Check your super – now!

Don’t hesitate. Don’t put it off any longer. Do it. Check your super!

Why do I say that? Two reasons:

• To ensure you don’t pay a tax penalty if you make super contributions that exceed the legislated caps; and
• To ensure you check for money you may have in super funds you had forgotten about, before the Federal Government gets its sticky fingers on it!

On the second point, people who move between jobs (or even stay in the same job) can end up with superannuation amounts sitting in separate super fund accounts. They often forget about all those separate accounts or cannot remember where they are. These so-called lost or inactive accounts have attracted the government’s attention.

In the Federal Government’s 2012-13 Mid-Year Economic and Fiscal Outlook (MYEFO), released on October 22, 2012, the Treasurer announced that, from December 31, 2012, the account balance threshold below which inactive superannuation accounts, and accounts of uncontactable super fund members, are required to be transferred to the Tax Office (i.e. to consolidated revenue) will be increased to $2,000 (from the current $200) and the period of inactivity before an account of an unidentifiable fund member is required to be transferred to the ATO will be reduced to 12 months (from the current five years). These changes are now in a Bill before Parliament and are significant.

The monies in question belong to super fund members and it is important that anyone who thinks they may have super in old forgotten accounts should go looking for it. The Tax Office has a service called SuperSeeker which is designed to help people keep track of their super. Use it, or risk losing your lost super to the government – after all, it’s your money in the first place.

Contributing too much to super

The government has deemed it appropriate to set caps or limits on the amount people can contribute to superannuation on a concessionally taxed basis. Many argue that the current $25,000 annual cap for concessional contributions (which include employer contributions and salary sacrifice contributions), regardless of age, is unreasonably low. While the setting of caps is fine in principle, the application of the relevant laws in practice has been, and still is, causing headaches and extra tax bills for some people, when this should not be the case.

Making superannuation contributions that exceed the concessional contributions cap continues to get many people into hot water, with the arrival of the then inevitable excess super contributions tax assessment from the Tax Office. In very many cases, it is strongly arguable that this shouldn’t happen, but the law is being administered in what can only be described as a very narrow fashion.

The law contains “special circumstances” provisions that provide alleviation for the problem, but what constitutes “special circumstances” has been the main point in issue in many cases.

The problem with excess concessional super contributions is not a small one. ATO stats reveal that, as at July 4, 2012, for the 2007-08 to 2010-11 financial years inclusive, the ATO had issued just over 115,000 excess contributions tax assessments for exceeding the annual cap on concessional (tax-deductible) contributions. With that annual cap now at a low $25,000 (regardless of your age), more excess tax assessments must be expected.

And don’t forget that concessional contributions include an employer’s compulsory 9% contributions (or more if an employer pays more than the 9%) plus any contributions made under a salary sacrifice arrangement.

Wins for taxpayers concerning excess super tax are few and far between, but when they happen, they are worth noting.

A recent decision by Administrative Appeals Tribunal (AAT) Senior Member Mason Allen has, however, brought some common sense to the application of these laws.

In that case, Mr Allen found that special circumstances existed in a taxpayer’s situation to allow for the Commissioner’s discretion to reallocate monies paid into a super fund on July 28 and 29, 2009 (that is, in the 2009-10 financial year) back to the 2008-09 financial year. This meant the taxpayer would not exceed the contributions cap.

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