As a trustee of a self managed super fund (SMSF), knowing which contributions you can legally accept is crucial to keeping your fund compliant. Getting it wrong could mean having to return contributions or pay additional tax – so it’s important to stay up to date.
The basics of allowable contributions
Your SMSF can only accept contributions that meet specific criteria. The contribution must be an accepted type, the member must meet any age restrictions, and importantly, you must have the member’s tax file number (TFN) to accept member contributions.
When accepting contributions, you must properly document the amount, type and breakdown of components, allocate them to the member’s account within 28 days of the end of the month you received them, and accurately report them in your SMSF annual return.
Why your members’ TFNs matter
While members aren’t legally required to provide their TFN, without it your fund faces significant limitations. Your SMSF cannot accept member contributions such as personal contributions and eligible spouse contributions, employer contributions will be subject to 47% tax, and the member won’t be able to receive super co-contributions.
If you’ve accepted member contributions without having the member’s TFN, you must return the contribution within 30 days of becoming aware of not having the TFN. However, if the member provides their TFN within 30 days of the SMSF receiving the contribution, you don’t need to return the amount.
Mandated employer contributions
These are contributions made by an employer under a law or industrial agreement, including super guarantee contributions. The good news is your SMSF can accept these for members at any time, regardless of the member’s age.
Non-mandated contributions and age rules
Non-mandated contributions include employer contributions in excess of mandated minimums, such as salary sacrifice contributions, and member contributions such as:
- personal contributions;
- downsizer contributions;
- spouse contributions; and
- contributions from third parties.
You can accept all types of non-mandated contributions for members under 75 years old, without them needing to meet any specific work requirements. One exception is downsizer contributions, where the member must be aged at least 55 at the time of the contribution. Downsizer contributions are contributions made from the sale of your home and are subject to specific eligibility rules.
A work test applies for members aged 67 to 75 if they wish to claim a tax deduction for their personal contributions. However, since 1 July 2022, this test is administered by the ATO and only impacts deductibility, not the SMSF’s ability to accept the contribution.
For members turning 75, contributions must be received no later than 28 days after the end of the month they turn 75.
For members 75 or older, you generally cannot accept non-mandated contributions, with the exception of downsizer contributions, which have no maximum age limit.
Certain types of contributions (eg downsizer contributions, contributions under the lifetime CGT cap) also require ATO approved forms to be submitted to the trustee at the time of the contribution so that the contribution is correctly classified for tax purposes.
In specie contributions and related party rules
In specie contributions are contributions made in the form of a non-monetary asset rather than cash. Care must be taken when making in specie contributions to ensure compliance with other areas of superannuation law such as the rules around acquiring assets from related parties.
Stay compliant
SMSF contribution rules are complex, and the consequences of getting them wrong can be significant. For detailed information about your specific circumstances and to ensure your fund remains compliant, visit the ATO website at www.ato.gov.au and search for “Accepting contributions” or speak with your professional tax adviser or financial adviser.
