The SMSF contributions caps mean you need to plan when a member's super contributions are made, and in what amounts.
One question to consider is 'can you allocate a single contribution across two financial years?'
The Australian Tax Office (ATO) has advised that you can. This article explains how.Kate Hocking
The ATO has outlined how (and why) an SMSF member can allocate a single contribution across two financial years.
Let's look at an example. Assume:
In these circumstances:
The single payment across 2 years works because a non-concessional contribution is only counted against a member's cap from the date it is credited to a member's account (and not from the earlier date on which the fund receives the contribution).
A member's non-concessional contributions can be allocated by the trustee of the fund:
Yes, there is limit on how long a contribution can stay in the SMSF's "contribution reserve". The limit is that if the trustee receives a contribution in a particular month, then the trustee must allocate the contribution to a member's account:
So you can see:
The Cleardocs SMSF Deed:
The ATO warns that the ability to allocate a member's contributions across two years leaves scope for the manipulation of the excess contributions caps. For this reason, the Commissioner applies subregulation 292-90.01(2) of the Income Tax Assessment Regulations 1997 only to amounts allocated within 28 days of the end of the month that the contribution is received.
The Tax Office has previously raised concerns with Treasury about this aspect of the law.
Although the Tax Commissioner's view has not yet been incorporated into a ruling, trustee(s) must proceed with caution as the ATO will be monitoring this area.
For information please call Maddocks in Melbourne (03 9288 0666) or Sydney (02 8223 4100) and ask for a member of the Maddocks Tax and Revenue Team or Superannuation Team.
You can read the ClearLaw article that provides an overview on contributions, reserves and contributions caps,here.
Download a checklist of the information you need to order a document package
 The ATO clarified its position on the use of contributions reserves within a SMSF and its effects on excess contributions under Div 292 of the Income Tax Assessment Act 1997, in the recently released minutes of a NTLG Superannuation Technical Sub-group meeting on 16 June 2009.
 see regulation 292-170.03 Income Tax Assessment Regulations 1997 (ITAA 1997).
Daniel is a lawyer in the Maddocks Tax & Revenue team.Daniel advises extensively in the following areas:
His advice covers both direct and indirect tax considerations.
Prior to joining Maddocks, Daniel worked at a Big Four Chartered Accounting Firm focusing on tax consulting for mergers and acquisitions.
The legal information and commentary on this site is general only. Documents ordered through Cleardocs affect the user's legal rights and liabilities. To assess their suitability for the user, legal accounting and financial advice must be obtained.
For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of their team.