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Technical Update: Contribution reserves – August 2015

On 31 July 2015, the ATO released changes to how we report concessional contributions which have not been allocated to a member’s account prior to year end. Most Trust Deeds allow for this “reserving” of contributions. As allowed under Division 7.2 of the SIS Regulations these contributions must be allocated to a members account within 28 days of the month in which a contribution is made.

 Superupdate

Complications can arise when bridging a financial year – the concessional contributions will be taxed in the year they are received, however they will count towards the members contribution cap when they are allocated to the member. Previously, there was no clear means to report this to the ATO.

The ATO have advised that when a contribution reserve is being used by a SMSF, then a form will need to be completed to enable this strategy.

By completing the form, the ATO will adjust their contributions records, so that the contributions are allocated to the members concessional contributions cap in the correct income year.

Please note this form only covers concessional contributions and is for use by SMSFs only. Details about the new form, and the form itself, can be found at: www.ato.gov.au/Forms/Request-to-adjust-concessional-contributions

What is the new process and what does it mean for your client’s SMSF?

Let’s consider the application of the ATO changes with an example:

Practical implementation – tips and traps

More Information

If you have any questions, please do not hesitate to email us or phone (03) 9886 0800

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