Contributions Caps and Reserves

In a recent superannuation meeting, the Tax Office set out the Commissioner’s preliminary views on the implications regarding the use of contribution reserves within an SMSF and the excess contributions tax.

The Tax Office states that where a non-concessional contribution is credited to a fund’s contribution reserve before being credited to a member’s account in the following financial year (but within 28 days of the end of the month that the contribution was received by the trustee), the contribution will count towards the member’s non-concessional cap for the financial year that it is allocated to their account.

*  Where an individual exceeds the contributions caps for an income year, the individual can potentially trigger a tax penalty with an effective rate of up to 93%.