As many individuals start to turn their minds toward meeting their tax time obligations, a recently published Administrative Appeals Tribunal (AAT) case highlights the strict application of the Notice of Intent (NOI) requirements when claiming a tax deduction for personal superannuation contributions – and the importance of ensuring that all the steps in the process are precisely navigated.

In Nicholls and Commissioner of Taxation (Taxation) [2023] AATA 2772, it was also made abundantly clear that the ATO has no discretion where the NOI requirements are not properly met.

In this case, while the member had made a personal superannuation contribution and lodged an NOI with the relevant super fund within the required timeframes, the deduction that the member was seeking to claim was denied by the ATO.

Unfortunately, the NOI that the member had lodged with the fund was declared to be invalid as it sought to claim a tax deduction for an amount greater than the amount the member had contributed at that time.
While the member claimed that they had lodged a subsequent NOI, after being notified by the fund of the initial oversight, the super fund trustee claimed to have never received the subsequent NOI.

In the mistaken belief that this subsequently lodged NOI would be sufficient, the member proceeded to lodge their personal income tax return – without first waiting for an Acknowledgement from the fund that the member’s NOI had been received (which of course is another of the key eligibility requirements).

Further, the ATO claimed not to have any available discretion to overlook the member’s failings in this instance, and the AAT agreed – resulting in the tax deduction being disallowed.

While not addressed in this AAT case, it’s also important to acknowledge that personal super contributions are, in effect, counted toward a member’s Non-concessional contribution cap until such time as they are properly and successfully claimed as a tax deduction by the member – at which point they will be counted as concessional contributions.

Another potential stumbling block arises following the relatively recent removal of the work test from the contribution acceptance rules. That is, member’s aged 67 to 75, who intend to claim a tax deduction for personal super contributions will need to remain vigilant when it comes to meeting the work test. A failure to meet the work test by members in this cohort will result in their claim for a tax deduction being denied – without impacting the fund’s ability to accept the contribution.

As such, in addition to the disallowance of a tax deduction, failure to properly follow the NOI process and/or a failure to properly claim the personal contribution as a tax deduction may result in that contribution being assessed against the member’s non-concessional contribution (NCC) cap, which in turn may lead to an excess NCC determination being issued by the ATO – and potential further tax implications.

If you need help navigating through the myriad of contribution-related stumbling blocks this tax time, we recommend seeking the help of an accredited SMSF Association Specialist.

Find an independently endorsed SMSF Specialist in your area using the interactive ‘Find a Specialist’ function. Listed professionals are a trusted source of information and advice for anyone managing their own super, as they have gone through rigorous and independent accreditation.