Federal Parliament is considering proposed amendments to deal
with the excess contributions tax regime and the unjust outcomes
that can arise from taxpayers making inadvertent errors.
In practice, excess contributions tax assessments have been
triggered by inadvertent errors or circumstances beyond the
taxpayer's control. The Commissioner's narrow reading of
the existing legislative discretion means that taxpayers have often
struggled to get relief once an excess contributions tax assessment
has been issued.
The proposed reforms
The Tax and Superannuation Laws Amendment (2012 Measures No.
1) Bill 2012 gives some individuals the option to have excess
concessional contributions taken out of their superannuation fund
and assessed at their marginal tax rates, rather than incurring the
potentially higher effective rate of excess contributions tax.
The fine print
This measure is only available where:
individuals have excess contributions of $10,000 or less;
there are no excess concessional contributions for an earlier
financial year; and
the excess contributions arose in the 2012 or later income
Once an individual has excess concessional contributions in any
financial year from 2012, the individual will no longer be eligible
for the refund option in any subsequent year. It is a 'once in
a lifetime' opportunity.
Also, if the individual exceeds their concessional contributions
cap in more than one financial year before receiving notification
from the Commissioner, then they will only be eligible for a refund
for the first year.
The refund option does not apply to excess concessional
contributions made before the 2012 income year. However, any excess
concessional contributions for a year prior to the 2012 income year
are disregarded in determining eligibility for refund in later
The notice of the refund offer will be issued in much the same
way as the existing letter the Commissioner sends to individuals
prior to making an excess contributions tax assessment.
While the individual cannot object to the offer, the individual
advise the Commissioner that the contribution amount is
incorrect and discuss with their superannuation provider the need
to have the amount of concessional contributions re-reported;
apply for the Commissioner to exercise his discretion to
disregard or reallocate to another financial year the excess
We have successfully applied to the Commissioner to exercise his
discretion to disregard or reallocate excess concessional
contributions in a number of cases.
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The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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