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Member deposited extra contributions and it could have excess non concessional contributions as member was used bring forward non concessional contributions cap $300,000 in 2019 year .
Super fund returned the amounts to member in 30 days and prepared resolutions for returning contributions . It seems like this is non complying .. What regulation will be a breach?
Hi Monica
The ‘Fund-capped contributions’ regulations were repealed from 1 July 2017, so there are 2 possible outcomes as outlined below that I will explain:
As the contribution occurred in the 2018/19 financial year;
1. If the member was over age 65 (& under 75) at the time of the contribution and the trustee determined that he/she did not meet the ‘work test’ at any time during the financial year, then once the trustee became aware of this it would have needed to refund the contribution to the member within 30 days; or
2. If the member was under 65 or was aged over 65 (& under 75) & he/she met the ‘work test’ then the trustee has no legislative power to refund the contribution, ie. with the fund-capped contributions regulations no longer applying the trustee had to accept the contribution. Then the trustee would have to wait until after the member was issued an excess contribution determination by the ATO, he/she elected to have the excess contribution refunded (along with any excess contributions charge/s); and then only after the trustee received a release notice from the ATO could it refund the excess contribution, via the ATO.
Thanks
SMSF AAA
Thank you for your reply .
I am still not clear with the answer .. "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"
Member has refunded the excess contributions within 30 days period . My question is whether super fund is allowed to do this as member realized he has put the excess non concessional contributions ( member contributed $ 300,000 in 18/19 year) ..
If this case is the contribution was not allowed to be received (?) and refunded within 30days .. so perhaps should be ok ?
However I found the below from ATO's website
Contributions a fund must not accept
The contributions your SMSF can accept are restricted by:
the age of the member for whom the contribution is made
whether you have a valid tax file number (TFN) for the member
prior to 1 July 2017, a member's fund-capped contribution limit.
Member used bring forward in 2018/19 year , but still not allowed to be received ?
Hi Monica
A similar issue was recently raised (with some similar issues / concepts). Excess contributions can be complicated.
An excess contribution is only qualified on and reported as a reportable contravention if there has been a breach of Regulation 7.04 of SIS.
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.
As an example Sam aged 54 made a non-concessional contribution (NCC) of $400,000 in the 2018/19 year (being $300,000 & $100,000). The contributions were allowed to be received as he was under the age of 65. If he was to withdraw the contributions over the cap this would be a breach of regulation 6.17 of SIS (payment of benefit rules).
In such a situation the member cannot withdraw the excess contributions as they are required to wait to receive a determination letter from the ATO in relation to them exceeding their contribution cap & what action they are required to take.
I also note:
1) for the 2018/19 year Regulation 7.04 allowed a member aged 65 and not over 75 to make a non-mandated contribution if they worked at least 40 hours over a 30 day period (being the "work test").
2) for the 2019/20, 2020/21 & 2021/22 years Regulation 7.04 allows a member aged 67 and not over 75 to make a non-mandated contribution if they worked at least 40 hours over a 30 day period (being the "work test").
As an example if a 74 year old did not meet the "work test" in the 2018/19 year & they made a contribution in that year there would be a breach of SIS and you should issue a qualified audit report & lodge an ACR (if the contribution was not refunded within 30 days).
Note: in this example it is not the excess contribution that causes the breach of SIS. The breach would be if they do not meet the requirement to make the contribution.
Unfortunately regulation 7.04 has had a number of changes to it so the rules re contributions are complicated. The rules are further complicated where there are excess contributions.
Regards
SMSF AAA