Self Managed Super Fund

Running a Self Managed Super Fund

Accepting contributions and rollovers

Contributions

There are minimum standards for accepting contributions. This ensures that contributions are made for retirement purposes only. However, these are minimum standards, and the trust deed of your fund may have more rules around accepting contributions.

You need to allocate contributions to a member's account within 28 days after the end of the month in which you received them.

Types of contributions

The two major categories of contributions are:

1 Mandated employer contributions

These are contributions made by an employer under a law or an industrial agreement for the benefit of a fund member. They can include any of the following:

• Super guarantee contributions
• Super guarantee shortfall components
• Award-related contributions
• Some payments from the superannuation holding accounts (SHA) special account.

You can accept mandated employer contributions for members at any time. This means you may accept mandated employer contributions for a person regardless of the age of the person or the number of hours they are working at that time.

2 Non-mandated contributions

These include voluntary super contributions such as the following:

• Contributions made by employers over and above their Superannuation Guarantee (Administration) Act 1992 or award obligations
• Personal contributions made by employees
• Personal contributions made by self-employed people
• Other personal contributions and spouse contributions.

You can only accept non-mandated contributions in the following circumstances:

• For members under 65 years of age, you can accept all types of contributions (within certain limits). However, you can only accept member contributions if the member's tax file number (TFN) has been quoted.
• For members aged 65 but less than 70, you may accept non-mandated contributions where
  • the member is gainfully employed in at least a part-time basis
  • the member has quoted their TFN
• For members aged 70 but less than 75, you may accept non-mandated contributions where
  • the member is gainfully employed on at least a part-time basis
  • the member has quoted their TFN, but you can only accept non-mandated employer contributions and member contributions made by the member
• In both cases, the contribution needs to be received on or before the day that is 28 days after the end of the month that the member turns 75.

There are special acceptance rules of fund-capped contributions for all age groups.

• For members 75 and over, you can't accept any non-mandated contributions.

Fund-capped contributions

Non-concessional contributions are currently capped at $150,000 annually or $450,000 over a three year period. You can't accept any fund-capped contributions in a financial year that exceed the following:

• For members aged 64 or less on 1 July of the financial year, six  times the non-concessional contributions, which is $450,000 for the 2009-10 financial year
• For members aged 65 but less than 75 on 1 July of the financial year, the non-concessional contributions cap, which is $150,000 for the 2009-10 financial year

Fund-capped contributions are member contributions other than any of the following:

• A contribution that your member advises they intend to claim an income tax deduction for
• A contribution from a structured settlement or personal injury payment. The member, or legal personal representative should have notified you before indicating that you would make such a contribution
• A contribution that is covered by a choice to treat it as a contribution for a capital gains tax (CGT) small business concession. The member should have notified you of their choice before making the contribution
• A super guarantee charge or SHA special account payment from the ATO
• A super co-contribution
• A contribution that is a directed termination payment

Member contributions are contributions made by, or on behalf of, a member, but don't include employer contributions made for the member.

Eligible spouse contributions

You can accept eligible spouse contributions for a member that is made by their spouse at any time if that member is under the age of 65.

If your member is aged between 65 and 70, eligible spouse contributions made for the member can be accepted only if that member is at least gainfully employed on a part-time basis. If your member is 70 or over, you can't accept eligible spouse contributions for them.

There is no age limit or employment test for the person making the contribution.

Super co-contributions

You could be eligible for the super co-contribution if the following applies:

• You are an employee or self-employed and makes personal super contributions
• 10% or more of your total income (assessable income plus reportable fringe benefits) for the financial year is from employment activities or activities from carrying on a business
• Your total income less any business expenses is less that the higher threshold (the higher threshold in the 2008-09 financial year is $60,342 and is indexed each financial year)

Members who are overseas

Your Self Managed Super Fund needs to meet the definition of an 'Australian super fund' as outlined in the super laws. Part of that definition required your Self Managed Super Fund to be a resident super fund.

It is important for you to review your management and contribution arrangements before you or any member of your fund leaves Australia. This is required to ensure your Self Managed Super Fund continues to be a complying fund.

If you or any of the members of your Self Managed Super Fund are planning to travel outside Australia, you'll need to know current rules around the definition of an Australian super fund to make sure your Self Managed Super Fund maintains its complying status.
In specie contributions

In specie contributions are contributions to your fund in the form of an asset, rather than money or cash.

Generally, you can't intentionally acquire assets (including in specie contributions) from related parties of your fund. However, there are some exceptions to this rule, such as listed securities and business real property acquired at market value.

Recording your member's TFN

If you don't have a members TFN:

• You'll have to pay additional income tax on some contributions (generally employer contributions
• You may not be able to accept member contributions

If you've accepted member contributions and the member's TFN has not been quoted, you need to return the contribution within 30 days of becoming aware that you received the contribution. If your member's TFN is quoted to you within 30 days of receiving the contribution, you don't have to return the amount.

If you receive employer contributions on behalf of a member and you pay additional income tax because you did not have your member's TFN, you can claim a tax offset in a later financial year if the member later gives you their TFN.

Additional income tax and offsets

Not quoting a TFN means you'll pay additional income tax on contributions that are assessable income of your fund. The contributions taxed in this way include the following:

• Contributions made by an employer on behalf of a member, including salary sacrifice contributions
• Any part of a transfer from a foreign super fund that is assessable income of your fund.

If your member has not quoted their TFN by the end of the financial year, all the assessable contributions made during the financial year will be taxed an extra 31.5%. You have to work out your liability for the additional tax at the end of the financial year that the contributions are made.

If you pay the additional tax and, at a later stage, your member gives you their TFN, you may be able to claim back the additional tax as a no-TFN income tax offset in your SMSF annual return. You can only claim this offset within three years from the end of the financial year that the contributions subject to the additional tax were made.

If you've debited the amount of additional tax from your member's account and claim the tax offset in a later year, you need to re-credit this money back to their account.

Deductions for personal contributions

Eligible people, including the self-employed, may claim a full income tax deduction for super contributions they make for their own benefit.

A member who intends to claim a deduction needs to give you a notice of this intent. The notice is required to be given by the earlier of the following:

• The time the member lodges their personal income tax return
• The end of the financial year following the year the contribution was made

The notice is invalid when any of the following occurs:

• A notice is given to you by the person is no longer a member of your Self Managed Super Fund
• You have paid a lump sum or you have started to pay a super income stream that includes the contribution

In these circumstances, the member will not be able o claim a deduction for the personal contribution made.

If the member claiming the deduction has made an error with their notice of intent to claim a deduction, the notice can be varied (including varied to nil) by the earlier of the following:

• The time the member lodges their personal income tax return
• The end of the financial year following the year that the contribution was made.

After this time the notice can't be varied unless:

• A deduction for the contributions is not allowable (that is, the member was ineligible to claim a deduction)
• The variation reduces the amount shown on the original notice by the amount that is not allowable as a deduction.

When deciding to claim a tax deduction, your members should consider the contribution caps. Deducted personal contributions are counted against the concessional contributions cap, with amounts over the concessional cap also counting against the non-concessional cap.

Rollovers and transfers

Most employment termination payments (previously known as eligible termination payments) can no longer be rolled over into super. However, some transitional arrangements apply.

Generally, transitional termination payments are employment termination payments received after 1 July 2007 that an employee was entitled to receive in an employment contract that existed before 10 May 2006. Transitional termination payments need to be made before 1 July 2012 and can be contributed or rolled over into a super fund.

A member's super benefits can generally be rolled over or transferred within the super system with their consent.

If you accept a rollover of benefits from another super fund, that fund can ask you to show that your fund is a complying fund before processing your request.

If you don't comply with the contributions standards, substantial penalties may apply.

Rogerson Kenny Business Accountants Melbourne can assist you with your accounting and auditing requirements. If you would like to appoint Rogerson Kenny Business Accountants as your approved auditor, or would like to discuss this topic further, click contact us or call us on (03) 9802 2533.

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