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Edited version of administratively binding advice
Authorisation Number: 1011613029867
This edited version of your advice will be published in the public Register of private binding rulings after 28 days from the issue date of the advice. The attached Tax Office advice fact sheet has more information.
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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 your concessional contributions for the 2008-09 financial year to the 2007-08 financial year for the purposes of excess contributions tax?
No. 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 your concessional contributions contributed in the 2008-09 financial year to the 2007-08 financial year for the purposes of excess contributions tax.
This ruling applies for the following periods:
Year ending 30 June 2008
Year ending 30 June 2009
The scheme commences on:
1 July 2007
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.
You are an employee of a Company.
An extract of the Company report shows officers and shareholders of the Company.
You provided a payslip issued for the relevant period.
You also provided an extract of superannuation cash transactions statement paid to your superannuation provider.
The Australian Taxation Office (ATO) requested further information.
Response to this request was received.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 292-465
Income Tax (Transitional Provisions) Act 1997 section 292-20.
Reasons for decision
Summary
Based on the facts provided, special circumstances do not exist in this case and it would not be consistent with the object of Division 292 of the ITAA 1997 to reallocate an amount of your concessional contributions contributed in the 2008-09 financial year to the 2007-08 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 prior to 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.
Superannuation contributions made for or by an individual are subject to annual contributions caps. The cap amount depends on whether the contributions are concessional or non-concessional contributions.
Concessional contributions include, but are not limited to, employer contributions including compulsory super guarantee contributions, additional voluntary contributions your employer may make and salary sacrifice amounts.
The concessional contributions cap for the 2007-08 financial year is $100,000.00 for individuals aged 50 or over.
Section 292-465 of the ITAA 1997 gives the Commissioner the discretion to disregard or allocate to another financial year all or part of a contribution for the purposes of the excess contributions tax.
The Commissioner may make such 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 the division is to ensure that the amount of concessionally taxed superannuation benefits that a person receives, results from contributions that have been gradually made over a persons lifetime.
The courts have considered what 'special circumstances' means in many different contexts. As confirmed by the Explanatory Memorandum (EM) to the Bill which introduced the amendments, 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 decision to issue a determination, the Commissioner may have regard to whether:
· the contribution you made in the 2007-08 financial year would be more appropriately allocated to another year, and
· it was reasonably foreseeable when a contribution was made that you would have an excess contribution for the relevant year, and the extent of your control over the making of the contribution.
Practice Statement Law Administration PS LA 2008/1 provides guidance on what the Commissioner may or may not consider special circumstances.
Paragraph 33 of PS LA 2008/1 states:
… Where the contribution is made for the person by someone else, the terms of any agreement or arrangement covering the amount and timing of the contribution will be relevant in forming this opinion. The EM notes at paragraph 1.119 that the terms of any agreement or arrangement will include an effect salary sacrifice arrangement, workplace agreement or union award. Another factor which may be relevant is the extent to which the person had control over the making of the contribution.
In your application you contended that as shown in the provided tax invoice the employer contributions were paid late as the superannuation entitlements were accrued in May 2008. You then contended that this late payment will cause an inappropriate imposition of excess contributions tax and also trigger your bring forward provisions in the 2008-09 financial year, which is why, you request these contributions to be re-allocated to the 2007-08 financial year.
Given that employers have until 28 days after the end of a quarter to pay their superannuation contributions, it is not uncommon for employer contributions related to the June quarter of a financial year, to be paid in July of the next financial year. A late payment of this nature is not of itself considered a 'special circumstance', unless there are other extenuating factors involved.
We have reviewed the transaction history of your superannuation account and based on this information it appears the relevant employer contributions, were paid into your superannuation account within the regular contribution pattern.
Furthermore, the tax invoice, you provided with your request, makes it apparent these entitlements will be contributed to your fund in the 2008-09 financial year.
Accordingly, we believe that at the time your company made the additional employer contribution in the 2008-09 financial year, it would have been reasonably foreseeable that this contribution, that equalled the allowed contributions cap amount, may cause you to exceed the cap.
As a result, the facts of this case are not sufficiently 'unusual or out of the ordinary' to constitute special circumstances as it is the Commissioner's view that as a director of the Company, you had control over the timing and the amounts of the employer contributions made on your behalf.
For the above reasons it is considered that special circumstances do not exist and it would not be consistent with the object of Division 292 of the ITAA 1997 to disregard or allocate to another financial year, concessional contributions for the 2008-09.
However, should you be issued with an excess contributions tax assessment, if you still believe that your situation does warrant the Commissioner issuing a determination to disregard or reallocate contributions you may apply for the Commissioner to issue a discretion that will be applied to the facts as established at that time.
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 the contributions of $X to the 2007-08 financial year.
Should you receive an excess contributions tax assessment for the 2008-09 financial year you may apply to the Commissioner to issue a determination to reallocate the contribution at that time.
When the time comes to consider your application that law, as it then exist, will be applied to the facts as established at that time.