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  • Contributions

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    The meaning of contributions

    The word ‘contribution’ is generally not defined in the law. The term's ordinary meaning is discussed in Taxation Ruling TR 2010/1 Income tax: superannuation contributions.

    For a receiving provider, it is the characteristics of an amount that comes into your hands that will determine if it is a contribution. Generally, any amount that increases your fund's capital is a contribution. However, not all of these amounts are required to be reported to us as part of your member information reporting.

    If an amount is derived or received as income, profit or gain from an investment, or is the realisation of an investment from your existing capital, it is not a contribution.

    The amount of a contribution

    The amount of a contribution is the gross amount originally contributed excluding deductions of tax, fees or other amounts. In some cases, you may need to calculate the market value – for example, in relation to in specie contributions.

    Always report the full amount of the contribution that was originally made for the member, do not reduce the amount by any:

    • fees, taxes and investment losses that may reduce an account balance below what was originally contributed
    • contributions rolled over, transferred or allotted to a spouse under a contributions splitting arrangement
    • super benefits paid to the member
    • contributions paid out to the member under the hardship provisions
    • amounts released in accordance with a release authority.

    If you return a contribution in restitution of a mistake of law or fact, you should not report it to us, unless otherwise advised. If you have already reported it, you will need to correct your reporting.

    See also:

    The income year for which a contribution is reported

    Report a contribution according to when the contribution was legally made – not when it was allocated. Do this regardless of the intentions of either the member or their employer. The period in which a contribution was intended to be made by the member or an employer does not affect when it was actually made. In this regard, you have no discretion in how you report the contribution.

    Contributions received by you (made) on or before 30 June of a financial year, but not allocated to the member’s account until the next financial year, should be reported as being made in the earlier year. Conversely, where a member attempts to make a contribution on 30 June but it is not received by you until July, the contribution is considered to have been made on the day it was received by you.

    Even if, for some other legal or practical purpose the contribution is recognised in a different year, for member contribution reporting purposes the contribution should be attributed to the year it was made (received by the provider). See example 2 for when a contribution may be legally recognised in another year than it was reported.

    If you are applying Taxation Determination TD 2013/22: Income tax: 'concessional contributions' – allocation of a superannuation contribution with effect from a day in the financial year after the financial year in which the contribution was made to the reporting of contributions, note that our administrative assumption is that contributions are always made and allocated in the same year. Therefore, affected members may need to bring their circumstances to our attention when this assumption does not apply.

    TD 2013/22 is not considered to apply as a broad brush approach that a provider should take for all of its members. It is used on a case by case basis which require the same or similar circumstances as discussed in the determination. Applying this determination may require either:

    • additional notification from you
    • an objection from the member to an impacted assessment of excess contributions tax (for 2012–13 and earlier financial years)
    • an income tax assessment that includes excess concessional contributions in their assessable income (for 2013–14 and later financial years).

    See also:

    • TR 2010/1 Income tax: superannuation contributions
    • TD 2013/22 Income tax: 'concessional contributions' - allocation of a superannuation contribution with effect from a day in the financial year after the financial year in which the contribution was made

    Example 1

    As part of a salary sacrifice arrangement, Austin's employer made a contribution for him of $10,000 on 29 June 2016. The contribution was received into his fund's bank account on the same date; however the contribution was not allocated to an account for Austin until 1 July 2016.

    The contribution was correctly reported as being made on 29 June 2016 as an employer contribution for Austin for the 2015–16 financial year.

    End of example

    Example 2

    Melanie had arranged for her employer, Wild Villas, to make regular personal contributions during the year, totalling $1,000, to allow her to take advantage of the maximum super co-contribution. The contributions were made by after-tax payroll deductions and paid monthly to her fund along with her employer contributions. Melanie's last monthly pay for the year was on 23 June 2017 when Wild Villas sent contributions of $83 (personal) and $400 (employer) to the fund. Her payments were part of a large cheque that covered contributions for all Wild Villas employees which was dated 28 June 2017 and mailed the next day. The cheque was received by the fund on 3 July 2017.

    Wild Villas has satisfied its super guarantee obligations for Melanie for the 2016–17 financial year as the contribution was made by 28 July 2017. However, the fund should report for Melanie that both the $83 and $400 were contributed in the 2017–18 financial year.

    Melanie asked the fund to re-report the $83 and treat the contribution as being made in the 2016–17 (the year it was intended for) but the fund correctly refused to do so, referring Melanie to the ATO's ruling TR 2010/1. Unfortunately, she was not entitled to the full co-contribution for the 2016–17 financial year. However, the contribution did count towards her co-contributions entitlement for the 2017–18 financial year.

    End of example

    Acceptance of contributions

    You may only accept contributions in accordance with regulation 7.04 of the Superannuation Industry Supervision Regulations 1994 (SISR). Circumstances in which you cannot accept certain contributions include where:

    • the member is over a certain age
    • the member has not quoted their tax file number (TFN) to you.

    If a contribution is inconsistent with regulation 7.04 of the SISR, you should not accept it.

    If you do accept a contribution that you shouldn't have, you must return it within 30 days of becoming aware of the error. Failure to comply with the time limit does not affect your legal obligation to return the contributions. An exception to this rule is if the member had initially failed to quote their TFN but then provided it to you within the 30 day period.

    The 30-day limit is a period of grace allowing you to remove the contributions from the super system without breaching the payment or contribution rules.

    Returning contributions under regulation 7.04 of the SISR may have implications for contributions reporting.

    Reporting member TFNs

    You are obliged to report a member's TFN to us if you have it. A member's TFN is central to our being able to correctly calculate their:

    • super co-contributions
    • low income super amounts
    • liability for excess contributions
    • Division 293 tax.

    If you do not have a member’s TFN, you:

    • will not be able to accept certain member contributions
    • may be liable for additional income tax (32% on top of the 15% tax you already paid) on assessable contributions, such as employer contributions (including salary sacrifice contributions).

    Only report valid member TFNs

    When reporting member information to us, if you do not know the member's TFN it is not acceptable to report an exemption code (such as 444 444 444) to us. The use of exemption codes is intended for an exemption from withholding tax on interest and other investment income by banks and other investment bodies. Find out more at Claiming an exemption from quoting a TFN for savings accounts and investments.

    If your member or their employer quotes a number to you that you know is not the valid TFN of the member, you should treat the member as having not quoted a TFN. You should attempt to obtain the correct number from them.

    If they do not give you their valid TFN and you are reporting:

    • an employer contribution – fill the member TFN field with zeroes
    • a member contribution – Regulation 7.04(2) of the SISR states that you may not accept member contributions in these circumstances, therefore you should not be reporting those contributions.

    Example

    In May 2013, Brunswick Super Fund reviewed the TFNs it held for all its members, checking for one or more members with the same TFN. It found that it had exemption codes stored at the TFNs for 90 members. The fund wrote to these members in June 2013 seeking their correct TFN.

    By August 2013, 85 of the members contacted had responded with valid TFNs.

    For the remaining five members, the fund reported no TFN (by zero-filling the member TFN field) in October 2013. Where they were accumulation members in receipt of contributions, the fund also returned member contributions and super co-contributions received since 1 July 2007 (when the SISR was amended to prohibit a fund from accepting member contributions where a TFN is not quoted). Brunswick Super Fund also applied additional tax to employer contributions being made for the members.

    End of example

    Release authority and contributions

    When you receive a valid release authority, the member has satisfied a condition of release. You are authorised to release a benefit, but not to refund contributions. The contributions that gave rise to an actual or potential liability to excess contributions tax are past transactions that are unchanged by application of the release authority.

    Actioning a release authority must have no impact on the contributions you report, or on any contributions tax you applied to the member account when the contributions were made.

    The release authority does not impact contributions reporting for a member, or whether the contributions are considered assessable contributions for the purposes of your fund's income tax liability.

    You must ensure that your systems do not trigger a re-report when you action a release authority.

    Classifying transactions

    When you receive a contribution or report an event, you should determine what type it is to ensure you report it correctly.

    How you classify the contribution in your reporting will depend on:

    • where the contribution has come from or how the event originated
    • the information provided by the contributor at the time of the contribution or event
    • the decisions you make about how it will be treated by you.

    When you accept a contribution, you need to collect information that will help you to correctly determine what type of contribution it is. Generally, you should be able to answer the following questions for each contribution:

    • Who is the contribution for?
    • Who made the contribution?
    • What is the contributor's relationship with the member for whom the contribution was made (that is, are they the member themselves, the member's employer, the member's spouse or another third party (such as other family and friends)?
    • What was the purpose of the contribution?
    • Did the contributor provide a valid notice of election to treat the contribution in a particular way?

    Use the information you collect, the Member Account Transaction Service business implementation guide (MATS BIG) and this protocol to help you correctly classify and report contributions and events. An explanation of each field, which adds to and supports the explanations given in the MATS BIG, is provided in this protocol.

    We use the contributions information you and other providers report to us, as well as deduction information from your members’ tax returns, to determine which contributions are:

    • eligible personal contributions – so we can determine super co-contribution entitlement and eligibility for deductions or schemes (eg First Home Super Saver Scheme (FHSS)
    • concessional contributions – so we can determine low income super amount entitlements for the financial year, and assess member tax liabilities in relation to the concessional contributions cap and Division 293
    • non-concessional contributions – so we can assess member tax liabilities and eligibility for deductions or schemes.

    See also:

    Insurance premiums are contributions

    Insurance premiums paid to you are contributions. If they are paid by the member, they are considered to be personal contributions. If they are paid by the member’s employer (whether directly to the insurer or to you) they are considered employer contributions. This is true in all circumstances, including for risk-only or insurance-only policies where the super benefit afforded provides cover for death, disability or sickness only – that is, contributions are not accumulated in an account for the benefit of the member. The relevant field to report these is specified further in the protocol.

    If your liabilities, such as insurance premiums, are paid for by employers or other third parties, you have an obligation to record and report them as contributions attributable to the relevant members.

    Your members may be unaware that contributions of this nature are being made for them and may inadvertently exceed the contributions caps. Consider bringing this issue to the attention of your members and associated employers and third parties so that they are able to manage their contributions in an informed way.

    See also:

    • TR 2010/1 Income tax: superannuation contributions

    Contributions made by an employer that are personal contributions

    In some circumstances, contributions made by an employer from an employee's after-tax take-home pay need to be classified as personal contributions. These include where:

    • the employer has an obligation to make such contributions and the employee has no choice, eg under the rules of an employer-sponsored super fund or the rules of a defined benefit scheme
    • the employer is voluntarily directed to make such contributions by the employee, eg under arrangements authorising a regular pay-roll deduction.

    Contributions for spouses or children

    Employer contributions should be reported at one of the Employer contributions fields, if they are:

    • contributions made by an employer for the employer’s spouse. You should not report these at the Spouse contributions field unless the employer is acting in their capacity as the spouse of the member rather than as an employer.
    • contributions made by an employer for a child employee under 18 years of age. You should not report these at the Child contributions field unless the employer is acting in their capacity as a relative or friend rather than as an employer.

    Defined benefits and constitutionally protected funds

    As well as reporting any actual employer contributions paid in relation to a member's accumulation interest, if you are a defined benefit scheme or a constitutionally protected fund, you may need to report contributions in relation to a member's defined benefit interest. These contributions are referred to as notional taxed contributions and defined benefit contributions.

    These are not reported at the Employer contributions fields, refer to the Annual amounts and balance protocol.

    Both contribution types are generally intended to reflect what an employer would have needed to contribute in that year to fund the member’s expected final benefit. However, they are calculated differently and should not be confused with each other. You should determine the amount for each member with the advice of an actuary.

    See also:

      Last modified: 26 Feb 2019QC 56350