Where such a contribution is incorrectly classified as an employer contribution, it can be corrected to a personal contribution at a later time. However, the client’s ability to claim a tax deduction for the contribution will, in many cases, no longer be available.

A member who incorrectly classifies a personal contribution as an employer contribution, and also claims a tax deduction for the contribution, risks receiving an excess concessional contributions determination, as the ATO will count the contribution twice.

In an example, Kerrie (age 45) intends to make a $27,500 personal tax-deductible contribution. However, she incorrectly advises her fund that the $27,500 is an employer contribution. Kerrie then claims a $27,500 tax deduction in respect of her contribution in her income tax return.

“In the case of a personal contribution, this is also determined by whether a valid deduction notice has been submitted and acknowledged,” Mr Sanderson said.

“The ATO is likely to count both a $27,500 employer contribution, plus a $27,500 personal tax-deductible contribution, towards her concessional contributions cap. Kerrie is, therefore, likely to receive a determination showing that she has exceeded her concessional cap by $27,500. 

“If a super fund has reported materially incorrect contribution information, it must provide corrected reporting to the ATO upon becoming aware of the error.

The ATO has also made it clear in the past that this requirement applies regardless of how long it has been since the contribution was made, according to Mr Sanderson.

Where Kerrie advises her fund that her $27,500 employer contribution was actually a personal contribution, the fund must correct its ATO reporting to show that Kerrie had made a $27,500 personal contribution for the year in question, and had not made a $27,500 employer contribution.

“Evidence may be required from the client to show that the contribution in question has been incorrectly classified,” he said.

“For example, if a client can show a contribution previously advised to be an employer contribution came from their personal bank account, it is likely that the fund will accept that it could not have been an employer contribution and therefore agree to reclassify it as a personal contribution.

“The reclassifying of an incorrect contribution type can have other implications for the fund and the member’s balance, including refunding the impact of contributions tax that has been deducted from the member’s balance and amending the level of tax-free and taxable component within the member’s balance.”

SMSFs also need to be aware of the impacts on the ability to claim a tax deduction for employer contributions amended to personal contributions.

Mr Sanderson noted clients who have incorrectly classified a personal contribution as an employer contribution generally intended to make a personal tax-deductible contribution.

In order to claim a personal tax deduction for a super contribution, the requirements are that a personal contribution must have been made, the client must have submitted a valid deduction notice (or variation to a previous notice) and had it acknowledged by the fund in writing within required timeframes.

Timeframes include where it occurs earlier, the day the client lodges their tax return for the year of contribution, on 30 June in the financial year following the year of contribution, and when the contribution is rolled out of or withdrawn from the fund (a partial notice may still be provided where a partial rollover or withdrawal occurs).

Furthermore, it also applies when the client makes a super contribution splitting application in respect of the contribution (a partial notice may still be provided where an application is made to only part of a contribution) and when any part of the contribution is used to commence a super income stream (no partial notices can apply in this case).

“Where a contribution the client had previously made is amended from employer to personal, it is important to note that the normal timeframes apply, starting from the date the contribution was originally made,” Mr Sanderson explained.

“This means in many situations, by the time the mistaken contribution type is identified and reporting corrected, it will be too late for the client to submit a valid deduction notice, and they will therefore be unable to claim a tax deduction in respect of the contribution.”