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How are transfers from reserves to member's balances in a Self Managed Superannuation Fund (SMSF) treated?
Typically when an allocation is made to a members balance it will be treated as a concessional contribution and be attributed towards the concessional contribution cap of that member unless one of the following conditions are met:
1. The amount is allocated in a fair and reasonable manner, and the amount allocated is less than 5% of the value of the member's interest; or
2. The amount is used to discharge a liability of the fund including a pension liability.
Refer Section 292 - 25 (4) of Income Tax Assessment Regulations 1997. The Australian Taxation Office (ATO) have stated that transfers from reserves can be either assessable or non assessable.
Assessable amounts count towards the concessional contribution cap and non - assessable amounts count towards the non concessional contribution cap.