Superannuation top-up brings on 93% tax
An employer contribution via a superannuation clearing account has resulted in a $69,665 excess superannuation contributions tax liability for a taxpayer, representing an effective tax rate of 93%.
Background
On 27 June 2008, the taxpayer's employer paid a "top-up" superannuation contribution to a clearing account operated by a superannuation fund. The clearing account was opened by the superannuation fund (ColonialFirstState) but was in the name of the employer. Under the terms of the arrangement, the employer contribution of $91,142 was not allocated to the taxpayer's account within the superannuation fund until 23 July 2008 when the employer uploaded a contribution file online.
In May 2009, the taxpayer made a personal contribution of $90,000 to her self managed superannuation fund (SMSF), for which she claimed a deduction, and made non-concessional contributions of $450,000. The Commissioner determined that the taxpayer had exceeded both her concessional and non-concessional contributions caps by $89,314 for the 2009 year. This was based on the $91,142 employer contribution to ColonialFirstState, the $90,000 deductible personal contribution and $8,172 in other employer contributions for the 2009 year. As excess concessional contributions are counted as non-concessional contributions, the taxpayer also exceeded her non-concessional contributions by $89,314 (as she was already at the $450,000 limit under the bring-forward rule).
The Commissioner assessed the taxpayer with excess concessional contributions tax of $28,134 (ie 31.5% of $89,314) and excess non-concessional contributions tax of $41,531 (ie 46.5% of $89,314). This represented an effective tax rate of 78% (ie 31.5% plus 46.5%) plus the 15% contributions tax paid by the fund, ie a total of 93%.
Decision
The AAT upheld the assessment after ruling that the employer contribution to the clearing account was not made "to a complying superannuation plan" in the 2008 year for the purposes of s 292-25(2)(a) of the ITAA 1997. Although the clearing account was opened by the superannuation fund, the AAT ruled that the clearing account was not itself a superannuation fund as it was in the name of the employer. Accordingly, the AAT considered that the payment on 27 June 2008 could not be said to have been "made" in the 2008 year to a complying superannuation fund.
In addition, the AAT agreed with the Commissioner that there were no "special circumstances" to warrant the exercise of his discretion under s 292-465 to reallocate the employer contribution to the 2008 year. The AAT rejected the taxpayer's argument that the 78% tax only arose because of the taxpayer's unusual circumstance. Rather, the AAT said that "special circumstances" need to be found beyond the actual tax rate intended by Parliament, and beyond the specific conditions that gave rise to that rate being imposed.
The AAT dismissed the taxpayer's claim that special circumstances arose from the unfortunate personal situation of the payroll officer, which allegedly resulted in the delay in uploading the contribution file. In any event, the AAT noted that it would be unlikely that a payment on Friday 27 June would be credited to the taxpayer's account by Monday 30 June as the process generally took three to seven business days.
Of critical importance, the AAT noted that a report from the super fund, clearly treating the employer contribution as having been made in the 2009 year, was located in a filing cabinet in the taxpayer's office. The AAT considered that the taxpayer, or someone close to her, knew of the problem with the exact timing of the employer contribution but chose to ignore it when making the further $90,000 personal contribution in May 2009. In this respect, the AAT distinguished this case from the finding of special circumstances in Re Hamad and FCT [2012] AATA 530, where the taxpayer was unaware of the delay by the employer in making the payment.
Re Verschuer and FCT [2013] AATA 12, www.austlii.edu.au/au/cases/cth/AATA/2013/12.html.
