SMSFs: How to spot incorrect contributions

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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 trustee(i). 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:

1. 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 non­concessional 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.

2. 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 else­such 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. As a trustee, you are responsible for refunding such contributions no more than 30 days after becoming aware that a troublesome contribution was received by the SMSF.

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.


(i) 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).
© AMP Life Limited. First published October 2019

Cristy Houghton