A taxpayer who withdrew and re-deposited his superannuation has been hit with excess contributions tax of $31,620 after the AAT agreed with the Commissioner that there were no “special circumstances” to disregard the excess contributions under s 292-465 of the ITAA 1997.
In January 2009, the taxpayer withdrew $366,573 from his superannuation fund and placed it in bank term deposits to avoid any further losses amid the global financial crisis. When the term deposits matured, and he thought it was safe, he re-deposited a total of $218,000 with his former super fund. As the taxpayer was over age 65 (and not entitled to the $450,000 cap under the “bring forward” rule), it followed that the he had exceeded his non-concessional contributions cap of id=”mce_marker”50,000 for 2009-10. The taxpayer argued that the Commissioner should exercise the discretion under s 292-465 to disregard the excess contributions as the imposition of the tax was “unfair” and he had not obtained any tax advantage by re-depositing the money.
The AAT upheld the Commissioner’s decision not to exercise the discretion after ruling that the taxpayer’s situation did not constitute “special circumstances” as required by s 292-465(3). While the taxpayer had made an unfortunate error with an unintended outcome, the AAT ruled that there was nothing “unique” or “special” which sets it apart from other taxpayers who have similar breaches. As the taxpayer did not seek professional advice to ascertain the consequences of re-depositing the money, the AAT said that any attribution of error or mistake was, regrettably, his alone.
(AAT Case [2013] AATA 311, Re McLennan and FCT, AAT, Ref No: 2013/0197, Levy SM, 16 May 2013.)
[LTN 95, 20/5/13]
Section 292-465 of the Income Tax Assessment Act 1997
Commissioner’s discretion to disregard contributions etc. in relation to a financial year
(1) If you make an application in accordance with subsection (2), the Commissioner may make a written determination that, for the purposes of this Division:
(a) all or part of your * concessional contributions for a * financial year is to be disregarded, or allocated instead for the purposes of another financial year specified in the determination; and
(b) all or part of your * non-concessional contributions for a financial year is to be disregarded, or allocated instead for the purposes of another financial year specified in the determination.
(2) You may apply to the Commissioner in the * approved form for a determination under subsection (1). The application can only be made:
(a) after all of the contributions sought to be disregarded or reallocated have been made; and
(b) if you receive an * excess contributions tax assessment for the * financial year–before the end of:
(i) the period of 60 days starting on the day you receive the assessment; or
(ii) if the Commissioner allows a longer period–that longer period.
(3) The Commissioner may make the determination only if he or she considers that:
(a) there are special circumstances; and
(b) making the determination is consistent with the object of this Division.
(4) In making the determination the Commissioner may have regard to the matters in subsections (5) and (6) and any other relevant matters.
(5) The Commissioner may have regard to whether a contribution made in the relevant * financial year would more appropriately be allocated towards another financial year instead.
(6) The Commissioner may have regard to whether it was reasonably foreseeable, when a relevant contribution was made, that you would have * excess concessional contributions or * excess non-concessional contributions for the relevant * financial year, and in particular:
(a) if the relevant contribution is made in respect of you by another person–the terms of any agreement or arrangement between you and that person as to the amount and timing of the contribution; and
(b) the extent to which you had control over the making of the contribution.
(7) The Commissioner must give you a copy of the determination.
(8) A determination under this section may be included in a notice of assessment.
Review of determinations
(9) To avoid doubt:
(a) you may object under section 292- 245 against an * excess contributions tax assessment made in relation to you on the ground that you are dissatisfied with a determination that you applied for under this section; and
(b) for the purposes of paragraph (e) of Schedule 1 to the Administrative Decisions (Judicial Review) Act 1977 , the making of a determination under this section is a decision forming part of the process of making an assessment of tax under this Act.