Running your own super fund means you have extra responsibilities as a trustee
If you’re running your own self-managed superannuation fund (SMSF) you’re likely to be acting as both a member and a trustee1. The two roles are very different.
- As a member you’re making and receiving contributions to build your wealth and save for a comfortable retirement.
- But as a trustee you’re responsible for making sure the SMSF complies with various rules and regulations.
It’s important to know which hat you’re wearing, particularly when you’re making sure that contributions to your super fund conform with the rules.
As a trustee you need to be able to spot an incorrect contribution and make sure it’s refunded in time.
There are two scenarios when a contribution can be refunded:
The SMSF isn’t allowed to accept the contribution under the Superannuation Industry (Supervision) Act and Regulations. This depends on factors including:
- your age
- whether you meet a work test if you are older than 65 but not yet 75
- the type of contribution, and
- whether you have provided your tax file number (TFN) to the SMSF.
Contributors to an SMSF can include employers, spouses and parents for their children. Here are some examples of invalid contributions that cannot be accepted by a super fund and must be refunded.
- Mark is 75 and makes a personal contribution.
- Sally is 66 and hasn’t worked for several years but makes a personal contribution.
- Nick hasn’t provided a TFN but makes a personal contribution.
- Peta makes a spouse contribution for her husband who is 67 and hasn’t worked for several years.
And here are some examples of valid contributions that are not refundable.
- Tran makes a personal non-concessional contribution of $400,000.
- Makayla has a total superannuation balance of $1.8 million and makes non-concessional contributions of $200,000.
- Frank is 60, retired and makes non-concessional contributions of $200,000.
It’s also important to keep up to speed with changing laws around SMSF contributions. For example, until 1 July 2017, an SMSF couldn’t accept a contribution that was larger than the member’s non-concessional limit, which was $180,000 for over 65s and $540,000 for under 65s.
The SMSF can make a refund under the legal principle of restitution for mistake.
However, it’s not enough simply to spot an error. You’ll need to prove it’s a legal mistake, which could be either:
- a payment meant for someone else—such as rent wrongly paid to a super fund instead of a landlord, or
- when the contributor wrongly thought they had a legal obligation to contribute.
You’ll also need to make sure you take action quickly.
Ways to help you stay compliant
- Get some advice before making super contributions.
- Engage with a professional fund administrator to help keep your eye on the ball.
- Put in place some checks and balances to work out the types of contributions your SMSF can and can’t accept.
If you miss something, a range of possible penalties could apply.
1 Or a director of a corporate trustee. Many SMSFs have a corporate trustee of which the member(s) is/are directors (as required by law).
Oliver’s Insights – Review of 2020, outlook for 2021 – from pandemic to recovery09 December 2020 | Grow my wealth AMP Chief Economist Shane Oliver looks back at 2020 and ahead at what’s in store for investors in 2021 Read more
Oliver’s Insights – Modern Monetary Theory – can it help with economic problems or is it just another Magic Money Tree?26 November 2020 | Grow my wealth AMP Chief Economist Shane Oliver looks at what government spending means for investors. Read more
What a COVID vaccine means for stocks18 November 2020 | Grow my wealth What does the recent vaccine breakthrough mean for the stock market? AMP Capital’s Australian Equities Portfolio Manager, Dermot Ryan, shares his views. Read more
This information is provided by AMP Life Limited ABN 84 079 300 379 (AMP Life) and AMP Bank Limited. It is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances and the relevant Product Disclosure Statement or Terms and Conditions, available by calling 13 30 30, before deciding what’s right for you. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.
All information on this website is subject to change without notice. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek professional advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability for any resulting loss or damage of the reader or any other person.
The information on this page was current on the date the page was published. As a result of changes to the business from time to time, including changes to product, product issuer, services, trust, trustees and other entities, the information may no longer be current. For up to date information, we refer you to the relevant product disclosure statement and product updates.