Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 171

SMSFs need vigilance with money in and out

When an SMSF member deposits money into their fund’s bank account, it is treated as the member’s superannuation contribution. When cash is paid from an SMSF’s bank account to a member, the member has received a superannuation benefit. There are, however, legal grey areas where contributions could be made unintentionally and a benefit might not be considered paid when intended.

In Taxation Ruling 2010/1, the ATO states that a ‘contribution’ is anything of value that increases the capital of a superannuation fund, provided by a person whose purpose is to benefit one or more members of the fund or all of the members in general.

It’s a long-winded way of saying that when a member transfers an asset into their SMSF without receiving payment for the asset, that asset should be treated as a contribution. In the same way, if a member pays their SMSF’s expenses without obtaining reimbursement from the fund, the payment could be treated as a contribution as it extinguishes the liability of their SMSF and increases the fund’s capital.

Members need to also be careful when making renovations to properties owned by their SMSF. If the property increases in value as a result of the renovation, it is treated as a contribution and not only the cost of the building materials paid for by the member.

Timing is important

The timing of a contribution is also important as it determines the financial year in which the member can claim it as a tax deduction, as well as whether the member has exceeded their contributions caps in that financial year (under the current rules).

As TR 2010/1 states, the capital of an SMSF is increased when an amount is received, or ownership of an asset is obtained, or the SMSF otherwise obtains the benefit of an amount.

It’s easy to determine that a cash contribution has been made when the SMSF trustee receives the amount. However, when it comes to an asset transfer, a contribution is sometimes made when the SMSF becomes the beneficial owner of the asset rather than the legal owner. Take, for example, a member transferring land to their fund. The relevant transfer form is signed and given to their SMSF trustee on 30 June. The SMSF trustee lodges the form with the State Revenue Office on 15 July and seeks a transfer of title via the Land Title’s Office once duty is paid.

The trustee, by holding a duly executed transfer form and not requiring anything further from the member to perfect its title, possesses everything required to make the transfer of beneficial ownership of the property on 30 June, so a contribution is considered to be made on 30 June. This is provided the SMSF trustee retains sufficient evidence of the relevant transactions and events to identify when the change of beneficial ownership occurred.

Grey areas in benefits

Just as there are some grey areas in super contributions, there are grey areas when paying benefits. An SMSF can, for example, pay a lump sum benefit by transferring an asset to a fund member, whereas an SMSF cannot pay a pension benefit using assets unless the pension is either partially or fully commuted to a lump sum. Not all pensions can be partially commuted – for example, a transition to retirement pension can only be partially commuted if it has an unrestricted non-preserved component. A lump sum super benefit can be paid in any number of instalments, whereas a lump sum death benefit can only be paid in one or two instalments to the deceased’s beneficiaries.

Benefits not permitted via journal entry

While super contributions can be made with journal entries where the member and the SMSF trustee have a present liability or legal obligation to each other and they offset the liabilities against each other using a journal entry in the SMSF’s books, a super benefit cannot be made with a journal entry.

The ATO states in ATOID 2015/23 that a death benefit, for example, must actually be paid to the deceased’s beneficiaries by transfer of cash and/or the ownership of an SMSF’s asset. The payment must reduce a member’s benefit in the SMSF. A transfer to the deceased’s beneficiaries simply by way of journal entries in the books of the SMSF would not satisfy the requirement of the super law that a benefit has been made.

Understanding the basic requirements of what a super contribution is and when a benefit is made can save a member from contravening the superannuation and tax laws. Just remember, a contribution increases the capital of an SMSF while a benefit should reduce it.

 

Monica Rule is an SMSF specialist and author of The Self-Managed Super Handbook – www.monicarule.com.au. This article is general information and does not consider the needs of any individual.

 

RELATED ARTICLES

Meg on SMSFs: Ageing and its financial challenges

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

Navigating SMSF property compliance

banner

Most viewed in recent weeks

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Maybe it’s time to consider taxing the family home

Australia could unlock smarter investment and greater equity by reforming housing tax concessions. Rethinking exemptions on the family home could benefit most Australians, especially renters and owners of modest homes.

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Chinese steel - building a Sydney Harbour Bridge every 10 minutes

China's steel production, equivalent to building one Sydney Harbour Bridge every 10 minutes, has driven Australia's economic growth. With China's slowdown, what does this mean for Australia's economy and investments?

Latest Updates

Economy

Why we should follow Canada and cut migration

An explosion in low-skilled migration to Australia has depressed wages, killed productivity, and cut rental vacancy rates to near decades-lows. It’s time both sides of politics addressed the issue.

Investing

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Property

Australian house price speculators: What were you thinking?

Australian housing’s 50-year boom was driven by falling rates and rising borrowing power — not rent or yield. With those drivers exhausted, future returns must reconcile with economic fundamentals. Are we ready?

Shares

ASX reporting season: Room for optimism

Despite mixed ASX results, the market has shown surprising resilience. With rate cuts ahead and economic conditions improving, investors should look beyond short-term noise and position for a potential cyclical upswing.

Property

A Bunnings play without the hefty price tag

BWT Trust has moved to bring management in house. Meanwhile, many of the properties it leases to Bunnings have been repriced to materially higher rents. This has removed two of the key 'snags' holding back the stock.

Investment strategies

Replacing bank hybrids with something similar

With APRA phasing out bank hybrids from 2027, investors must reassess these complex instruments. A synthetic hybrid strategy may offer similar returns but with greater control and clearer understanding of risks.

Shares

Nvidia's CEO is selling. Here's why Aussie investors should care

The magnitude of founder Jensen Huang’s selldown may seem small, but the signal is hard to ignore. When the person with the clearest insight into the company’s future starts cashing out, it’s worth asking why.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.