The changes to the superannuation contributions caps announced in the 2016 federal budget will make the administration of an SMSF a great deal more difficult, according to a technical expert for the sector.
Miller Super Solutions founder Tim Miller identified the new rule allowing the carry forward of unused portions of concessional contributions caps for five years for individuals with superannuation assets of less than $500,000 as one change that would add complexity to the administration of SMSFs and other funds.
“This rule just adds an additional layer of administrative burden to I suspect multiple parties because it’s going to be the super funds recording the contributions and that information obviously being reflected in the regulatory return, with the ATO then collecting the member balances to determine where people sit with that $500,000 limit,” Miller said.
He noted the situation would be further complicated for SMSFs using reserves as a method to allocate the amounts held in the reserves to the balance of the individual fund members would have to be implemented.
“These are all of the little hidden things in the budget that will be the ramification of it,” he said.
The introduction of the lifetime non-concessional contributions cap of $500,000 is another rule change Miller flagged as having administration implications for SMSFs.
“I’ll be intrigued to see how this operates because a further reading of the rule says it’s a $500,000 limit applicable from 1 July 2007, so they’re effectively saying if you’ve used the non-concessional contribution bring-forward provision in the last three years, and particularly in the last couple, totalling contributions of $540,000, then you’re already in excess of the new limit,” he said.
“So there will be effectively a refund mechanism is what I’m reading there.”
On a more positive note, he pointed out any non-concessional contributions made under the old regulations that led to a breach of the new $500,000 lifetime limit would not attract any excess contributions tax liabilities.