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I am auditing the fund in which the accountant has treated the part of the deposit as contribution reserve and balance as non- concessional contribution.
Example : Deposit of $50,000 on 28 June 2021 of which $10,000 as NCC for 2021 and remaining $40,000 as contribution reserve which has been allocated on 1 July 2021 as NCC.
My understanding is that as per reg 7.08 of the SISR, Trustees can not accept part of a contribution allotted to the member’s account and part to contribution reserve.
Entire $50,000 should be treated as contribution or reserve in FY2021.
Could you please confirm this?
Hi Umesh
My experience is that contribution reserves in a SMSF are now not commonly used.
My understanding was the same as yours in that a single contribution could not be allocated over 2 years if banked in June under the 28 day rule to allocate under SIS Reg 7.08.
Looking into it further it appears that there are views both ways as to if the Fund can allocate a single contribution received in June over 2 years under the 28 day rule. I cannot find anything from the ATO that clarifies the issue.
There was an article from DBA Lawyers from June 2021 that refers to only a "discrete" contribution can be reserved and that you cannot reserve part of a single contribution. There article was in relation to personal deductible contributions.
DBA's article can be found at:
An option may be to query the accountant as to what basis can a single contribution be allocated over 2 years. Depending on their response it could be a matter that is included in your management letter. Reg 7.08 is not a regulation referred to in the audit report although Reg 7.04 is and it requires that:
"Contributions can only be accepted in accordance with the applicable rules for the
year being audited ".
If other members have a view on this query can you please let the forum know.
Thanks
SMSF AAA