SMSF Release Authorities: What They Are and How to Manage Them.

An ATO message lands in your SMSF’s inbox. It tells you to pay a set amount from a member’s account to the ATO, and you have 10 business days to pay it and report back.

That’s a release authority. The ATO has reported that about a quarter of SMSFs that receive one don’t respond. This post explains what triggers them and how to handle one.

What is a release authority?

A release authority is a notice from the ATO directing your fund to pay a specified amount from a member’s super to the ATO. It lets a member use super money to settle certain tax obligations. The payment goes to the ATO, not to the Member.

What triggers one?

It starts with the Member, not the fund. The ATO sends the Member a determination or assessment. The Member elects to release money from super. Then the ATO sends the release authority to your fund. The common triggers:

Excess concessional contributions. The Member elects to release up to 85% of the excess. If they don’t elect within 60 days, the ATO can make the election for them.

Excess non-concessional contributions. The Member elects to release the excess and 85% of the associated earnings, or to pay excess non-concessional contributions tax, which can also be paid through a release authority.

Division 293 tax. This is extra tax on concessional contributions for high-income earners. It’s due 21 days after the assessment, and the Member generally has 60 days to elect to pay it from super.

Division 296 tax. The ATO’s SuperStream release authority types already include it, so expect these once assessments for the new tax start.

Release authorities follow ATO assessments, so they can land in the months after returns are lodged.

What do Trustees have to do?

Within 10 business days of a valid release authority, you must do two things:

·         Pay the stated amount to the ATO

·         Return the Release Authority Statement, which confirms the payment

Your fund hasn’t met its obligation until the statement is lodged. If your fund has an ESA, the authority arrives through SuperStream and you respond the same way. If it doesn’t, you get a letter and a paper form. The ATO counts from the date the authority is issued, so don’t let it sit unread.

Where Trustees go wrong

Paying too early. A Member’s letter from the ATO isn’t a release authority. Don’t pay the ATO, or the Member, until the authority itself arrives.

Paying the Member. The money goes to the ATO.

Missing the message. An out-of-date ESA or contact detail means nobody sees it.

Not having the cash. The payment is due in cash within 10 business days. A fund with most of its money in property can get caught.

Skipping the statement. Paying without lodging the statement doesn’t count.

Merging authorities. A Member with more than one authority has more than one task.

Missing the deadline can lead to penalties for the Trustee.

Things to consider

Tell your SMSF Service Provider the day a member receives a Division 293 assessment or an excess contributions letter, before any authority exists

Keep your ESA and ATO contact details current, and know where the fund’s messages arrive.

Check the fund holds enough cash, and which Member account the payment comes from.

Set a reminder for 10 business days from the issue date, not the day you read it

Keep the payment record and the statement confirmation with your permanent records

Got a release authority, or a Member who’s just received a Division 293 or excess contributions letter? Contact Lifetime SMSF on 1300 031 943 or visit lifetimesmsf.com.au. The sooner we talk, the more of the 10 business days you have.