Excess super contributions: Commissioner’s discretion refused
The AAT has recently heard several cases concerning the Commissioner’s discretion to reallocate excess superannuation contributions received by superannuation funds to an earlier financial year. We examine these decisions below.
Kuyper decision
In this decision, the AAT denied a taxpayer’s request that the Commissioner reallocate concessional contributions received by his superannuation fund in July 2009 to the 2008–2009 financial year because it found that no “special circumstances” existed to warrant the Commissioner’s discretion under s 292-465 of the ITAA 1997.
The AAT heard that the taxpayer had arranged with his employer for part of his salary to be paid by way of monthly salary-sacrificed superannuation contributions into his fund and that he managed the amount of those contributions. In 2009–2010, contributions made to the fund totalled $52,196. The excess contributions of $2,195.96 arose as a result of a contribution of $2,508 made on 8 July 2009 by way of salary sacrifice. The Commissioner assessed excess contributions tax (ECT) of $692.
The taxpayer argued that “special circumstances” existed to support his contention that the excess contributions should be reallocated to the 2008–2009 year. The taxpayer was of the opinion that he had ensured that his contributions stayed below the cap by around $700 and that if any other contributions had been made, they were made outside of his control. The taxpayer also asserted that it was reasonable for him to rely on the employer to make payments on or prior to year-end.
The AAT said a late contribution by an employer following year-end is not in itself something “out of the ordinary”. Further, the AAT was not persuaded, on the basis of past contribution practices, that the taxpayer was entitled to assume that the final contribution for 2008–2009 would be made on or before 30 June 2009. Rather, the AAT was of the view that it was “reasonably foreseeable” that, in the circumstances, a payment would be made in July 2009 that would count towards to the 2009–2010 year. Accordingly, the Commissioner’s decision was affirmed.
Re Kuyper and FCT [2012] AATA 282, www.austlii.edu.au/au/cases/cth/AATA/2012/282.html
Rawson decision
In this decision, the AAT upheld an ECT assessment and affirmed the Commissioner’s decision that there were no “special circumstances” under s 292-465 of the ITAA 1997 to warrant the reallocation of an excess contribution received late via BPAY.
On 29 June 2009, a concessional contribution of $97,127 was initiated by the taxpayer’s employer (also her husband) via BPAY to the taxpayer’s superannuation fund. However, the BPAY payment was not received into the superannuation fund’s bank account until 1 July 2009. The Commissioner treated the $97,127 as a concessional contribution “made” in the 2009–2010 year (instead of the 2008–2009 year) and issued the taxpayer with an ECT assessment of $30,595.
The AAT found that the concessional contribution initiated by BPAY on 29 June 2009 was not “made” in the 2008–2009 year pursuant to s 292-25(2)(a) of the ITAA 1997 because the amount was not “received” by the superannuation fund until 1 July 2009 (ie in the 2009–2010 year). The AAT agreed with the view that contributions by electronic funds transfer (EFT) are “made” when they are actually “received” by the superannuation fund and credited to the fund’s account.
In addition, the AAT affirmed the Commissioner’s decision that there were no “special circumstances” under s 292-465(3)(a) to justify a determination to reallocate the excess contributions to the 2008–2009 year. The mere fact that a transfer of funds initiated on the last business day of the financial year was not credited to the superannuation fund until the following business day is not in any way “unusual or out of the ordinary”, the AAT said, especially given that it was made after the BPAY cut-off time on 29 June.
Re Rawson and FCT [2012] AATA 322, www.austlii.edu.au/au/cases/cth/AATA/2012/322.html
Paget decision
In this decision, the AAT upheld an ECT assessment after finding there were no “special circumstances” under s 292-465 of the ITAA 1997 to reallocate an excess contribution made via an EFT.
In late June 2009, the taxpayer requested that his employer bring forward a superannuation contribution that would ordinarily have been paid in July 2009. On 30 June 2009, his employer initiated an EFT of $8,286 to the taxpayer’s superannuation fund. However, the contribution was not received into the superannuation fund’s bank account until 1 July 2009. The Commissioner treated the $8,286 amount as a concessional contribution “made” in the 2009–2010 year. This resulted in excess contributions of $4,954 for the 2009–2010 year and an ECT assessment of $1,560.
The AAT found that the concessional contribution on 30 June 2009 was not “made” in the 2008–2009 year pursuant to s 292-25(2)(a) of the ITAA 1997 as the amount was not “received” by the superannuation fund until 1 July 2009. The AAT rejected the taxpayer’s argument that the contribution was “made” as soon as his employer had done everything necessary to effect an EFT to his superannuation fund. Instead, the AAT agreed with the Commissioner that contributions by EFT are “made” when they are actually “received” by the superannuation fund and credited to the fund’s account. In doing so, the AAT essentially followed its reasoning from Re Rawson and FCT [2012] AATA 322 (see above).
The AAT also found there were no “special circumstances” under s 292-465 to justify a determination to reallocate the excess contributions to the 2008–2009 year. The AAT considered there was nothing “unusual or different” about the taxpayer’s circumstances to take them out of the ordinary course, or that produced a result that was “unreasonable, unfair, inappropriate or unjust”. The AAT said it was normal banking practice for an EFT not to be credited to the receiving bank until the next business day. Consequently, the AAT said it was not unusual, exceptional or uncommon that the relevant contribution was not received by the fund until 1 July 2009.
Re Paget and FCT [2012] AATA 334, www.austlii.edu.au/au/cases/cth/AATA/2012/334.html
Bornstein decision
In this decision, the AAT set aside the Commissioner’s objection decision and decided that a superannuation contribution made by a taxpayer to his superannuation fund on 10 July 2007 should be attributed to the 2006–2007 financial year. The AAT found that the taxpayer had missed the deadline as a result of a “misunderstanding” of the rules.
The taxpayer was employed by a company of which he was also the sole director and shareholder. The taxpayer visited an ATO webpage that pointed out that an employer could make superannuation contributions in respect of an employee up until 28 July and still have those amounts credited to the quarter ending the previous June (for superannuation guarantee purposes). Based on that information, the taxpayer assumed he was able to make superannuation contributions up until 28 July without any adverse consequences. The taxpayer was not aware that there was also effectively a 30 June deadline for concessional contributions for employees in terms of their contributions cap. The taxpayer exceeded the cap when he made a contribution on 26 June 2008.
The AAT was satisfied that there were “special circumstances” in this case. The AAT took note of the taxpayer’s attempts to secure advice from his accountant before the 30 June deadline, the apparent “ambiguity” of the ATO webpage (although the AAT noted that the webpage was not actually misleading in relation to the employer’s position) and the fact that the taxpayer was not afforded an opportunity to avoid compounding the error “because the Commissioner did not alert him to the true position” before he made a further contribution in June 2008. The AAT also observed the taxpayer’s behaviour in making regular contributions to super, which it found was consistent with the object of Div 292.
The AAT concluded that the taxpayer had satisfied both limbs of the test in s 292-465(3) of the ITAA 1997 to enliven the Commissioner’s discretion to reallocate the 10 July contribution to the previous financial year.
Re Bornstein and FCT [2012] AATA 424, www.austlii.edu.au/au/cases/cth/AATA/2012/424.html
