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Contributions a fund must not accept

Last updated 14 December 2022

The contributions your SMSF can accept are restricted by:

Each contribution must meet the first two restrictions. Contributions made prior to 1 July 2017 must also meet the fund-capped contribution limit.

In an SMSF, all members of the fund are also trustees of the fund. Members should not make personal contributions that the fund cannot accept. Contributions by third parties may be at risk of being against the requirements.

If your SMSF cannot accept the contribution of a member because of these restrictions, you must return the amount to the member or entity who contributed it.

You must return the contribution within 30 days of becoming aware that you cannot accept it. For an SMSF we consider you're aware that a contribution is in breach of the law when you become aware of the contribution itself. This would generally be on the day you receive the contribution.

We expect you to act with care, skill, diligence, and to:

  • know which types of contributions breach the super laws
  • have a process to work out whether a particular contribution breaches the super laws
  • return non-acceptable contributions within 30 days of receiving them.

The ATO view is that the 30-day requirement obliges funds to return contributions without delay. The trustee remains obliged under SISR subregulation 7.04(4) to return the amount, even if more than 30 days has elapsed since the trustee became aware of the obligation.

Example: Excess contribution not returned within 30 day timeframe

Alice is 40 years old and a trustee and member of an SMSF. She makes a $1 million member contribution to the fund on 31 January 2017.

During the audit of her fund in August, the approved SMSF auditor points out that the fund has not complied with the super laws because:

  • the contribution exceeded Alice's fund-capped contribution limit for the 2016–17 financial year
  • the excess amount was not returned within 30 days of it being made.

Although Alice made the contribution, she claims that the fund wasn't aware that it had breached the fund-capped contribution limit. This is because her bank only issues paper statements every six months and she received the statement covering her contribution in early July 2017.

As Alice is both a member and trustee of the SMSF, the fund is taken to have been aware of the fund-capped contribution limit.

It is not reasonable that a trustee, acting with the level of care, skill and diligence required of a trustee of a complying fund, did not check the affairs of the fund within the required timeframe.

In addition to an administration penalty of 20 units, the trustee must return the excess amount. If this does not occur, the Commissioner of Taxation may also give Alice's SMSF a rectification direction requiring the excess amount of the contribution to be returned within a specified timeframe.

End of example

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Age restrictions on contributions

There is no age restriction on your SMSF accepting mandated employer contributions. However, there are criteria which need to be met for other contributions. Your SMSF can only accept non-mandated contributions which are received on or before the day that is 28 days after the end of the month in which the member turns 75 years of age.

From 2022–23 financial year onwards, your SMSF can accept non-mandated contributions for members under 75 years and there is no requirement to meet the work test.

For the 2020–21 to 2021–22 financial years your SMSF can accept non-mandated contributions for members over 67 years of age but not over 75 years of age if they have worked at least 40 hours within 30 consecutive days in that financial year. This is known as the work test.

For the 2004–05 to 2019–20 financial years your SMSF could only accept non-mandated contributions from the members over 65 years of age but not 75 years if they met the work test

You need to be sure the following contributions can be accepted if your member is at or above the relevant age threshold for:

  • non-mandated employer contributions
  • personal contributions
  • spouse contributions
  • government co-contributions
  • downsizer contributions.

From the 2019–20 financial year onwards, your SMSF can also accept voluntary contributions for an additional 12-month period from the end of the financial year in which your member last met the work test, provided your member meets the following criteria. This is known as the work test exemption. Your member cannot have relied on the exemption in a previous financial year.

Table 1: Eligibility criteria for the work test exemption

Year

Age

Total super balance

2019–20

65-74

Less than $300,000

2020–21 and 2021-22

67-74

Less than $300,000

The table below looks at age restrictions in more detail.

For your SMSF to accept a downsizer contribution the member must have reached the eligible age, there is no maximum age limit and no requirement to meet the work test.

From 1 January 2023, the eligible age to make a downsizer contribution is 55 years of age and over. From 1 July 2022, it was 60 years of age or over, and prior to this, it was 65 years of age and over.

Member meets the work test (or work test exemption)

Age

2004–05 to 2019–20

2020–21 and 2021–22

2022–23 onwards

Under 55

All contributions can be accepted, except downsizer contributions.

All contributions can be accepted, except downsizer contributions.

All contributions can be accepted, except downsizer contributions.

55 – 59 years

All contributions can be accepted, except downsizer contributions.

All contributions can be accepted, except downsizer contributions

All contributions can be accepted, including downsizer contributions after 1 January 2023.

60–64 years

All contributions can be accepted, except downsizer contributions.

All contributions can be accepted, except downsizer contributions

All contributions can be accepted

65–66 years

All contributions can be accepted

All contributions can be accepted

All contributions can be accepted

67–69 years

All contributions can be accepted

All contributions can be accepted

All contributions can be accepted

70–74 years

You can only accept:

  • mandated employer contributions
  • downsizer contributions

personal contributions and other non-mandated contributions received, on or before 28 days after the end of the month in which the member turns 75 years old.  

You can only accept:

  • mandated employer contributions
  • downsizer contributions
  • personal contributions and other non-mandated contributions received, on or before 28 days after the end of the month in which the member turns 75 years old.
  • spouse contributions

 

All contributions can be accepted

75 years or older

You can only accept:

  • mandated employer contributions
  • downsizer contributions.

 

You can only accept:

  • mandated employer contributions
  • downsizer contributions.

 

You can only accept:

  • mandated employer contributions

downsizer contributions

Member does not meet the work test (or satisfy the work test exemption criteria from 1 July 2019)

Age

2004–05 to 2019–20

2020–21 and 2021–22

2022–23 onwards

Under 55

All contributions can be accepted, except downsizer contributions.

All contributions can be accepted, except downsizer contributions.

All contributions can be accepted, except downsizer contributions.

55 –59 years

All contributions can be accepted, except downsizer contributions.

All contributions can be accepted, except downsizer contributions.

All contributions can be accepted, including downsizer contributions after 1 January 2023.

60–64 years

All contributions can be accepted, except downsizer contributions.

All contributions can be accepted, except downsizer contributions.

All contributions can be accepted

65–66 years

You can only accept:

  • mandated employer contributions
  • downsizer contributions

 

You can only accept:

  • mandated employer contributions
  • downsizer contributions
  • voluntary contributions

 

All contributions can be accepted

67–69 years

You can only accept:

  • mandated employer contributions
  • downsizer contributions

 

You can only accept:

  • mandated employer contributions
  • downsizer contributions

 

All contributions can be accepted

70–74 years

You can only accept:

  • mandated employer contributions
  • downsizer contributions.

 

You can only accept:

  • mandated employer contributions

downsizer contributions

All contributions can be accepted

75 years or older

You can only accept:

  • mandated employer contributions
  • downsizer contributions.

 

You can only accept:

  • mandated employer contributions
  • downsizer contributions.

 

You can only accept:

  • mandated employer contributions
  • downsizer contributions.

 

For members who are 75 years old or older, if the contribution is made more than 28 days after the end of the month in which the member turned 75 years old, the only acceptable contributions are mandated employer contributions and downsizer contributions.

TFN restrictions on contributions

Every member of the fund needs to supply their tax file number (TFN) for super purposes.

If your member has not given you their TFN, you can only accept employer contributions. All other contributions must be returned to the contributor within 30 days unless the member gives you their TFN within that period.

If any of your members haven't supplied their TFN, their contributions will be taxed at a higher rate – see Assessable contributions.

You must ensure that you correctly report member TFNs to us every year, or we may:

  • make you return contributions for the member
  • tax their contributions at a higher rate.

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Fund-capped contributions

The fund-capped contribution limit does not apply for any contributions made from 1 July 2017.

For fund-capped contributions made prior to 1 July 2017, there was a limit on the amount you could accept in any single contribution. A fund-capped contribution was generally the largest contribution amount your fund could accept.

The fund-capped contribution limit applied per contribution, not to the total member contributions to your fund.

If you received a contribution for your member which was more than their fund-capped contribution limit, you must return the excess amount (above the limit) to them within 30 days.

The fund-capped contribution limit, by age of member

Member's age at 1 July

Fund-capped contribution limit

Under 65 years old

Three times the non-concessional contributions cap for that financial year.

Over 65 years old

The non-concessional contributions cap for that financial year.

For example, the fund-capped contribution limits for the 2016–17 financial year were:

  • $180,000 if the member was 65 years old or over on 1 July 2016
  • $540,000 if the member was under 65 years old on 1 July 2016.

When you worked out the fund-capped contribution amount, you should not have included any amount:

  • for which you gave an acknowledgment notice to your member after they had validly notified you that they intended to claim a personal super contribution deduction for the amount
  • that your member gave you a valid election to exclude an amount from their non-concessional contributions because:        
    • they received it as a result of personal injury
    • it qualified for the small business capital gains tax (CGT) concession
  • that related to a directed termination payment
  • where the payment was made by us because it was government contributions such as co-contributions, low income super contributions or low income superannuation tax offset.

Example 1

In the 2016–17 financial year Rosa was 72 years old and made a personal super contribution of $200,000. Rosa's fund checked her member details and determined that her fund-capped limit was $180,000.

Her fund returned the excess part of her contribution ($20,000) to Rosa within 30 days.

After the end of the financial year, Rosa's fund reported personal contributions of $180,000 for her.

End of example

 

Example 2

In the 2016–17 financial year Henry was 55 years old and made a contribution of $575,000. At the same time, he gave a valid notice that he intended to claim $35,000 as a personal super contribution deduction.

Henry's fund checked his member details and determined that his fund's capped limit was $540,000. After deducting the amount covered by the notice, the fund capped contribution amount was $540,000. Therefore the fund did not have to return any amount to Henry.

Henry's fund reported personal contributions of $575,000 for him for the financial year.

Henry's fund also reported an assessable personal contribution of $35,000 for the financial year at Label R2 of its SMSF annual return.

End of example

 

Example 3

Nerissa was 60 years old and made two contributions of $400,000 in the 2015–16 financial year, totalling $800,000 in personal contributions.

Individually, neither one of Nerissa's contributions was greater than her fund-capped contribution amount for the financial year. Therefore, her fund could not return any part of the contributions to her.

The fund must report $800,000 as Nerissa's personal contributions for the year.

End of example

For more information, see:

  • ATO ID 2007/225 Superannuation contributions: acceptance of fund capped contributions by a self-managed superannuation fund
  • ATO ID 2008/90 Superannuation contributions: return of fund capped contributions by self-managed superannuation fund
  • ATO ID 2012/79 Superannuation contributions: the operation of subregulation 7.04(3) of the Superannuation Industry (Supervision) Regulations 1994 in the context of in-specie contributions of listed shares

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QC21807