Andrea Slattery

The SMSF Professionals’ Association of Association has welcomed the passage in the Senate of the Government’s amendments to the Excess Contributions Tax regime to allow refunding of excess concessional contributions.

SPAA CEO Andrea Slattery says: “We have long championed a refunding solution for excess contributions tax to ensure taxpayers are not treated in a draconian way for accidently breaching their superannuation contribution caps.”

These amendments will allow taxpayers who have exceeded their concessional contribution cap after 1 July 2013 to withdraw the excess contribution from their superannuation fund with the excess contribution being taxed at the taxpayer’s marginal rate, with an additional interest charge levied on the excess.

Unlike the current regime, this measure will not be limited to excesses of less than $10,000 and will not be limited to a once-off refund.

Mrs. Slattery says: “This gives people a genuine chance at rectifying any mistakes they had made with their concessional contributions.

“These new rules strike the right balance between ensuring that taxpayers adhere to the contribution cap while providing adequate penalties for those who breach the concessional contributions cap.”

Although SPAA supports the passage of the legislation, Mrs Slattery adds “that the peak body for SMSFs believes a similar refunding option should apply to excess non-concessional contributions as it is the excess non-concessional contribution breaches that usually attract significant amounts of excess contributions tax. We also believe that the interest rate should not apply retrospectively.

“In some circumstances it can reach a 93% tax rate, and the current remedial options available to members who breach their non-concessional cap are grossly inadequate.”

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“There is no shortage of evidence to show the system is not working.

“In a recent excess contributions tax case in which the Tax Commissioner’s decision was overturned by the Administration Appeals Tribunal (ATT), the ATO claimed they made the correct decision by not exercising discretion, but it was also open for the Tribunal to conclude they should have. 

“It seems we have a system where both a decision to exercise discretion and a decision not to exercise discretion are both right – not a very good system!” 

Burgess also drew attention to a recent AAT decision that affirmed the Commissioner’s decision to impose a 93% tax rate on an excess concessional contribution. 

“A tax system that applies a 93% tax on individuals, who, in the main, have made an innocent mistake, is not system that could be considered remotely fair or equitable. 

“Looking at these recent cases it is not difficult to conclude that the system is not working and changes need to be made.” 

Burgess is not suggesting the ATO or the Tribunal have got it wrong. “It’s the underlying policy that is the problem here and this is what needs to be fixed.” 

The revenue generated by individuals exceeding their limits will not pose an issue for the Government, says Burgess. 

“Since the introduction of excess contributions tax in 2007, $450 million has been collected by the ATO. Reforming the excess contributions tax system will hopefully reduce this tax grab, but overall it would have a little impact on the Government’s budget position. 

“Superannuation is already an election issue and SPAA wants this issue added to the list. We intend to lead the charge and we have already started the process with our Federal budget submission.”

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