by Olivia Long

A common breach we see in SMSFs is one where members exceed their contribution caps attracting a higher rate of tax as a penalty.

Investors who want to make large superannuation contributions should exercise extreme care regarding the amount and type of contribution they make to avoid excess contributions penalties. For example, any type of contribution made during the two preceding financial years may impact on the contributions that can be made this financial year.

It is also important to consider when a contribution is deemed to have been made. Where cash or funds are the subject of the transfer, the following table summarises when the contribution will be recorded:

Two key points here are in relation to contributions made via cheque and electronic funds transfer. A cheque deposit is classed as a contribution when the cheque itself is received by the superannuation provider, even if it takes several days for the funds to clear (providing it is promptly banked).

A contribution received via EFT is allocated on the date it is received into the bank account, regardless of when the request to transfer funds was made. As a result, if a clearing house is used by an employer or there is a delay or error with the transfer request, contributions intended for one financial year may be classified in the next year when they appear on the bank statement.

Another form of contribution we often see, and one that is not always fully appreciated, occurs when a super fund expense or liability is paid from a third party bank account. This is deemed to be a contribution because the super fund has benefitted by not making a payment it was otherwise obligated to make.

There are a number of other, albeit less common, situations where contributions are deemed to have occurred, and we urge readers to seek guidance if in doubt.