The bill that will allow taxpayers to refund their excess non-concessional contributions remains in the lower house, and it will not pass until at least the Autumn sitting of parliament, AMP SMSF’s head of policy, technical, educational services Peter Burgess told SMSF Adviser.
The industry was hopeful this legislation would pass before the end of this calendar year, Mr Burgess said, with the delayed start date raising several points to consider for SMSF practitioners and their trustee clients.
“One of the implications of that is we may see a delay in the issue of some of these excess determinations, because once this law is passed the commissioner will be able to issue people that exceed their non-concessional cap with a release authority, but they can’t do that until obviously the law is passed,” Mr Burgess said.
The delayed introduction could also cause the associated earnings figure to be larger than would’ve been the case if the legislation was passed this year.
“That’s calculated based on the number of days that the excess amount is in the superannuation environment. One theory is that this delay will mean that the determinations will be delayed and as a result of that the associated earnings figure will perhaps be higher than what it would’ve otherwise been,” Mr Burgess said.
In light of the delayed passage of this legislation, SMSF practitioners should ensure they are not releasing funds now, Mr Burgess noted.
“As the law currently stands, you’re not able to release an excess non-concessional [amount] unless you’ve satisfied conditions of release. So [clients] need to wait for the law to change before they can get these amounts released,” he said.
Mr Burgess also said some changes that were made to the legislation when it was introduced to parliament are “good news” for the SMSF sector.
“When you’re refunding the associated earnings, under the previous draft, 100 per cent of those earnings would be added to your assessable income. Under the … legislation that’s before parliament, only 85 per cent of those associated earnings will actually be added to your assessable income,” Mr Burgess said.
“It’s to take away the double taxation effect which was in the draft.”
In addition, there were some minor changes made to reporting details in the revised version of the bill. Under the draft, where a fund had released an excess amount to the member, they had seven days to report it to the ATO.
Under the revised legislation, this is now 21 days, Mr Burgess said.
Paul, I admire your idealism but the law is perverted on taxation. The Government makes the laws, Courts interpret them but the ATO in effect makes its own laws.
1 The ATO disagrees with Court decisions & issues decision impact statements threatening anyone game enough to it.. 2. Legitimate & legal tax strategies are worthless when the ATO offers an amnesty to taxpayers, daring them to take them on in Court.3.ATO rulings, determinations etc are as an effective deterrent as any law could be. It is rarely economically viable to fight city hall.. In relation to excess contributions, the ATO rejected mistakes by SMSF members as they are also the trustees. They publicly threatened any tax agent, lawyer, adviser with promoter penalties for encouraging any attempt to reject contributions or hold on bare trust. It was in all the newspapers! The ATO reasoning is that ECT is not a penalty it is a tax and taxes cannot be avoided, not on their watch!
Because the Law you refer to deals with one party who is being enriched due to a mistake by another party who gave them money they are not entitled to.
Exceeding a legal limit due to carelessness, negligence or an intention to circumvent such limits is not enrichment. You are not giving the money to the Trustee, they are merely holding it in trust for you. Totally different situation.
We are not totally protected from making mistakes or the consequences. If the law says there is a limit we have to obey the law or suffer the consequences. Using your argument, if I got caught drink driving I could escape penalty if I “mistakenly” miscounted the number of drinks I had. Good luck trying that excuse!
Ralph, youre forgetting the Law of Restitution of Unjust Enrichment. The same law that says you cant keep the money when a bank gives you $1M too much interest, and puts the FBI onto you if you dont give it back.
Isnt this the same as a member mistakenly giving the trustee a mistaken contribution?
If not why not.
Not many people know that we are protected from making mistakes. We are human. As an accountant told me “if i couldnt correct my mistakes then id be out of business” !
What if I put $1000 into a super account online when i was supposed to be paying ‘the plumber’. I realise the mistake straight away. Then what do I do???
The law accepts mistakes happen and we are so protected. So whats gone wrong?
Even the Inspector General of Taxations repopt says its wrong – so did treasury, and alarmingly the ATO agreed.
see
http://www.igt.gov.au/content/…
for an interesting read.
You missed my point Paul. I was referring to the “agreeing not to penalise mistakes” comment.
You cannot just lodge an amendment once the ATO have discovered you put a wrong claim in or did not correctly follow tax law and expect to escape any penalty. Whilst they may have the disretion not to, there are thousands of court cases where the ATO has been able to penalise people for “mistakes”. You lodge a return you are declaring it is correct. Whether the mistake is innocent or not, issues of negligence, deception and carelessness all arise.
Whilst there may not be a specific law about “mistaken contributions” you could always argue that your actions in exceeding the clearly stipulated limits are negligent and therefore a penalty is appropriate.
Alternatively, once a contribution has been received and allocated, a payment must meet a condition of release. I did not know that “whoops I put too much in, can I have it back please?” qualifies.
Ralph there is no law that says the trustee cant return mistaken contributions – even if they are not excess contributions.
The ATO just made up that rule.
Actually as ‘work deductions’ are IT then if you did make a mistake I believe you just put in an amended assessment and there is no penalty – maybe a bit of interest.
Please can you tell me which bit of law preventing mistaken contribution refunds you are refering to ? – I would love to know what it is if it exists
I can’t see the ATO agreeing to not penalise mistakes. Otherwise everybody will “mistakenly” increase their work deductions by 1000% safe in the knowledge that there is no penalty.
The law is the law, you break it, even inadvertently, and there is a penalty.
Mistaken contributions can be withdrawn at anytime.!
This was stated in the Inspector General of Taxation report on ECT (see pdf at igt) and agreed to by the ATO in the report!! ie the ATO agreed it shouldnt penalise mistakes. (Arent they all mistakes?)
In fact ECT should NEVER have been applied to mistakes according to treasury.
Under the Law of Restitution of Unjust Enrichment the Trustee must return Members a mistaken contribution plus its earnings if requested -otherwise the Member can sue the trustee for theft.(same as banks when they give you too much interest)
If people realised this then there wouldnt be a problem.
Im surprised there hasnt been a giant class action!