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Tax deduction process for contributions set for shake-up
The government plans to tighten up the current notice of intent (NOI) process for claiming tax deductions for personal superannuation contributions by integrating a tick box process into income tax returns.
Currently, some individuals receive deductions on their personal superannuation contributions but do not submit a NOI, despite being required to do so, the budget papers explained.
“This results in their superannuation funds not applying the appropriate 15 per cent tax to their contribution. As the contribution has been deducted from the individual’s income, no tax is paid on it at all.”
The government plans to provide the ATO with additional funding to enable it to develop a new compliance model, and to undertake additional compliance and debt collection activities.
“The ATO will modify income tax returns to alert individuals to the NOI requirements with a tick box to confirm they have complied. The ATO will also provide guidance to individuals on how to comply if they have not yet done so,” the budget papers said.
This will ensure that any deductible contributions are appropriately taxed by superannuation funds and enable the ATO to deny deductions to individuals who do not comply with the NOI requirements.
NowInfinity technical director Julie Dolan said the notice of intent process has always been quite loose with individuals only required to fill in a form prior to a certain date to show your notice of intent.
“So now what they're doing, is they're tightening up that process, and they're going to integrate a tick box process into the tax return,” Ms Dolan explained.
“They’re also putting in more money into educating individuals to make sure that they understand what that's all about.”
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
There was some recent discussion that rules relating to Notice of Intent (NOI) were up for Treasury review. This Budget measure seemingly is in support of the current NOI process. The question that remains is what purpose does the Notice of Intent documentation and process serve and could there be a better way?
If collection of the 15% contributions tax and correct tax components backing the super benefit is the driver behind the Government's attention to this, then I do wonder whether there is a better way of reducing the red tape.
For example, could the whole process be more efficient if the member informs the super fund before doing the tax return or moving the contributions out (rollovers, commencement of pension, lump sum) that they wish to claim a tax deduction (so that 15% tax is taken out and contribution reflected as taxable component) and let the ATO simply conduct audit activities under the self-assessment process as we have with many other tax matters. This then reduces at least one requirement (and trap) in the process, getting away with the need to provide Notice of Intent to the super fund0
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