Tax Office softens its line on excess super breaches

WITH the concessional super contribution limit $25,000 a year for everyone from July 1, there is an increased chance more people will be paying excess super contributions tax.

WITH the concessional super contribution limit $25,000 a year for everyone from July 1, there is an increased chance more people will be paying excess super contributions tax.

Despite the Tax Office having taken an inflexible attitude that maximised the collection of this tax, there has been some recent good news.

The tax-maximising attitude of the Tax Office has been supported by recent statistics. For the three financial years from 2008 to 2010, the Tax Office received 4221 applications for the commissioner to exercise his discretion not to impose the tax. Only 1037 applications were granted.

Despite this abysmal record, the first piece of good news comes from the ATO in the form of the minutes of a meeting of the superannuation consultative committee in March.

The committee is the consultative forum the Tax Office organised to gain input from professional, industry, and business groups about the administration of superannuation.

At the March meeting, the Tax Office outlined a new approach it would be taking when a small breach of the concessional super contributions cap caused a breach of the non-concessional cap. When this occurs, penalty tax of 93 per cent can be imposed on the excess concessional super contribution.

But it did not say what it regarded as a small breach. However, sources believe that this would be excess contributions of up to $5000.

In a surprising move, the Tax Office advised that it would be applying this principle to all future cases and past cases as far back as the 2008 financial year. This would be done by identifying the relevant cases and sending letters and an amended assessment to those individuals.

Anyone who paid the tax and has not yet received a letter from the Tax Office should apply in writing to have the policy applied to their case.

The final piece of good news comes from a surprising win by a taxpayer in a case brought before the Administrative Appeals Tribunal against the Commissioner of Taxation.

The taxpayer had made a super contribution on July 10, 2007, in the belief that it would be classed as a 2007 contribution, but the ATO classed it as a 2008 contribution, causing an excess contribution.

The request by the taxpayer for the commissioner to exercise his discretion and allocate the contribution to the 2007 year was refused. The AAT decided for the first time in favour of a taxpayer with regard to an excess contribution because of the confusion caused for the taxpayer by advice on the ATO's website. It is not known if the ATO will appeal.

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