Fund Capped Contributions and Super Funds

Fund Capped ContributionsThe Fund Capped Contribution rules limit the amount that a super fund can accept in a single contribution. Super funds do not have to monitor contributions for excess concessional or non-concessional contributions throughout the year, but they do have to check that each individual contribution is less that the Fund Capped Contribution limit. For example, if a members non-concessional cap was $ 450,000, they could make three contributions during the year of $ 200,000 each, the fund could accept these contributions even though they total an amount over the contributions cap. However if the member made a single contribution of $ 500,000 the fund would not be able to accept all of the contribution – see ATO ID 2007/225.

How much are the Fund Capped Contributions?

The Fund Capped Contributions limit is created by regulation 7.04 of the SIS Regulations, which says that a super fund must not accept contributions which exceed:

  • For a member 64 years old or less on 1 July of the financial year – three times the non-concessional contributions caps (in other words NCC cap with the 3 year bring forward)
  • For a member between 65 and 75 years old on 1 July of the financial year – the non-concessional capacity

Note that the Fund Capped contributions limits apply to the Non-Concessional Contributions, not concessional contributions. Also fund capped contributions aren’t relevant for people 75 years and older as super fund are only able to receive “mandated employer contributions” in respect of them. Therefore the Fund Capped amounts are:

Year Fund Capped – <65 Fund Capped – 65-<75
2013/14 $ 450,000 $ 150,000
2014/15 $ 540,000 $ 180,000

What happens if a contribution exceeds the Fund Capped Contribution limit?

If a super fund receives a single contribution in excess of these amounts that amount must be repaid to the person/entity that made the contribution within “30 days of becoming aware that the amount was received in a manner that is inconsistent with subregulation[s]” – reg 7.04(4)a.

The ATO has also clarified that the super fund is only required to refund that amount of the contribution over the fund-capped limit. For example, if the members NCC cap was $ 450,000 and they made a contribution of $ 460,000 the fund would have to return the $ 10,000 over the fund capped amount, not the full contribution, see ATO ID 2008/90.

Given that the contributions would come from a member, and the duties of the trustees, the ATO appears to take the position that the 30 days start from the date the contribution is made for an SMSF, as opposed to 30 days from the date the members become aware that the contribution exceeded the Fund Capped Contribution limits. Per the ATOs publication Running a Self-managed Super Fund “your fund must return the excess amount within 30 days” .

Like many of these sections in the SISA/R, regulation 7.04 sets out a rule but doesn’t describe what happens if the rule isn’t followed. The ATO is of the view that the contribution must still be returned after the 30 days has passed – ATO ID 2009/29.

Note that reg 7.04 excludes the following contributions and payments from the definition of Fund Capped Contributions:

  • A contribution subject to a “valid and acknowledged notice under section 290-170” – notice of intent to claim
  • Contributions arising from structured settlements or orders for personal injuries ITAA 292.95(1)
  • Contribution relating to some CGT small business concessions ITAA 292-100(9) 
  • A payment of shortfall component from the Commissioner – s65 of the Superannuation Guarantee (Administration) Act 1992
  • An amount transferred by the Commissioner under s61 or s61A of the Small Superannuation Accounts Act 1995
  • A government co-contribution
  • A contribution that is a directed termination payment under s82-10F of the Income Tax (Transitional Provisions) Act 1997

More examples of Fund Capped Contributions can be found on the ATOs website.

 

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2 Replies to “Fund Capped Contributions and Super Funds”

  1. What is the fund capped contribution limit for 2015 for a SMSF member who turns 75 in June 2014. Under Reg 7.04 (1), they have until 28 July 2014 to make a non-concessional contribution. If the contribution is made in 2015 FY prior to 28 July, does the 2014/15 non-concessional contribution limit apply under reg 7.04 (3)?

    1. As a member who is 74 or 75 would not have access to the three-year bring forward their fund-capped contribution limit would be the same as their non-concessional contributions cap. However with the 28 day limit from turning 75 in June that becomes more complicated.

      Per the ATO, generally “contributions are counted towards the caps in the year in which they are received and credited by your super fund”. Also see ATO TD 2013/22 for some situations where this may be different – but largely to do with contribution reserves/suspense accounts.

      Unfortunately there is very little guidance about how other rules interact with the 28 day rule, especially where the member turns 75 during June. For example, how does the Work Test apply? Before implementing such a strategy advice should be sought from professionals specialised in the area, and also the ATO and super fund itself. It isn’t only the many conditions that need to be met that is the issue, but also other parties’ understanding of the rules – given the APRA guidance Superannuation Circular No. I.A.1 (PDF) to large super funds doesn’t mention the 28 day rule for members turning 75 there could be an issue with funds accepting the contribution.

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