Excess super contributions tax: “Perfect storm” gives taxpayer a win

The superannuation contributions limits continue to pose problems for some taxpayers. Cases involving taxpayers making excess superannuation contributions continue to come before the courts and tribunals.

The new rules giving a once-only opportunity to have up to $10,000 in excess contributions refunded might now be in play, but that hasn’t stopped cases that pre-date those rules being litigated.

One might be forgiven for suggesting that the excess super contributions tax system does not seem to be working properly – unless you consider the imposition of thousands of dollars in penalties means a properly working system. The people being caught are often the innocent victims of laws that are too draconian.

In a recent case however, a taxpayer had what is a rare win. The Administrative Appeals Tribunal (AAT) decided that the Tax Commissioner’s discretion should be exercised so that a superannuation contribution made by a taxpayer to his super fund on July 10, 2007 should be attributed to the previous year i.e. the 2006-07 financial year. While it is often stated that ignorance of the law is no excuse, the AAT accepted that the taxpayer had missed the deadline as a result of a “misunderstanding” of the rules.

The taxpayer was employed by a company of which he was also the sole director and shareholder. He travelled overseas between June 21 and July 8, 2007. He had emailed his accountant to check whether he needed to make a superannuation payment before June 30. However, there was no record of a response, though the AAT understood the taxpayer was “given an impression” that he had a period of grace in which to make payments which would be backdated.

The taxpayer visited an ATO webpage (titled “Superannuation guarantee – a guide for employers”) which pointed out that an employer could make super contributions in respect of an employee up until July 28 and still have those amounts credited to the quarter ending the previous June.

The webpage does not refer to the consequences for an employee when contributions are made after the end of the financial year under the excess contributions regime, but based on the information the director saw, he assumed he was able to make super contributions up until July 28 without any adverse consequences.