Although there have been a significant number of decisions concerning excess contributions tax (ECT) assessments in recent months, the only consistency is inconsistency.
What we all know
ECT is imposed on contributions which exceed a superannuation fund member’s contribution cap in a particular year. Effectively, this can result in a member paying tax at 46.5%, or in some cases at 93%, on the excess contribution. Where a member can establish that “special circumstances” exist, the ATO has the ability to allocate contributions to another year, or disregard contributions. The effect can be to reduce or eliminate the ECT. However, to date, the ATO has been loath to do this.
Recent decisions haven’t delivered a consistent line
Whilst there has been no recent change to the law in this area, there have been several Administrative Appeals Tribunal (AAT) decisions over the last 12 months where members have challenged the ATO’s determination that no special circumstances existed. The hope was that clearer guidance would emerge from these decisions about what constitutes “special circumstances”. However, the reality is that no clear, consistent line has emerged from the decisions. What has emerged is the need for those considering a possible challenge to take advice on whether their circumstances are in line with any cases where fund members have been successful against the ATO.
What does this mean for clients?
Clients who have received an ECT assessment face the dilemma of deciding whether it is worthwhile proceeding down an uncertain path of challenging the assessment, or whether instead to pay the often considerable assessment and moving on.
Free Service
In response to this, McInnes Wilson Lawyers is now offering a free review service. We will review the particular facts giving rise to an ECT assessment to provide an initial indication of whether it resembles any of the decided cases where the taxpayer has been successful. This will then assist you and your client in deciding whether to take the matter further.
Next steps
Anyone wanting to avail themselves of this service should contact us with details of the particular fact pattern surrounding the ECT assessment. From there we will contact you with our initial view – normally by telephone with a follow up email confirming our discussions. You and your clients will then be better informed when deciding how to proceed. And if you decide to proceed, we can assist with further advice, and with the objection or AAT application.
