Excess Contributions Tax — Commissioner’s Discretion

The Tax Office has provided guidance on whether or not the Commissioner will exercise his discretion to disregard excess non-concessional contributions in two specific circumstances.

Example 1: unforeseen inability to claim a tax deduction

The first circumstance relates to a situation where a concessional contribution is made to a superannuation fund and due to an unforeseen inability to claim a tax deduction, the contribution is treated as a non-concessional contribution.

The Tax Office provides an example where an individual makes a concessional contribution to their superannuation fund with the intention of claiming the full amount as a tax deduction under s 290-170 of ITAA 1997. At the same time, the individual makes a non-concessional contribution up to the non-concessional contributions cap.
Following the end of the income year, it is determined the individual does not have adequate taxable income to claim the full amount of the superannuation contribution as a tax deduction. Consequently, the s 290-170 notice is varied and the excess that was unable to be claimed is treated as a non-concessional contribution. The fund cannot refund the excess contribution. As the non-concessional cap has already been reached, the individual is issued an assessment for the excess non-concessional contributions.

Example 2: banking error by non-trustee

The second circumstance relates to a situation where the excess non-concessional contributions arose due to a banking error made by a party other than the trustee of a superannuation fund.

The Tax Office provides an example where a taxpayer gave their financial planner a number of cheques for superannuation contributions in June 2007. Some of the cheques were to be banked immediately (ie in June 2007) and one was to be banked in the following financial year. All the cheques were ultimately paid to the same superannuation fund and none were post-dated. The taxpayer assumed the financial planner would hold the cheque until July 2007 and therefore the contributions would be reflected in the 2007/08 income year.