The government has moved to introduce a mechanism to allow taxpayers to withdraw excess non-concessional contributions made after 1 July 2013.
“This is good news as it stops punitive tax outcomes where taxpayers can pay up to 93 per cent on excess non-concessional contributions,” said Jordan George, senior manager, technical and policy, at the SMSF Professionals’ Association of Australia (SPAA).
“We congratulate the government on allowing taxpayers to refund excess non-concessional contributions, removing the overly punitive outcomes.”
Speaking to SMSF Adviser, Mr George said this is a measure SPAA has been advocating, and the association is pleased with the government’s response.
However, he also said the government will need to work through the finer details of the proposal.
“The suggestion to allow taxpayers to withdraw earnings associated with the excess non-concessional contributions is likely to result in complex compliance requirements,” Mr George said.
In its 2014-15 Federal Budget Report, Bendzulla Actuarial said this measure will reduce the significant tax impost of making an inadvertent contribution error.
Perhaps the ATO should revisit those victims of a harsh 93% penalty tax regime. The original rules meant that taxpayers who made inadvertent excess non-concessional contributions were penalised in a manner which greatly exceeded their “crime”.