Description
The trust deed of an SMSF is amended to insert specific clauses, or a new SMSF is established with such clauses included in its deed, in the belief that the presence of such clauses prevents a member from ever being subject to the excess contributions tax. 2. A member makes contributions to the SMSF which in total exceed the member's contributions caps. The superannuation law does not generally allow the trustee to return all or part of any one of the contributions made for the member. An exception allows the trustee of an SMSF to return all or part of a single contribution in very limited circumstances. For example, if a single non-concessional contribution exceeds $150,000 for a member aged 65 or more on 1 July of the financial year the trustee must return the excess amount. The trustee must also return the part of a single non-concessional contribution that exceeds $450,000 for a member aged 64 or less on 1 July of the financial year. (ATO ID 2007/225 explains how the SIS Regulations apply to a single contribution). 3. The contributions are intermingled with the assets of the SMSF. 4. The trustee becomes aware that the member has made contributions in excess of a contributions cap. This may occur for example as a result of correspondence from the ATO to the member about administration of the excess contributions tax. 5. The trustee asserts that any amount of excess contributions is held in a separate trust even though all the contributions are intermingled with the SMSF's other assets. 6. The trustee relies on clauses of the SMSF trust deed which are intended to operate as follows: a. to prevent the trustee from accepting contributions above the member's contributions caps; b. if the trustee does receive contributions that causes the member to exceed his/her contribution caps the excess amount is said to be held in a trust separate from the SMSF; and c. the trustee is then obliged to repay the excess amount along with any earnings to the relevant member. 7. The member asserts that the amount that is, or the amounts that are, the subject of the purported separate trusts cannot be counted as a contribution(s) for the purposes of excess contributions tax. 8. The trustee may have returned the amount to the member, in reliance upon such clauses.