trouble?

1. Make a tax deductible contribution sometime during the year, send notification and receive confirmation
2. Make a lumpsum withdrawl (over 65)
3. Make another tax deductible contribution before 30th June, ammend notification and receive confirmation

 

Don’t worry @JacM - consulted him already

 

It is permitted but illogical. However the breach of the concessional contribution cap of $25K will result in a excess contribution penalty. AND the tax return you lodge will be amended so only a single $25K concessional deduction can be claimed. A concessional contribution is defined by law as being one which is a concessional contribution for which the member claims a tax deduction. Since the cap is $25K the ATO will deny any deduction claim greater. And also impose excess contribution penalties and tax the other $25K that is excessive. A futile and costly effort

 

A relative recently did this. The total employer contribution + concessional contributions is less than $25k during that year but they had a cashflow issue, so initially made a contribution, withdrew 85% of it and contributed again to make full use of the $25k cap. I thought that was a handy strategy (if legal) of course.

 

Depends on the investment income outside super. Can be a benefit or be futile too. One catch many dont consider is that a concessional super contribution should not bring taxable income to less than approx $21K (ie the tax free threshold band). If it does there can be a few issues.

1. The taxpayer may be paying 15% tax for a 0% tax saving or
2. The concessional deduction CANNOT create a tax loss. eg Mary has a potential taxable income of $15,000. The MOST she can claim as a concessional contribution is $15K...However she would be impact by the issue in 1. above

I have seen taxpayers complete the notice for $25K and then they lodge a return with a deduction of $25K. ATO then writes to them eg Mary and cancels the amount of $10K that creates a tax loss. Super (and gifts) cannot create a tax loss. That portion of the contribution that "was concessional is then counted as non-concessional but the taxpayer has effectively overpaid 15% tax.