Edited version of administratively binding advice

Authorisation Number: 1011601118179

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Advice

Subject: Administratively binding advice - excess contributions tax

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 an amount of $D of your non-concessional contributions for the 2009-10 financial year to the 2011-12 financial year for the purposes of excess contributions tax?

No.

This advice applies for the following period:

Year ending 30 June 2010

The scheme commences on:

1 July 2009

Relevant facts and circumstances

Early 2009 you made a personal superannuation contribution of $A to your superannuation fund.

Later in the same month you made a personal superannuation contribution of $B to your superannuation fund.

You received an administratively binding advice (ABA) issued in respect of financial years 2008-09 to 2010-11 advising that the Commissioner considers special circumstances existed and as such reallocate $C of your non-concessional contributions for the 2008-09 financial year to the 2011-12 financial year.

Since the issue of the ABA, you made a personal superannuation contribution of $D to your superannuation fund.

You contend that the same facts apply in relation to the additional $D personal superannuation contributions, as you had a reasonable belief on the basis of our information available on the website that you could still make additional contributions over the next two years which would include non-concessional contributions of $D during each of those two financial years.

You believe that your previous circumstances should still qualify such contributions to be consistent with the object of the legislation.

You contend that had the correct information been given by the Australian Taxation Office (ATO) at the time, you would have contributed less to allow for contributions in subsequent years to qualify for the co-contribution.

You intend to make additional personal superannuation contributions for the next financial year.

Relevant legislative provisions

Income Tax Assessment Act 1997 Division 292

Income Tax Assessment Act 1997 subsection 292-85(3)

Reasons for decision

Summary

Based on the facts provided, special circumstances do not exist and it would not be consistent with the object of Division 292 of the ITAA 1997 to reallocate an amount of $D of your non-concessional contributions contributed in the 2009-10 financial year to the 2011-12 financial year for the purposes of excess contributions tax.

Detailed reasoning

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 before an assessment issuing, we are providing administratively binding advice in response to your request. You may 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' means 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.

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

· a contribution made in one financial year would be more appropriately allocated to a different financial year, and

· it was reasonably foreseeable when the contribution was made that there would be excess contributions for the financial year.

Law Administration Practice Statement PS LA 2008/1 provides guidance on how to exercise the Commissioner's discretion to reallocate or disregard concessional or non-concessional contributions for a financial year.

Paragraphs 22 to 26 of PS LA 2008/1 explain the meaning of special circumstances and specify that special circumstances are unusual circumstances or circumstances which are out of the ordinary. Whether circumstances are special varies from case to case but for the purposes of the excess contributions tax they must make it unjust, unreasonable or inappropriate for a liability for excess contributions tax to be imposed.

Factors that may be considered when deciding whether special circumstances exist include the terms of any agreement or arrangement covering the amount and timing of the contribution and the extent to which the person had control over the making of the contribution.

Financial year ended 30 June 2009

Your non-concessional contributions cap for the 2008-09 financial year was $150,000. In accordance with subsection 292-85(3) of the ITAA 1997, if you were 64 years old or less on 1 July of the financial year, you were able to bring forward the next two years of non-concessional contributions. This meant you were able to contribute up to $450,000 over a three-year period (bring-forward provision).

You have triggered your bring-forward non-concessional contributions cap of $450,000 when you contributed $B. You made this contribution based on the information you read from our website which was misleading. Your total non-concessional contributions for the 2008-09 financial year were $E.

As a result of misleading and incorrect information you have received, on 30 April 2009 we have issued an administratively binding advice (ABA) advising you that special circumstances existed and that we will reallocate the excess of your non-concessional contributions of $C to the financial year ended 30 June 2012. This ABA was based on the information provided at that time, and is valid for the financial years ended 30 June 2009, 2010 and 2011.

Financial year ended 30 June 2010

The bring-forward is automatically triggered when your non-concessional contributions exceed $150,000 in a particular year. Once this happens, the normal non-concessional contributions cap does not apply to the next two years. Instead, your total contributions over the next two years cannot exceed $450,000.

In your case, you have triggered your bring-forward provision in 2008-09 financial year which means that your non-concessional contributions cap for the financial year ended 30 June 2010 is $450,000. You have made $D of personal superannuation contributions in June 2010, as you wanted to obtain superannuation co-contributions.

You contend that the same facts apply in relation to the additional $D personal superannuation contributions, as you had a reasonable belief on the basis of our information available on the website that you could still make additional contributions over the next two years which would include non-concessional contributions of $D during each of those two financial years.

We can reallocate your contributions to another financial year but only if there are special circumstances, and the reallocation is consistent with the object of excess contributions tax in Division 292 of the ITAA 1997.

According to paragraphs 22 to 26 of PS LA 2008/1 special circumstances are factors which are unusual or out of the ordinary and which justify the making of an exception to the general application of the legislation because that operation would be unjust, unreasonable or otherwise inappropriate.

Generally, ignorance of the law would not be regarded as 'special circumstances' unless other factors existed, such as where incorrect advice was provided to the person by the ATO.

The ABA advised you that information on our website, at the time when you made your non-concessional contributions in 2009, was not clear. In the meantime, we have updated our website since then and advised you in the ABA about the correct application of the law.

As a result, you were made aware of the non-concessional contributions cap amount you were entitled to at the time we issued our ABA. Consequently, the special circumstances previously acknowledged in our ABA would no longer exist in relation to any additional non-concessional contributions made further to receipt of our ABA, which includes the $D contribution.

We also consider that the additional contributions you made in June 2010 and the potential excess contributions tax liability is consistent with the object of Division 292 of the ITAA 1997. This is because the breach of your non-concessional contributions cap was not unjust, unreasonable or inappropriate, as you knew about the cap limit and were made aware of it in our previous advice.

In conclusion, based on the facts of your case it is considered that special circumstances do not exist and it would be inconsistent with the object of Division 292 of the ITAA 1997 to reallocate your personal superannuation contribution of $D to the 2011-12 financial year.