A technical specialist has alerted advisers and their SMSF clients that the ATO can easily monitor compliance with the required work test for individuals over the age of 66 making personal superannuation contributions.
SuperConcepts SMSF technical and strategic solutions executive manager Philip La Greca explained while no formal proof needs to be provided to the SMSF regulator regarding work test compliance, the ATO still has information at its disposal to ensure superannuants are satisfying this obligation.
“Basically what most funds do is they expect you to sign a piece of paper as a declaration [of work test compliance]. Certainly as an administrator that’s what we have [in place], so we will ask clients to confirm they have passed the work test,” La Greca said.
“[However], the ATO can cross-reference [this information] … because whenever a super fund receives a contribution for someone it also reports that information to the ATO and your SMSF does exactly the same. It’s part of the tax return.
“So if you look at the tax return, you will see there is a schedule of member information for each member and one of the things that it does is that it breaks down the different types of contributions.”
According to La Greca, the regulator can compare this information to other data it has on hand to determine work test compliance.
“It is relatively easy for the ATO to do data matching because all it needs to do is [decide to examine the records of] everyone over the age of 67 who [made] a non-concessional contribution greater than $50,000,” he noted.
“[So] how does the ATO know if [these individuals] have passed the work test? It’s pretty easy. It will go and look at [people’s] personal income tax return. Because if [they’ve] worked in that tax year, then the chances are [they’ve] either received salary and wages or [they] run a business, in which case either one of those sorts of things should be viable on [their] tax return.”
He pointed out the regulator does not tend to look too closely at a person’s work test compliance unless, for example, the individual has never made any superannuation contributions in the past.''