SMSF Alert: March 2013

Rumours of potential changes to superannuation law are back in circulation, just over a month since ‘taxing the over 60s’ was knocked on the head. Super surcharges on the ‘wealthy’ – except, of course, the politicians – are apparently the chief contender for plugging budget holes.

But let’s wait and see what the May budget announcement brings. Simon Crean – off the leash and talking his mind – may yet make the Government think again, although a tightening of super concessions is only a question of time.

March was an exciting month in politics, but a very quiet month in actual super developments. Let’s take a quick look.

Tribunal decisions

The Administrative Appeals Tribunal (AAT) handed down two decisions late last  month on whether the Tax Office should exercise its discretion to disregard excessive non-concessional contributions and save the taxpayer from an excess contributions tax liability.

In both cases the taxpayer made personal contributions over and above the non-concessional contribution cap and argued that they had intended to claim a tax deduction for the excess (which would have made the contributions ‘concessional’ rather than non-concessional). However, in each case, the required notice, setting out the amount they would be claiming as a tax deduction, was not received by their super fund .

Without the notice, the amounts remained as non-concessional contributions, in excess of the cap, and excess contributions tax was levied by the Tax Office.

The AAT upheld the tax bill in each case, pointing out that the Tax Office’s discretion exists to alleviate ‘special and unusual circumstances’, not to rectify mistakes. This is the case even where the taxpayer is ignorant of the law or receives incorrect advice.

Action point: If you are making a mixture of concessional and non-concessional contributions take extra care to make sure the deductible (concessional) component is properly documented. Ending up with this component as a non-concessional contribution can have adverse consequences, including breach of the annual cap and accidental triggering of the ‘bring forward rule’ (which can lead to future cap breaches).

Other recent developments

Members may also have an interest in the following:

1. Changes to super for super funds, including self-managed super funds. The ATO has updated its website, summarising recent super law changes including those that apply to SMSFs.

Note:  Jointly authored by Richard Livingston and Ruth Stringer.