When Is A Contribution Not A Contribution?

For those who are self managing their superannuation, making a contribution into the fund should be a relatively simple exercise of depositing cash in to the fund account, or transferring other assets into the fund. However, nothing in the world of superannuation is ever simple, and knowledge of current Tax Office rulings is a must if the fund is not to be disadvantaged. The timing of the contributions is one crucial area where the fund trustee must take nothing for granted, as the determination of the exact date that the fund receives the contribution actually depends on the type of contribution.

Since the purpose of a superannuation fund is to benefit the members, the motivation of the person making the contribution also becomes a primary consideration. The fund's capital value should increase, thus benefiting a few or all of its members, as a result of the actions of the person making the contribution. When managing DIY Super fund managers need to understand the different ways in which a contribution can be made to a self managed fund.

Where checks are dishonored by the bank, contributions will not be accepted and considered. While the most frequent method of making a contribution is by cash, check or electronic transfer, the timing points are different. In the case of cash, the contribution is made when the trustee physically takes possession of the cash. For electronic transfers, the important date is not when the contributor asks for the funds to be transferred from their account, but when the funds are actually received into the super fund account.

Contributions by check are generally considered to be received when the trustee has taken physical possession of the check. Post dated checks can be accepted as contributions when they can be presented to the bank and when they are honored. Dishonored checks cannot be considered to be a contribution.

Only when ownership to the asset has been legally and formally transferred can a contribution made through asset transfers be considered. The ATO will also accept beneficial ownership, which sometimes happens before legal ownership, as a contribution.

Lesser known examples are that creating a contractual, legal or equitable right in a super fund that didn't previously exist is also a contribution, and also when the value of an asset owned by a super fund is increased. When a liability owed by a super fund is paid or a debt owed by a super fund is forgiven are other examples where, through an SMSF members are able to set aside funds for their retirement, while still keeping within ATO rules and guidelines.

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