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Sandeep Dheer

May 17, 2023

Excess Non Concessional Contribution

in SMSF Technical Forum

Hi SMSFAAA Team ,

Could you please guide me on the following:

I am doing audit of one SMSF for FY 2022 where total balance of the member as on 30th June 2021 was $1.64 Mn. As per guidelines he could do only $110k non concessional contribution during FY22 however he did contribution of $330k.

As per the returning guidelines ATO states that "You must return the contribution within 30 days of becoming aware that you cannot accept it. However the contribution was not returned within stipulated days, therefore it is breach of regulation 7.04."

I mentioned this to the accountant that “As per ATO guidelines Reg 7.04 acceptance of contribution is a reportable section. Regulation 7.04 is the rules that requires: "Contributions can only be accepted in accordance with the applicable rules for the year being audited". That is if the contribution was not allowed to be received and not refunded within 30 days there would be a breach of Regulation 7.04.

However, accountant if of the view that “The regulation 7.04 doesn’t cover the contributions where members go over the caps, it covers the contributions where members are NOT eligible to make the contributions because of age and TFN rules. If the members have gone over the cap and choose to opt that their contributions remain in the fund, they will pay tax at 45% in the fund. It is definitely not a breach.”

Many thanks

4 comments

Comments (4)

May 23, 2023

I also had an issue like this and some people were suggesting if the Deed calls for any excess contribution to be rejected you may be able to argue this path but I did not agree as it was in contract to the ATO's guidance and laws, if the ocntribution is an eligible one not sure the deed can reject it?

Option 1 election is also likely to be better for them but you need to check into some other factors like personaly income tax brackets and how mich earnings will be applied.