subject: When Is A Contribution Not A Contribution? [print this page] Those of us with a vested interest in superannuation funds, and let's face it, this should be most taxpayers, understand generally what a contribution to a super fund is and how such contributions serve to built up assets in the fund over time for the benefit of the members. These contributions are held by the fund and are invested, hopefully to increase in value and provide the members with an income in retirement which gives a better lifestyle than a basic pension. However contributions differ in type and purpose, and it is these differences that determine how the contribution is treated by the ATO.
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.
The fund manager also needs to understand how the timing of these contributions are not all treated the same by the ATO. 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
