Importance of identifying the timing of a superannuation contribution continued
- Tax treatment of contribution – an amount which qualifies as a contribution to an SMSF may be assessable in the hands of the receiving fund, generally in the income year in which the contribution is made to the fund, and taxed concessionally at the rate of 15% (unless there are deductions to offset this assessable income). Refer to Subdivision 295-C of the ITAA 1997. Further, where an individual is liable for Division 293 tax (i.e., where their income, for these purposes, exceeds $250,000), a further 15% will be payable, by the individual, on certain concessional contributions in the income year in which the contribution is made.
- Excess contributions – where the relevant contributions cap has been exceeded (i.e., the general $25,000 cap for concessional contributions or the general $100,000 cap for non- concessional contributions), adverse tax consequences may apply with regard to the excess amount.
For contributions capping purposes, a contribution counts in the income year in which a contribution has been allocated to the member’s accumulation account. Generally, when a contribution is made to a superannuation fund in respect of a member, the contribution must be allocated to the member’s account within 28 days after the end of the month it is made to the fund. Refer to SIS Reg 7.08(2) and Taxation Determination (‘TD’) 2013/22.
- Avoiding an SG charge (‘SGC’) – Generally, in order to avoid a liability for the SGC, employers must have made a minimum quarterly contribution for employees (e.g., 9.5% of ordinary time earnings, up to a quarterly maximum earnings base of $55,270 for 2019/20) to a complying fund, generally by the 28th day after the end of the relevant quarter. Refer to S.23(6) of the Superannuation Guarantee (Administration) Act 1992 (‘SGAA’).
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