Self-managed superannuation fund (SMSF) trustees need to be mindful of the consequences stemming from refunding contributions made in error to the fund that caused a breach of the contributions caps, according to an expert provider operating in the sector.
"Where clients simply refund contributions they wish they had not made, there are potentially serious consequences," SMSF specialist Heffron said.
"In particular, clients who are not eligible to access their superannuation will have effectively paid out preserved benefits."
The service provider is referring to situations where SMSF trustees can refund contributions that were made as the result of a genuine mistake.
This provision covers situations where a cheque may have been banked into the SMSF account instead of an alternative bank account, or a clerical error has led to an amount greater than the one intended being deposited into the fund.
Heffron pointed out though that the circumstances where a refund could be prepared were limited and advised against challenging the Australian Taxation Office (ATO) on this score.
Particular situations, such as where a contribution is made in the belief it will fall within the caps but subsequently breaches the caps, do not constitute mistakes as defined by the ATO.
