Taxation Determination confirms use of UCAs to manage excess contributions

The practice where contributions received by a super fund in June and immediately allocated to the unallocated contributions account for subsequent allocation to member accounts before 28 July has been confirmed by the ATO in a recently released Determination: TD 2013/22.

The ATO has confirmed that for income tax purposes such contributions will be treated as being deductible and assessable in financial year one but will be reported for contribution cap purposes in respect of financial year two.

For example, if an employer made a $20,000 super contribution in June 2013 to a super fund then the employer would be entitled to claim a tax deduction for the contribution in respect of the 2012/13 financial year and the super fund trustee would include the employer contribution in its assessable income for the 2012/13 financial year.

If the entire $20,000 were immediately allocated by the super fund to an unallocated contributions account and then allocated to the relevant member’s account before 28 July 2013, the $20,000 will be counted for contribution cap purposes in respect of the 2013/14 financial year.   If the contribution was not immediately allocated to the unallocated contribution account when received in June 2013, the contribution would, for contribution cap purposes, be counted in respect of the 2012/13 financial year.