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  • CRT Alert 039/2019

    How funds administer ineligible downsizer contributions

    Where a downsizer contribution is ineligible, the fund must re-assess the amount in accordance with both subregulation 7.04(1) of the Superannuation Industry (Supervision) Regulations 1994 and its trust deed, to determine if the amount can be retained as a non-concessional contribution. If allowed by the trust deed (in accordance with existing contribution reporting requirements) the fund can either:

    1. Adjust the prior downsizing contributions to nil and report this amount as a non-concessional contribution if the member meets the age/work tests; or
    2. Adjust the prior downsizing contribution to nil and return the contribution to the member.

    What happens if the contribution can't be returned or returned in full

    Members who no longer have a super interest with the fund, or an insufficient amount being able to be returned, must have their contribution re-reported as non-concessional. This re-reporting must occur even if the contribution was returned because the member did not meet the age/work tests.

    Some or all of the contribution may be an excess non-concessional contribution (ENCC). Regardless of the age of the member, if this is the case the member will receive an ENCC determination.

    This also applies if the fund can't return the full amount. Any contributions the fund can return should be treated:

    • under process 2 (above), and
    • any subsequent amounts the fund can't release should be treated under process 1 (above).

    Members will continue to have access to all review rights under the ENCC scheme including:

    We' monitor the rectification of this contribution reporting. Where funds don't action within legislative timeframes, for example within 30 days of being notified that a member’s downsizer contribution in ineligible, we may notify APRA.

    What happens if your member is in pension phase

    The requirement to return an ineligible downsizer contribution if it cannot be accepted remains, even if the member is in pension phase.

    If a fund can't return the contributions or can't return the full amount (due to an insufficient amount in the member’s interest), the fund must re-report the amount of the downsizer contribution which they can't return to the member as a personal contribution.

    What happens if a fund receives a release authority

    An amount released under these circumstances is treated as a super lump sum (as it is a partial commutation of the member’s super interest). Being in pension phase doesn't prevent a fund from complying with the release authority; however it may mean the full amount can't be released (as the available balance may be lower than the amount stated in the release authority). Where the member’s available balance is lower than the release authority amount, the fund must release the maximum amount available.

    For further enquires, email SuperCRT@ato.gov.au

      Last modified: 19 Jul 2019QC 59717