Questions & Answers - Contributions

Cash contributions are made to your SMSF by simply depositing cash into your SMSF Bank Account.

No. You do not need to notify ESUPERFUND when a contribution is made to your SMSF. We will be able to view the Cash Contribution on your SMSF Bank Statements which are electronically provided to us by Commonwealth Bank.

No. You do not need to notify ESUPERFUND when a contribution is made to your SMSF. We will be able to view the Rollover on your SMSF Bank Statements which are electronically provided to us by Commonwealth Bank.

No. All Rollovers and Contributions made by each Member of the SMSF must be deposited into the Transaction Bank Account established for your SMSF. There is only one Transaction Bank Account established for your SMSF and all Members must deposit Rollovers and Contributions into the same Transaction Bank Account. It is unnecessary and administratively inefficient to have a separate Transaction Bank Account for each Member. Each Member's Benefit in the SMSF is tracked on a proportional basis.

Yes. Members of a SMSF traditionally make contributions in cash. However it is possible for Members to make contributions of assets directly into the SMSF instead of cash. These types of contributions are called in specie contributions. Importantly only certain assets listed in the super regulations can be transferred in specie by a Member. If not specifically listed in the super regulations, it is illegal to transfer assets owned by a Member into the SMSF as a contribution. The only assets currently allowed to be transferred to a SMSF from a Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member) are as follows:

Importantly whilst a SMSF can purchase Residential Property from a person who is not an SMSF Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member), a SMSF cannot purchase Residential Property from a SMSF Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member) even if the purchase is at market value. This is illegal! It is also important to understand that capital gains tax and stamp duty issues may arise when assets are transferred to an SMSF by a Member. More on transferring assets from a Member to a SMSF can be found here.

No. You do not need to notify ESUPERFUND at the time the Non Cash Contribution is made to your SMSF. However as part of our annual compliance process, we will send you an Annual Checklist in July each year requesting information we cannot electronically access. If you have made a Non Cash Contribution (e.g. transferred Listed Shares) into your SMSF, you will need to provide a copy of the Off Market Share Transfer Form evidencing the Transfer. This information is only required to be provided annually and we will request the information when required.

All Contributions made to your SMSF whether in cash or via a transfer of assets must be allocated to an SMSF Member. This is a legal requirement. It is also a legal requirement that each Member be issued with a Member Statement annually detailing their Member Balance movements including contributions made. Typically the Member making the Contribution will be detailed on the Bank Statement. To the extent that the narration on the Bank Statement is insufficient, you will be asked to confirm on whose behalf the contributions have been made using an annual checklist we send to all SMSF clients each year in July. You do not need to send us confirmation at the time each contribution is made. This information is only required annually and we will guide you through the process and prompt you when information is required from you.

Each Rollover must be allocated to a specific Member as part of the annual compliance process. This is a legal requirement. Each time you Rollover monies from another Superfund into the Transaction Bank Account, that Superfund must provide you with a Rollover Statement. In order to determine which Member has made the Rollover, ESUPERFUND will require the Rollover Statement issued by the previous Superfund. This will have all the information about the Rollover including the Member receiving the Rollover and the amount rolled over. ESUPERFUND will also request the Rollover Statements at the end of the Financial Year as part of preparing the SMSF Annual Compliance requirements. This information is requested in the Annual Compliance Checklist sent to you in July each year.

All Members of a SMSF have a proportional interest in the SMSF assets based on the Contributions and Rollovers made to the SMSF and any withdrawals made from the SMSF by each Member. This means that if one Member contributes 100% of monies to the SMSF and a second Member contributes no monies, then the Member making the total contributions to the SMSF will own 100% of the SMSF. Similarly if one Member contributes say $60,000 to the SMSF and the other Member contributes say $40,000 to the SMSF, then Member 1 will own 60% of the SMSF Assets and Member 2 will own 40% of the SMSF Assets. Each Members percentage or proportional interest in the SMSF Assets is constantly changing. That is each time that a Member contributes or withdrawals monies from the SMSF their proportional interest in the SMSF changes. ESUPERFUND tracks each Members proportional entitlement in the SMSF by allocating every Rollover, Contribution and Withdrawals to a specific Member. This is a legal requirement.

Your SMSF earnings are allocated to each Member on a proportional basis based on each Members percentage interest in the SMSF. This is done by ESUPERFUND automatically as part of the annual compliance process and no action is required by you. Importantly as part of the annual compliance process ESUPERFUND will prepare a Member Statement for each Member of the SMSF. This is a legal requirement. The Member Statements are included in the annual compliance documents completed for clients and must be approved by you as the SMSF Trustee before lodgement with the ATO.

Personal Contributions made into a SMSF on which no tax deduction is claimed are known as Non Concessional Contributions. Non Concessional Contributions are essentially personal contributions made into your SMSF from your own personal Bank Account and not from your Employer.

If you are under age 65 you do not need to pass a Work Test to make a Non Concessional Contribution. If you are aged over 65 (but under 75) you can only make Non Concessional Contributions into your SMSF if you pass a Work Test. The "Work Test" requires that an Individual is "Gainfully Employed" for at least 40 hours in a period of not more than 30 consecutive days in that Financial Year. The term "Gainfully Employed" is defined to mean employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment. Gain or reward essentially means that you are remunerated in return for the personal services provided (e.g. as a salary, business income, bonuses and commissions that are fully documented and declared for tax purposes). Gain or reward does not include passive investment income (e.g. rental income or dividend income). In addition volunteers are generally not considered to be gainfully employed as they do not receive remuneration for their services. You should also take care if you involve family and friends in an attempt to satisfy the definition of 'gainful employment'. If you assist another family member by say, babysitting or gardening, the particular circumstances surrounding the arrangement will be critical. For example, if you look after your grandchildren while their parents are on holiday, it is likely that your motive for doing so would be for personal or domestic reasons rather than to derive financial gain as per a normal employer / employee arrangement. In this case, even if you are paid for your services, the definition of gainful employment may not be satisfied.

From 1 July 2017, if you are aged under 75, you must also meet the $1.6 million Eligibility Threshold before making the Non Concessional Contributions. This means that If you have a total superannuation balance of $1.6 million or more on 30 June of the previous Financial Year you will not be eligible to make Non Concessional Contributions. For more details please click here.

If you are under age 65, the Non Concessional Contributions limit for a given Financial Year is as follows:

If you are under age 65 at any time during a Financial Year, there is capacity to bring forward one or two years’ worth of Non Concessional Contributions (i.e. $200,000 cap over two years or $300,000 cap over three years) depending on your total superannuation balance on 30 June of the previous Financial Year). There is no requirement to elect to use the Bring Forward Rule. It is automatically triggered in the first Financial Year in which a Non Concessional Contribution exceeds the annual limit.

It should be noted that Individuals with balances close to $1.6 million are only able to bring forward the annual cap amount for the number of years that would take their balance to $1.6 million. For more details on the Bring Forward Rule click here.

To the extent you make a Non Concessional Contribution exceeding your Non Concessional Contribution Limit your SMSF must return the excess contribution to the contributing Member within 30 days of receiving the contribution.

To the extent that this does not occur, the ATO will ask you to choose how your Excess Non Concessional Contributions are taxed after the lodgement of your SMSF Annual Return. You have the following options:

Option 1 Release amounts from SMSF

If you choose this option, you are electing to withdraw all your Excess Non Concessional Contributions and 85% of associated earnings from your SMSF. In this case, the Excess Non Concessional Contributions will NOT be subject to Excess Non Concessional Contributions tax. However the full amount of associated earnings is added to your assessable income and taxed at you marginal tax rates subject to a 15% tax offset.

Option 2 Pay Excess Non Concessional Contributions tax on the excess amount

If you choose not to release your Excess Non Concessional Contributions from your SMSF, the Excess Contributions over the Non Concessional Contribution Limit will be subject to Excess Contributions Tax at the highest marginal tax rate of 47%.

Excess Contributions Tax can result in double taxation, with an effective tax rate of up to 94%! To avoid this disastrous situation, it is vital that you keep track of all your Non Concessional Contributions.

No tax is ever payable on a Non Concessional Contribution made into a SMSF either when the monies are contributed into the SMSF or when monies are accessed later on retirement, to the extent that the contributions are within the limits allowed.

Concessional Contributions are contributions where a tax deduction has been claimed for the contribution, either by the Member or by an Employer. Concessional Contributions include the following subsets of contribution types

These Contribution types are discussed in detail here.

If you are under age 65, the following limits apply per Member for Concessional Contributions made into your SMSF. The limits apply to the total of your Employer, Salary Sacrifice and Personal Concessional Contributions.

Tax is payable on Concessional Contributions made into a SMSF at the rate of 15%.

If you exceed your Concessional Contribution Limit, the Excess Contributions over the Concessional Contribution Limit will be taxed at your actual marginal tax rate, plus an interest charge calculated by the ATO (as would happen for income tax paid late to the ATO), rather than the top marginal tax rate. If you're already on the top marginal tax rate, you only need to pay the interest charge.

Before 1 July 2017

You are only allowed to claim a tax deduction for personal contributions if you satisfy the 10% Rule. Personal contributions are made by you and not by your Employer or by way of Salary Sacrifice. The 10% Rule allows you to claim a tax deduction for super contributions made to your SMSF, if your employment income divided by your assessable income is less than 10%. Employment income includes salary sacrifice contributions (but not SGC contributions) plus reportable fringe benefits. Assessable income includes gross income before deductions and includes salary, investment and business income, net capital gains, salary sacrifice contributions plus reportable fringe benefits. For example assume your salary income from employment is $1,000 and your total assessable income from all sources is $20,000 (predominantly from investment income. In that case you will divide $1,000 / $20,000. The result of 5% will be under 10% enabling you to claim a tax deduction for personal contributions made up to the Concessional Contribution limit based on your age. If you fail the 10% Rule you cannot make a personal Concessional Contribution and claim a Tax deduction for that Contribution. If you qualify and make a personal Concessional Contribution into your SMSF under the 10% Rule and in turn claim a Tax Deduction on that Contribution you will need to complete an ATO Tax Deduction Form evidencing the Tax Deduction. The form can be found here.

After 1 July 2017

From 1 July 2017, if you are aged under 65, you are allowed to claim a tax deduction for personal contributions regardless of your employment situations. If you make a Personal Concessional Contribution into your SMSF and claim tax deduction on that Contribution you will need to complete an ATO Tax Deduction Form evidencing the Tax Deduction. The form can be found here.

It is important to remember that Tax Deductible Contributions are subject to 15% tax. Accordingly to justify this level of tax liability you need to save more than 15% to make the exercise financially viable. The Personal Tax Rate on Taxable Income under $18,200 from 1 July 2014 is Nil. The Personal Tax Rate on Taxable Income above $18,200 is 19% and increases progressively to a top Personal Tax Rate of 47% (including the Medicare levy). This means that any Tax Deductible contribution made should not reduce your Taxable Income below $18,200. For example if you are over 50 in 2017-2018 Financial Year and have a Taxable Income of $43,200 you should consider making a maximum Tax Deductible Contribution of $25,000 to reduce your Taxation Income to $18,200. Any Tax Deductible Contribution greater than $25,000 in this example would result in no tax saving.

All Contributions made to your SMSF whether in cash or via a transfer of assets must be allocated to an SMSF Member. In addition, the correct Contribution Type must be recorded. This is a legal requirement. It is also a legal requirement that each Member be issued with a Member Statement annually, detailing their Member Balance movements including Contributions and the Contribution Type made. Typically the Member making the Contribution will be detailed on the Bank Statement. However the type of Contribution will not be able to be determined solely from the Bank Statement. Accordingly you will be asked to confirm the Contribution Type made for each Member using an Annual Checklist we send to all SMSF clients each year in July. You do not need to send us confirmation of the Contribution Type at the time each contribution is made. This information is only required annually and we will guide you through the process and prompt you when information is required from you. In addition please note that if you have claimed a Tax Deduction for a personal Contribution, we will require a completed ATO Tax Deduction Form evidencing the Tax Deduction. The Form can be found here.

If you are under Age 65 you do not need to pass a Work Test to make a Concessional Contribution. If you are aged over 65 (but under 75) you can only make Non Concessional Contributions into your SMSF if you pass a Work Test. The "Work Test" requires that an Individual is "Gainfully Employed" for at least 40 hours in a period of not more than 30 consecutive days in that Financial Year. The term "Gainfully Employed" is defined to mean employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment. Gain or reward essentially means that you are remunerated in return for the personal services provided (e.g. as a salary, business income, bonuses and commissions that are fully documented and declared for tax purposes). Gain or reward does not include passive investment income (e.g. rental income or dividend income). In addition, volunteers are generally not considered to be gainfully employed as they do not receive remuneration for their services. You should also take care if you involve family and friends in an attempt to satisfy the definition of 'gainful employment'. If you assist another family member by say, babysitting or gardening, the particular circumstances surrounding the arrangement will be critical. For example, if you look after your grandchildren while their parents are on holiday, it is likely that your motive for doing so would be for personal or domestic reasons rather than to derive financial gain as per a normal employer / employee arrangement. In this case, even if you are paid for your services, the definition of gainful employment may not be satisfied.

If you are 65 or over and contribute to your SMSF without first meeting the work test, the amount must be returned to you by your SMSF within 30 days. If the 'ineligible' amounts are not returned within this time, your SMSF will have breached the superannuation contribution rules resulting in compliance issues that will be reported in you annual audit.

Yes. The test for making Contributions to your SMSF is an Aged Based Test not a Retirement Test. Hence you can continue contributing to your SMSF after you retire up to the age of 65. After 65 you can continue contributing to your SMSF even if you previously retired as long as you worked at least 40 hours in a period of not more than 30 consecutive days in the particular financial year, up to the age of 75.

Yes. You can continue contributing to your SMSF even after you commence a Simple Account Based Pension or TRAP subject to the contribution rules which can be found here on our website. That is if you are aged under 65 you can contribute to your SMSF even after commencing a Simple Account Based Pension or TRAP with no work test required. If you are aged between 65 and 75 you can contribute to your SMSF even after commencing a Simple Account Based Pension or TRAP if you have worked for at least 40 hours in a period of not more than 30 consecutive days in the particular financial year. You should bear in mind that Concessional Contributions (which include Employer and Salary Sacrificed Contributions) continue to be subject to tax at 15% even after you commence a Pension.

Before you commence a SABP/TRAP your SMSF Benefit is recorded in your "Accumulation Account". When you commence a SABP/TRAP your SMSF Benefit is transferred and recorded in your "SABP Account" or “TRAP Account”. These are simply "Accounting Entries" in your SMSF and do not require separate Bank Accounts for each Account Type.

Unlike Retail Funds, a SMSF can accept contributions (subject to the normal contributions rules) and rollovers after the SABP/TRAP has commenced. These contributions and rollovers continue to be made to the Transaction Bank Account setup for your SMSF. When you make additional contributions and rollovers to your SMSF after you commence a SABP/TRAP, they are allocated to your "Accumulation Account".

This will mean that you will have two "Accounting Accounts" at the same time in this case, namely a "SABP Account" or “TRAP Account” paying your Pension and an "Accumulation Account" which represents the additional contributions and rollovers made to your SMSF after commencing the Pension. The difference between each Account is the "SABP Account" does not pay tax on earnings and realised capital gains but the "Accumulation Account" and “TRAP Account” do pay tax on earnings and realised capital gains at up to 15%.

Yes. If you make rollovers or contributions to your SMSF after commencing a Pension these amounts will sit outside the "Pension Account" in the "Accumulation Account" as detailed above. This will mean that earnings on this part of your Super Benefit will continue to be subject to tax. If you are eligible for a SABP, it may be appropriate to commence a second SABP with your "Accumulation Account" balance to ensure your entire Super Benefit continues to be completely tax free (subject to the Transfer Balance Cap).

We do caution however that additional Pensions should only be commenced when there is a significant benefit in the Members "Accumulation Account" (eg $50,000 or more). Where you are making smaller contributions (eg from your monthly employer super contributions) you should not commence a separate Pension with each of these amounts as this becomes administratively burdensome.

These Contributions are made by your employer on instructions from you. Salary Sacrifice Contributions are voluntary superannuation contributions made by an employer to your SMSF over and above their Superannuation Guarantee or award obligations. These contributions are made to your SMSF account instead of to you as an employee receiving that amount as salary. The advantage in salary sacrificing is that the contributions made to your SMSF are not taxed in your personal name but in the SMSF at 15%. So if your personal tax rate is more than 15% there is a tax advantage in salary sacrificing. For more details, please see here.

Yes. The Super Co-Contribution is an Australian Government initiative to assist you to save for your retirement. Each year you are eligible and make a personal super contribution, the Government will match your contribution with a co-contribution up to certain limits up to a maximum of $500 (see here for details). To be eligible for a co-contribution, the following criteria must be satisfied:

1. You make a personal contribution by 30 June of that income year to a complying superannuation SMSF.
2. You don't claim a deduction in your income tax return for the contribution.
3. Your total income is below the higher income threshold.
   

   Income Year	Maximum Entitlement	Lower Income Threshold	Higher Income Threshold
   2017-18	$500	$36,813	$51,813
   2016-17	$500	$36,021	$51,021
   2015-16	$500	$35,454	$50,454

4. 10% or more of your total income is from running a business, eligible employment or a combination.
5. You are less than 71 years old at the end of the income year, and
6. You do not hold an eligible temporary resident visa at any time during the income year.

Additional Eligibility criteria were added from 1 July 2017:

7. Your Total Superannuation Balance must be less than $1.6 million on 30 June of the previous Financial Year, and
8. You must not have exceeded your Non Concessional Contributions cap in the relevant Financial Year.

You must meet all these requirements to be eligible.

No Application is needed for the Government Co Contribution. All you need to do if you are eligible is make a personal superannuation contribution to your SMSF and lodge your personal income tax return. It is that simple and there are no additional forms. ESUPERFUND will determine the amount of the contribution made by you when completing your SMSF annual accounts (noting the contribution will show up in your SMSF Bank Account). The Tax Office will in turn use the information on your income tax return and the information provided by ESUPERFUND on your SMSF tax return to work out whether you are eligible. If you are, they will automatically calculate the co-contribution amount and deposit your entitlement into your SMSF or send you a cheque. The ATO will send you a letter to confirm payment once it has been paid.

Yes. You can make contributions on behalf of your spouse if your spouse is under 65 years of age or your spouse has reached 65 years of age but not reached 70 years of age, and worked at least 40 hours in a period of no more than 30 consecutive days during the financial year. There is no age limit or employment test for the person making the contributions. An 18% income tax rebate for contributions up to $3,000 pa applies.

Before 1 July 2017, the full rebate is available where the assessable income and reportable fringe benefits (RFB) of the spouse are below $10,800 pa. That is a maximum rebate of $540 pa. The rebate entitlement phases out gradually ($1 for $1 increase in income) as the recipient spouse's assessable income and RFB increase to $13,800 pa, above which no rebate will be available. From 1 July 2017, the income threshold for the low income spouse tax offset has been increased from $10,800 to $37,000. The offset is gradually reduced for income above this level and completely phases out at income above $40,000. No tax offset will be available when the spouse receiving the contribution has exceeded their non-concessional contributions cap or their balance at 30 June of the previous financial year is $1.6 million or more.

The rebate is only available when both spouses are Australian residents for tax purposes. There is no form to complete or lodge with the ATO to claim the Spouse Rebate. The Spouse Contribution simply needs to be declared when lodging the contributing Members personal tax return. The ATO will in turn assess the rebate and it will be paid when processing your individual tax return.

Yes. Contributions Splitting refers to splitting Concessional Contributions between you and your spouse. Typically this is done to increase your spouses' super balance. The key issues around contributions splitting are:

SuperStream is a government reform aimed at improving the efficiency of the superannuation system.

Under SuperStream, employers must make super contributions on behalf of their employees by submitting data and payments electronically in accordance with the SuperStream standard. All superannuation funds, including SMSFs, must receive contributions electronically in accordance with this standard.

ESUPERFUND will be a registered Messaging Service Provider for SuperStream, and for our SMSF clients ESUPERFUND will receive and provide your Fund with contribution messages for FREE.

For more information regarding what we offer and what SMSF trustee responsibilities are, please click here.

Under SuperStream, an Electronic Service Address (ESA) is used to identify all the information relating to the contribution being made by your Employer including the Member Name and the amount of the Contribution. We are pleased to announce that ESUPERFUND is a registered Messaging Service Provider with the ATO for SuperStream and our ESA is ESUPERFUND. This means that you will need to quote "ESUPERFUND" when you notify your employer of your Fund's ESA.

For more information regarding SuperStream, please click here.

All superannuation funds, including SMSFs, must receive contributions from employers in the new data and e-commerce standard.

If you are employed, you will need to provide the following information to your employer in order to meet the SuperStream requirements:

For more information regarding SuperStream, please click here.

You need to provide your SMSF's ABN, Bank Account details and Electronic Service Address ("ESUPERFUND") to your current employer in any format (email, letter, etc.) or alternatively your current employer may provide you with a form to complete.

If you commence work with a new employer you will need to fill out a Choice Form with your SMSF's ABN, Bank Account details and Electronic Service Address ("ESUPERFUND"). The Choice Form once completed must be provided to your new employer and NOT to ESUPERFUND.

For more information regarding SuperStream, please click here.