Contribution Cap Breach and the Auditor's Reporting Duty
The Halcyon Super Fund has two members, Wei and Lin, both aged 58. In the 2025-26 year Wei's employer made contributions of $22,000, and Wei personally contributed $15,000 in June 2026, claiming a deduction. Wei also rolled over $200,000 from an industry fund in March 2026. Lin contributed $30,000 as a personal contribution and claimed a deduction. The fund's accountant recorded all contributions as concessional. Wei's total superannuation balance at 30 June 2025 was $1.9 million. The trustee has not obtained a contribution cap assessment. The fund's 2026 financial statements show contributions of $67,000. The auditor is asked to sign the audit report in four weeks.
1. Analyse the contribution cap position and identify the likely breaches.
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Concessional cap. For 2025-26 the concessional cap is $30,000 for members under 75. Wei's concessional contributions appear to be $22,000 employer plus $15,000 personal (if the deduction is valid) = $37,000, which exceeds the cap by $7,000. Lin's $30,000 is at the cap, assuming no employer contributions. The auditor should verify whether Lin had employer contributions not recorded.
Non-concessional cap. Wei's personal contribution may be non-concessional if the deduction is invalid. If it is non-concessional, the non-concessional cap is $120,000 for 2025-26, subject to the member's total superannuation balance. Wei's balance at 30 June 2025 was $1.9 million, which is above the $1.9 million threshold for non-concessional contributions in 2025-26, so Wei's non-concessional cap is nil. Any non-concessional contribution by Wei would be an excess.
Bring-forward. Wei's balance of $1.9 million is at or above the threshold, so the bring-forward is not available.
Rollover. The $200,000 rollover is not a contribution and does not affect the caps, but the auditor should confirm it was a valid rollover and that the fund received the correct documentation.
Financial statements. The $67,000 contributions figure should be disaggregated into concessional and non-concessional, and the auditor should test the classification. If Wei's $15,000 is concessional, the excess is $7,000 and the fund may be liable for excess concessional contributions tax. If it is non-concessional, the excess is $15,000 and the fund may be liable for excess non-concessional contributions tax.
Conclusion. There is a likely breach for Wei. The auditor should obtain the contribution records, the notice of intent to claim a deduction, and the member's total superannuation balance evidence.
2. What are the auditor's reporting obligations and what should the trustee do?
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Auditor's obligations. The auditor should report the contravention to the trustee in writing and consider whether to report to the ATO. Under the SIS Act, the auditor must report certain contraventions to the ATO, including breaches of the contribution caps. The auditor should also consider whether the fund's financial statements are materially misstated because of the excess contributions.
Trustee's obligations. The trustee should assess the excess contributions, determine whether the fund is liable for excess contributions tax, and consider whether to refund or reallocate the excess. The trustee should also consider whether Wei's deduction notice was valid and whether the contribution should be reclassified.
Timing. The auditor has four weeks. The auditor should request the contribution records and the deduction notices immediately, and should not sign the audit report until the matter is resolved or the auditor has sufficient evidence to conclude.
Financial statement impact. The excess contributions may create a liability for the fund. The auditor should consider whether the financial statements need to disclose the contingent liability and whether the trustee needs to adjust the accounts.
Documentation. The file should record the contribution analysis, the trustee's response, the auditor's conclusion, and the reporting decision. The auditor should also document the consideration of the member's total superannuation balance and the validity of the deduction notice.