While TR 2010/1 covers the mechanics of how to make a personal contribution, difficulty arises when claiming contributions as a tax deduction is not done correctly.

Regardless of the cause, the tax rules are unforgiving if one step of the process is missed because the Commissioner has no discretion in allowing the deduction.

Personal Deductible Contributions

Where members contribute directly and claim a tax deduction in the year the contribution is made, they are considered concessional contributions and taxed in the fund at a rate of 15%.

From 1 July 2024, the concessional contributions cap is $30,000 for all individuals regardless of age.

Other mandatory conditions include:

1. The contribution is to a complying fund
2. A member aged between 67 to 75 must pass the work test
3. The deduction cannot create or increase a tax loss

A member with a total super balance of less than $500,000 on 30 June from the previous financial year can carry forward those concessional contribution amounts from up to the last five (5) financial years, including when they were not a super fund member.

Lodging a Notice of Intent

The most essential aspects of claiming a deductible contribution, apart from contributing itself, are:

1. Ensuring that a valid “Notice of intent to claim or vary a deduction for personal super contributions” (NAT 71121) is made AND
2. Receiving an acknowledgement from the fund

The personal super contributions claimed as a deduction will count towards the member’s concessional contribution cap, as well as the concessional contributions for which a deduction cannot be claimed, such as contributions made by the member’s employer.

Valid Notice of Intent

There are 3 moving parts to ensuring that the notice of intent is valid and accepted by the ATO:

1. Meeting the Conditions

• The member is still a member of the fund
• The fund still holds the contribution
• It does not include all or part of an amount covered by a previous notice
• The member has not commenced a pension using any of the contribution
• The member has not lodged an application to split the contribution for which a deduction is being claimed
• The contributions in the notice of intent have not been released from or recontributed to the fund under the First Home Super Saver amounts.

2. Timing of Notice

Timing of lodging the notice of intent is critical as it must be given to the fund by the earlier of either the:

• Day the member lodges their personal income tax return for the year in which the contributions are made
• End of the income year following the one in which the contributions were made.

3. Acknowledgement of Notice

The fund must send the member a written acknowledgement that a valid notice of intent was received. The member MUST receive the acknowledgement before the deduction is claimed on their personal tax return.

ATO Reminder

The ATO has been vigilant in issuing reminders to taxpayers on how to claim deductible contributions and has noted that the timing of lodging the notice of intent is critical.

While a notice of intent can be varied, including down to nil, it cannot be revoked or withdrawn. Any downward variation must be made before the member lodges their tax return, but where the amount is increased, the member must lodge a second notice of intent with the fund.

If the amount claimed results in a personal tax loss, the ATO will disallow the deduction, which will count towards the member’s non-concessional contribution caps.

ATO Private Binding Ruling

In this ATO private binding ruling 1052284933968 (“PBR”), the taxpayer paid contributions to their SMSF over a 3-year period. A notice of intent was signed each year, and in the last 2 years, the accountant was unwell, leading to a major health incident.

The accountant met with his client and assured him the notice of intent would be lodged and sent to his super fund. However, the accountant was not fit to look after the client’s affairs due to his extremely slow recovery.

Unfortunately, the accountant did not lodge the notice of intent for years 2 or 3, and the ATO refused to allow the taxpayer to claim the deduction. As a result, the contributions during those years were treated as non-concessional contributions.

The ATO ignored the accountant’s health issues and referred the taxpayer back to s290-150 Income Tax Assessment Act 1997 of the Tax Act regarding the timing of lodging the notice of intent.

The ATO recognised that the taxpayer, not the accountant, failed to provide a valid notice of intent.

Where the timing of the lodgement and the conditions are not satisfied, the Commissioner has no discretion to allow the deduction because all of the conditions must be satisfied.

As can be seen, the legislation provides no wriggle room for delay, with the taxpayer being entirely responsible for the timing.

Conclusion

SMSF professionals must understand the necessity of meeting the lodging conditions for a notice of intent. Failure to do so means the Commissioner cannot permit the deduction.

Although the taxpayer holds ultimate responsibility, there could be future litigation if an advisor commits to lodgment activity but fails to fulfil this promise.

SMSF professionals can avoid complications by ensuring that all requirements are meticulously met to safeguard their clients’ entitlements to deductible contributions.

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