Edited version of administratively binding advice

Authorisation Number: 1011508782640

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Advice

Subject: Administratively binding advice - excess contributions tax

Question

Based on the facts provided, do special circumstances exist and would it be consistent with the object of Division 292 of the Income Tax Assessment Act 1997 (ITAA 1997) to reallocate concessional contributions made during the year ended 30 June 2010 to the year ended 30 June 2009?

Advice

Based on the facts provided special circumstances do exist and it would be consistent with Division 292 of the ITAA 1997 to reallocate part of the concessional contributions made in the year ended 30 June 2010 to the year ended 30 June 2009, where they are more appropriately referable.

Relevant facts and circumstances

This advice is based on the facts stated in the description of the scheme that is set out below. If your circumstances are significantly different from these facts, this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on Tax Office advice.

· Applicant had a salary sacrifice agreement with his employer to sacrifice a proportion of his salary beginning in the year ended 30 June 2009 into his personal superannuation account with a retail superannuation fund.

· Due to an administrative error the salary packaging company, through which the applicant's contributions were to be contributed to his superannuation account, paid his contributions into another person's superannuation account between 1 July 2008 and 30 June 2010.

· The applicant raised his concerns with the salary packaging company during the year ended 30 June 2010 regarding the whereabouts of his salary sacrificed monies, which the retail superannuation fund ultimately located and refunded back to the salary packaging company.

· The salary packaging company subsequently re-contributed the amount refunded to the correct superannuation account during the year ended 30 June 2010, of which a part of the recontribution was appropriately referrable to salary sacrificed contributions made during the year ended 30 June 2009.

Relevant legislative provisions

Income Tax Assessment Act 1997

Subsection 292-465(3)

Division 292

Reasons for decision

The law allows a person to apply to the Commissioner to make a written determination that all or part of an individual's concessional or non-concessional contributions for a financial year are to be disregarded or allocated to another financial year, in making an assessment of the excess contributions tax.

However, this application can only be made after the person has received an excess contributions tax assessment for the financial year. The application is required to be made within 60 days of receiving the excess contributions tax assessment, or such longer period as the Commissioner allows.

Although the Commissioner is unable to consider making the determination prior to as assessment issuing, we are providing administratively binding advice in response to your request. You may wish to request the Commissioner to consider making a determination after you have received an excess contributions tax assessment.

The Commissioner may make a determination if he considers that there are special circumstances, and that making the determination is consistent with the object of Division 292 of the ITAA 1997. The object of Division 292 of the ITAA 1997 is to ensure that the amount of concessionally taxed superannuation benefits that a person receives results from contributions that have been made gradually over a person's lifetime.

The courts have considered what 'special circumstances' mean in many different contexts. It is clear from case law that special circumstances are circumstances which are unusual or out of the ordinary. Whether circumstances are special will vary from case to case however in this context they must make it unjust, unreasonable or inappropriate to impose the liability for excess contributions tax.

In this case, the information provided indicates that the salary packaging company made an administrative error between the 1 July 2008 and 30 June 2010 when they contributed the applicant's salary sacrificed contributions to another person's superannuation account held by the retail superannuation fund.

Upon discovering the error, the applicant instructed the salary packaging company to cease all further payments into superannuation fund until the contributions could be made to the correct account.

Correspondence provided from the salary packaging company and the superannuation fund shows that when the error was discovered and reported to the superannuation fund, the contributions were returned to the salary packaging company who then resubmitted them back to the superannuation fund in the year ended 30 June 2010, to be credited to the correct account on the applicant's behalf.

The total amount resubmitted by the salary packaging company included salary sacrificed contributions in relation to the period from 1 July 2008 to 30 June 2009.

When making a determination the Commissioner may have regard to whether:-

1. a contribution made in one financial year would be more appropriately allocated to a different financial year; and

2. it was reasonably foreseeable when the contribution was made that there would be excess contributions for the financial year and in particular:

· if the contribution was made by another person, the terms of any agreement or arrangement covering the amount or timing of the contribution; and

· the extent to which you had control over the making of the contribution.

Our approach to making this decision is set out in Law Administration Practice Statement PSLA 2008/1.

In accordance with the guidelines in PSLA 2008/1, the Commissioner must consider whether the circumstances in this case are sufficiently unusual or out of the ordinary that make the imposition of the ECT liability unjust, unreasonable or inappropriate.

Furthermore, because the Commissioner can not only determine to disregard any excess contributions, but may also consider allocating contributions to another year, the effect of this reallocation must nevertheless be considered as being appropriate and within the purpose of the law.

The applicant's contentions together with the evidence provided from the salary packaging company and the superannuation fund demonstrate that a portion of the contribution made in the year ended 30 June 2010 are properly referrable to the year ended 30 June 2009. This is because these payments were initially intended to be paid into the superannuation fund during the year ended 30 June 2009, but for the administrative error causing the payments to go to another individuals account.

Conclusion

The facts as outlined therefore support an argument that special circumstances exist and it would be consistent with the object of Division 292 of the ITAA 1997 for the Commissioner to exercise his discretion to allocate part of the concessional contributions made in the year ended 30 June 2010 to the year ended 30 June 2009.

Should the applicant receive an excess contributions tax assessment he should apply to the Commissioner to issue a determination to reallocate the contribution at that time. A copy of this letter should be included with the application.

When the time comes to consider the application, that law as it then exists must be applied to the facts as established at that time.

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