Is an accidental deposit by member into smsf a contribution

 Author: Bruce4Tax(Taxicorn)Taxicorn

6 Dec 2022

The error may not be detected until end of year reconciliation. Surely, if a mistake like this if corrected when known cannot be a breach and/or contribution.

The question is really "why would it not be?"

If fixed the next day, then it would probably be a bank error.

If it is not detected within a few days, then it is a contribution - or maybe a loan from a member. Apart from very limited circumstances, a loan from a member is a breach.

Trustees are responsible for preventing bank errors, or at least fixing them straight away.

Apart from anything, the practice when making a contribution is to notify in writing that one is to be made.

Or confirming at year end.

The error can occur in the other direction, that the smsf transfers a large sum to the wrong trading account. Obviously, the member may not want this to be a pension payment particularly if it is a large amount. Can it be reversed with NO consequences.

Only if picked up in a few days.

I have just done a fund where that kind of error resulted in the fund being wound up. All cash and term deposits were paid into the member's personal bank account - in his view, as part of changing banks. Not fixed immediately, so effect was pensions and LSP. None of the money could be contributed back to the fund because member was well over age 75.

This is serious stuff, so trustees are required to exercise due care.