Unallocated Contributions Account – ATO ID 2012/16

This Interpretative Decision confirms the view that concessional contributions are counted for contribution cap purposes when they are allocated to the member and not when they are received by the trustee.

The ID provides the following example:

A member of an SMSF made a personal contribution of $25,000 on 4 April 2011.  This contribution was immediately allocated by the trustee to the member account of that member.

The member made a further personal contribution of $25,000 on 28 June 2011.  This contribution was applied by the trustee to an “unallocated contributions account” which had been established in accordance with the governing rules of the fund.  The trustee then on 4 July 2011 allocated the amount previously credited to the unallocated contributions account to the member account of that member.

As the member had made $50,000 of super contributions in the 2010/11 financial year, the member will be entitled to claim a deduction for the entire $50,000 (assuming the other conditions for deductibility are satisfied) in the 2010/11 financial year.

For contribution cap purposes, the April contribution is counted in the 2010/11 financial year, as it was allocated by the trustee to the member account of the member during that year.

The June contribution, however, is not counted for the 2010/11 financial year but is counted in the 2011/12 financial year, as it was allocated by the trustee to the member account of the member in July 2011.

The questions which arise from this ID are:

1. Must the entire contribution be allocated to the unallocated contributions account or can a portion be allocated to the unallocated contributions account?  Could the taxpayer have made one contribution of $50,000 in June 2011 with the trustee allocating half immediately to the member’s account and the other half to the unallocated contributions account for subsequent allocation to the member? Response  –  It seems that a single contribution can be partially allocated directly to the member’s account with the balance allocated to an unallocated contributions account.
2. The ID relates to concessional contributions.  Does the principle of the ID relate to non-concessional contributions?  Could the taxpayer make a $600,000 non-concessional contribution in June 2011 with the trustee immediately allocating $150,000 to the member account and $450,000 to the unallocated contributions account for subsequent allocation to the member account? Response – It should.  However, the reasoning of the ID relies on an intention that there is to be no double counting of concessional contributions which is explicitly stated in the Explanatory Memorandum to the Statutory Instrument which introduced Reg 292-25.01.  In respect of non-concessional contributions, there is no corresponding explicit statement in the Explanatory Memorandum to the Statutory Instrument which introduced Reg 292-90.01. There is uncertainty as to whether the principle of the ID apply to non-concessional contributions.  Accordingly, while that uncertainty remains, the better and safer view is that the principle of the ID does not apply to non-concessional contributions.
3. Does the principle of the ID relate to mixed contributions?  Could the taxpayer make a $650,000 contribution in June 2011 with $175,000 allocated immediately to the member account (as $25,000 concessional and $150,000 non-concessional contributions) with $475,000 allocated to the unallocated contributions account for subsequent allocation to the member account? Response  –  while the uncertainty remains as to whether the ID’s principle applies to non-concessional contributions, the better view is that the principle does not apply to mixed contributions.
4. Must there be two unallocated contributions accounts – one for concessional contributions and the other for non-concessional contributions. Response  –  for the reasons set out above, it would be better not to operate an unallocated contributions account for non-concessional contributions.
5. Must there be an unallocated contributions account for each member of the fund or is an unallocated contributions account for the fund sufficient. Response  –  only one unallocated contributions account needs to be established for the fund.
6. What are the consequences if the trustee fails to allocate the contribution within the required period (within 28 days of the end of the month in which the contribution was received)? Response  –  The intuitive response is that the contribution will be counted at the time of receipt by the trustee (as the counting of the contribution at the time it is allocated within the relevant 28 day period is really a concession conditional upon that time period being satisfied).  An alternate argument is that the contribution will still be counted at the time it is allocated as the allocation would constitute an allocation from a reserve and also counted at the time of receipt by the trustee.

The SUPERCentral Governing Rules will be amended to expressly provide for unallocated contributions accounts.