What is the expected procedure when a SMSF member who thought they could utilise the full $25k cap contributed the full amount + completed the s290-170 documents during the year; but on completion of the fy, found their taxable income wasn’t high enough to use the full deduction amount? Does the SMSF adjust the coding from Concessional to Non-Concessional if the Member provides a Variation document after the end of the Financial year (if it’s provided before the SMSFAR is lodged) - or do they just wait until the ATO pick up the discrepancy between their personal return & the Superfund contribution, & then issue the ENCC notice (as they also have a NCC cap of $0)?
Its too late to do anything for the 2020 year.
For 2021, perhaps consider the bring Forward NCC if available.
Thanks Freman, but their TSB establishes their NCC at $0 - so no b/f is available for them.
The issue I have is about the timing of the classification of the contribution…
The SMSF accepted the contribution based on it being concessional, but now that the client knows they’re not eligible to claim the full amount, does the SMSF re-allocate the contribution to NC for that fy(21) if the client provides a s290-170 variation notice prior to the SMSFAR lodgement, or does it leave it in the Financials as Concessional, extract the 15% tax & wait until the ATO issue their ENCC Notice which will have affect on the SMSF in the next fy22?
If the decision was to vary the CC then you’d be processing ‘adjustment’ (depending on which option is taken on the ENCC notice) in the following year when ATO sends out the instruction to the SMSF.
If Option 1 of the ENCC is selected then an interesting anomaly might be triggered. I can only see 1 Refund of Excess contributions account in SF360. Its entirely possible that SF360 will calc the components based on the members Taxed/Tax Free components. So the NCC excess went in as 100% Tax Free in 2021 and then when released in 2022 it comes out as a spit between Taxed and Tax Fee. Very interesting if SF360 handled it in that way, of course this is me thinking out loud here without any testing to see what SF360 actually would do.