The ATO said that when conducting the fund’s annual audit, approved SMSF auditors need to obtain sufficient and appropriate audit evidence to verify the fund has complied with the downsizer contribution requirements.

“At a minimum, we expect auditors to check for and obtain evidence of the member is aged 65 years or older at the time the contribution was made, a tax file number (TFN) for the member has been provided and the SMSF trust deed to ensure the fund can accept a downsizer contribution,” the ATO said. 

This includes an approved Downsizer contribution into super form (NAT75073) from the member that has been signed and dated. The member is able to use a form provided by the fund; however, to be in the approved form, the ATO noted it must contain a number of key elements which are listed on the ATO website.

Furthermore, the ATO recommended to check if the contribution was made either at the same time or after the form was received by the fund and that the contribution does not exceed the $300,000 cap per member. The member should also not have previously made downsizer contributions to the fund from a previous sale of property and the contribution has been correctly allocated to the member’s account.

“We do not require auditors to check if a member has met any other downsizer eligibility requirements, as they can rely on the member making a correct declaration on the approved form (NAT75073),” the Tax Office said.

“Contributions that do not meet the eligibility criteria as a downsizer contribution may be able to be accepted by the fund as a personal contribution for the member.”

Where the contribution does not satisfy the acceptance rules under regulation 7.04 of the Superannuation Industry (Supervision) Regulations 1994, trustees are required to ensure the contribution is returned by the fund, according to the ATO. The contribution must be returned within 30 days of the fund becoming aware that the amount received did not meet the eligibility criteria (where the SMSF trust deed allows this).

“A contravention of regulation 7.04 occurs where the contribution is not returned within 30 days,” the ATO said.

“The auditor will be required to report the contravention to us via an auditor/actuary contravention report (where the reporting criteria is met), notify the trustees via a management letter, and modify Part B of the SMSF Independent Auditor’s Report (IAR).”