Since superannuation contributions come in several forms; SMSF members would be wise to understand what contributions are available and how they might impact them in regards to the contribution limits.

The ATO considers a ‘contribution’ as anything of value that increases the capital of a superannuation fund provided by a person whose purpose is to benefit one or more particular members of the fund or all of the members in general.

SMSF members are required to keep track of contributions their employer, themselves or others make on their behalf into their self-managed super fund.

When deciding whether an event is a contribution,  a person’s objective purpose will be taken into account. For example, an increase in an SMSF’s capital due to income, profit and gains arising from the use of the SMSF’s assets is not derived from someone whose purpose is to benefit the members. However, it may still be viewed as a contribution.

Other situations where a SMSF member may not be aware that they have made a contribution include:

Cash and EFT transfers

A cash contribution or EFT transfer is made when an amount is received by the SMSF trustee or credited to the relevant SMSF bank account.

How the transfer occurs is relevant to whether the fund’s capital is increased and when a particular contribution is made. An amount set aside but not actually paid is not a contribution. However, an actual payment or reimbursement for certain expenses incurred by the fund may constitute as a contribution.

Property transfers

Members can transfer assets in the form of business real property to their SMSF. These contributions will be subject to contribution cap limits.

Share transfers

Members can transfer shares (in a publicly listed company) to their SMSF. The value of the shares is regarded as a contribution and subject to the contribution cap limits.

Improvements to an asset

Where the capital of the SMSF is increased due to the improvements of the SMSF’s assets e.g. when a fixture is added to an SMSF’s property.

Payment of a liability

Where a member pays the SMSF’s expenses, which results in an increase in capital. In instances where a member satisfies an SMSF’s loan obligations as a guarantor to a loan this may constitute as a contribution as the guarantor’s payment removes the fund’s liability and therefore increases capital.