Since superannuation contributions come in several forms, SMSF members would be wise to understand what contributions are available and how they might impact them regarding the contribution limits.
The ATO considers a ‘contribution’ as anything of value that increases the capital of a superannuation fund provided by a person whose purpose is to benefit one or more particular members of the fund or all of the members in general.
SMSF members must keep track of contributions their employer, themselves or others make on their behalf into their self-managed super fund. When deciding whether an event is a contribution, a person’s objective purpose will be considered.
For example, an increase in an SMSF’s capital due to income, profits and gains arising from using the SMSF’s assets is not derived from someone whose purpose is to benefit the members. However, it may still be viewed as a contribution.
Other situations where an SMSF member may not be aware that they have contributed include:
A cash contribution or EFT transfer is made when an amount is received by the SMSF trustee or credited to the relevant SMSF bank account.
How the transfer occurs is relevant to whether the fund’s capital is increased and when a particular contribution is made. An amount set aside but not paid is not a contribution. However, an actual payment or reimbursement for certain expenses incurred by the fund may constitute a contribution.
Members can transfer assets as business real property to their SMSF. These contributions will be subject to contribution cap limits.
Members can transfer shares (in a publicly listed company) to their SMSF. The value of the shares is regarded as a contribution and subject to the contribution cap limits.
Where the capital of the SMSF is increased due to the improvements of the SMSF’s assets e.g. when a fixture is added to an SMSF’s property.
This is where a member pays the SMSF’s expenses, which results in a capital increase. In instances where a member satisfies an SMSF’s loan obligations as a guarantor to a loan, this may constitute a contribution as the guarantor’s payment removes the fund’s liability and therefore increases capital.