The Commissioner treated the $8,286 amount as a concessional contribution “made” in the 2010 year (rather than the 2009 year). This resulted in excess contributions of $4,954 for the 2010 year and an ECT assessment of $1,560.
Mr Paget objected to the assessment and argued that he was being penalised for something that was within his power to assess but beyond his control to achieve. “I am trying my best to provide for my future to avoid a burden on the state and you are treating me with disdain and I feel like a criminal”, he submitted.
Nonetheless, in upholding the ECT assessment, the AAT held that the concessional contribution on June 30, 2009 was not “made” in the 2009 year as the amount was not “received” by the superannuation fund until 1 July 2009.
The AAT rejected Mr Paget’s argument that the contribution was “made” as soon as his employer had done everything necessary to effect an EFT to his superannuation fund. Instead, the AAT agreed with the Commissioner that contributions by EFT are “made” when they are actually “received” by the superannuation fund and credited to the superannuation fund’s account.
My colleague at Thomson Reuters, senior tax writer Stuart Jones, suggests the timing issue may still be ripe for a challenge beyond the AAT. He believes that, to date, a clear legal authority has not been put forward to support the Tax Commissioner’s view on the timing of contributions in Ruling TR 2010/1. Accordingly, there may be an alternative legal argument to maintain a view that a contribution can be “made” (at law) at a time earlier than receipt by a fund. It will, however, take someone with enough courage (and money) to take the matter further.
The proposed reduction in the concessional contributions cap to $25,000 from July 1, 2012 for taxpayers aged 50 or over has set a trap for more unexpected ECT liabilities due to timing issues for contributions. The message is to not make superannuation contributions too close to June 30.
Taxpayers aged 50 or over need to be especially careful to ensure that contributions intended for 2011-12 are “received” by the superannuation fund before June 30, 2012 (and counted towards the current $50,000 cap) instead of the $25,000 cap that will apply for 2012-13. These taxpayers should also review their salary sacrifice arrangements and transition to retirement pensions ahead of the changes.
Beware those super contributions caps and the timing of contributions! You have been warned!
Terry Hayes is the senior tax writer at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions.
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Terry Hayes is the editor-in-chief of tax news reporting at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions.
