In March this year, the IGT handed down a report entitled Review into the Australian Taxation Office’s compliance approach to individual taxpayers – superannuation excess contributions tax.
In its report, the IGT recommended that the ATO improve the transparency of its de minimis process and to ensure that taxpayers benefiting from this de minimis approach are aware of their contribution levels and the need to take more care in the future to avoid a breach.
“The ATO has disagreed with this specific recommendation but has indicated more broadly that it is committed to helping taxpayers avoid exceeding the caps inadvertently,” the report stated.
“Moreover, the ATO is of the view that other IGT recommendations in the report, once implemented, should assist to mitigate the risks of inadvertent excess contributions being made.”
Managing director of The SMSF Academy Aaron Dunn previously explained de minimis is a shortened form of a Latin term meaning “the law does not care about very small matters”.
“It is often considered more efficient to waive very small amounts of duties and taxes rather than collect them. For ECT purposes, it appears that the ATO is looking to apply this rule to small amounts that have created sizeable excess contributions tax liabilities.”
Speaking to SMSF Adviser, AMP SMSF’s head of policy, technical and education services, Peter Burgess, said it is unsurprising that the ATO has taken this position in response to the IGT’s recommendation.
“There has been some concern in the past that the ATO hasn’t been consistent when they’ve applied this de minimis rule. And it’s difficult for the industry to know whether they’re being consistent if they don’t know the threshold,” Mr Burgess said.
“But the other side of the story is if they disclose what the threshold is, it will open it up for abuse. So the ATO’s concerns and position is understandable.
“We need to find that middle ground between giving enough information so that the industry understands their approach without disclosing what that de minimis threshold actually is.”
Similarly, Mr Dunn told SMSF Adviser he can see “both sides of the argument”.
“The ATO doesn’t want to provide guidance because it could be used as a tool for people to stretch contribution opportunities, [knowing] they have a ‘get out of jail free’ card to use through de minimis,” Mr Dunn said.
“However, the circumstances in which it may be used would certainly be of assistance to the profession and taxpayers, demonstrating examples where the ATO would consider applying de minimis to a situation.”