ATO warns SMSF funds to stick to contribution caps

The Australian Taxation Office has warned it will be watching self-managed superannuation funds for any sign of members breaching their contribution caps, along with monitoring funds to ensure they correctly calculate exemptions for pension income.

The comments come as the Government has attempted to take the sting out of taxes on excess super contributions, releasing a discussion paper on prospective legislation that would allow money to be refunded.

Yesterday ATO assistant commissioner Stuart Forsyth warned funds that it will continue to watch for aberrations, although said overall the industry is performing well and that most funds are complying.

“From cross-checking contributions information with income tax information, we are concerned that in some cases the lifetime super capital gains tax cap is being used incorrectly or inappropriately to exclude amounts from the non-concessional cap,” he said, according to the Australian Financial Review.

“This is an area that we will be looking at closely.”

Forsyth warned the ATO will continue to attempt to find those funds that have broken the law, and also warned that it will be making sure that funds comply with the correct ways to calculate exempt pension income. He said 100 reviews are planned for this year.

Forsyth also yesterday described rules for personal assets, which have some restrictions on where these assets can be located. New regulations came into effect during July this year that affect all assets – Forsyth warned attendees to make sure they are compliant.

“If you are going to argue a mistake then act early,” he told the newspaper. “What is a genuine mistake varies according to the circumstances, but it’s hard to see how a genuine mistake cannot be picked up early.”

Forsyth also said the ATO would put resources into identifying undervaluations. “We will look to see if they are making a genuine attempt,” he said.

Dan Butler from DBA Lawyers says the comments regarding super caps and pension income are simply reiterating what the ATO has constantly been telling funds for years.

“Contributions caps have been a big issue, so it’s just one of those reminders. What’s really been in the spotlight is the personal contribution tax, there have been a lot of issues there and practitioners have been changing their ways around that.”

With regard to calculating exempt super income, Butler says funds just need to pay attention to how they are calculating super when members also receive a pension.

“People may calculate exempt income, but won’t adjust for expenses. Some people can overstate their pension income, and so on. Funds just need to be sure they are calculating correctly.”