“Although he did not labour the point, [Lynton] also alluded to the fact that his accountant had not cautioned him against exceeding the aggregate contributions cap in the year in question.”
The Tribunal found that while it was “in no doubt” Lynton faced challenging personal circumstances due to his own financial situation and in supporting his children and grandchildren, he had not satisfied the requirements to justify the exercise of the Commissioner’s discretion to disregard the excess non-concessional contribution.
Deepti Paton, tax counsel at the Tax Institute, told SmartCompany the case was not unusual and sadly there were many like it.
“We have noted for a long time the excess contribution rules are too strict and often lead to rulings which are quite harsh,” she says.
“It’s quite obvious from the case that special circumstances is a hurdle that has been interpreted quite highly.”
Paton says it is unclear how relevant Lynton’s claim is that he suffered financial hardship on the basis of a “significantly younger wife”, but “it’s unfortunate the case refers only fleetingly to his professional adviser not alerting him.”
“I can’t help but think that’s an issue that would benefit from greater exposure,” she says.
Paton says there is some relief for taxpayers in the form of an amendment which was brought in on July 1, 2012 which allows first time offenders for amounts of under $10,000 to self-assess a reallocation.
She says this is “certainly a step in the right direction” but more change is needed so the Commissioner can exercise its discretion more broadly.
Paton says while you can’t allow the excess contributions to remain in the concessional superannuation environment for an excessive period of time, there should be leniency where taxpayers realise the mistake in six to 12 months and attempt to rectify it.
“You do have to recognise there are so many factors at play – financial advisers, tax advisers and the super fund – it’s not quite as simple as ‘I did the wrong thing as a taxpayer’,” Paton says.
She says the Australian Taxation Office, the Treasury and the tax profession have to convene and talk about the best way forward.
“We need greater flexibility for taxpayers who have inadvertently exceeded their contribution cap and where they have self-identified the problem and sought to rectify it within a period of time,” Paton says.
