A recent Federal Court decision illustrates the need to take care when it is intended to roll-over a superannuation benefit from one superannuation fund to another fund.
In this particular case, the taxpayer received a superannuation benefit from one fund into her bank account which she then immediately drew a bank cheque against to pay into another superannuation fund. The taxpayer claimed that the payment was a superannuation roll-over payment and therefore did not form part of her nonconcessional contributions made to a superannuation fund for the year.
However the Commissioner successfully argued that the payment into the taxpayer’s bank account could not be a superannuation roll-over payment, As a result, the payment to the second superannuation fund out of the taxpayer’s bank account was a contribution to that superannuation fund. Because this payment caused the taxpayer to exceed the non-concessional contribution amount to which she was entitled for the income year, the payment was subject to excess non-concessional contribution tax.
This was because the payment into the taxpayer’s bank account was legally and beneficially that of the taxpayer. The payment from the taxpayer’s bank account to the second superannuation fund therefore failed to satisfy the requirement to be a rollover superannuation benefit because it was not paid from a complying superannuation fund to a complying superannuation fund. It was a payment made by a complying superannuation fund to the taxpayer and then was a payment made by the taxpayer to a complying superannuation fund.
The taxpayer paid a heavy price for getting it wrong. If a payment from a superannuation fund is intended to be a superannuation roll-over payment then the taxpayer should ensure that the payment is made directly from one fund to the other fund rather than through the taxpayer’s own bank account.
Although there is some indication that a payment via a solicitor’s trust account with a direction that the amount be on-paid to a superannuation fund may possibly still satisfy the requirement it would be wise not to take this course but rather the better option is to ensure direct payment is made from one fund to the other fund.