Edited version of administratively binding advice

Authorisation Number: 1011420646510

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.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Advice

Subject: Administratively binding advice - excess contribution tax

Question 1

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 disregard or reallocate an amount of your concessional contributions for the financial year?

Advice

Based on the facts provided special circumstances do exist and it would be consistent with Division 292 of the ITAA 1997 to disregard or reallocate an amount of your concessional contributions for the financial year.

This advice applies for the following period/s:

Year ended 30 June 2010

The arrangement commences on:

1 July 2009

Relevant facts and circumstances

Your date of birth is xx xxx xx

The concessional cap for the the relevant income year for a person aged over 50 is $50,000.00.

You were an employee of your employer.

You received an email from your employer regarding requirements to enable salary sacrifice for the relevant month.

You requested that $xxxx.xx from your salary, be salary sacrificed to your superannuation fund. Your instructions did not detail when the contributions were to be sent to your fund nor did they instruct your employer to ensure that they were received prior to the end of the financial year.

You received a letter from your fund which included your termination statement. On the second last page of the letter, you noticed the total concessional contributions for the income year were listed as $xxxx.xx.

You kept your own record of your concessional contributions for the income year and you were aware of the $50,000.00 contribution cap. Your records showed that the total concessional contributions for the income year should in fact be $xxxx.xx.

You wrote to your employer to enquire about the difference.

Your employer responded to you in their letter and advised you the salary sacrificed contribution of $xxxx.xx was remitted to your fund. Additional to that amount was the employer superannuation guarantee (SG) contributions to the value of $xxxx.xx.

The ATO requested a copy of your member benefits statement for the year which you received. You sent this copy to the ATO.

The statement shows a contribution date for $xxxx.xx and another separate entry for $xxxx.xx. The member benefits statement does not show that the contribution was received by your fund.

The ATO requested a copy of your member benefits statement for the year which you received. You sent this copy to the ATO. We also requested a copy of a letter from your employer regarding your salary sacrifice payment advising what date it was sent to your fund.

You provided a copy of the letter from your employer to the ATO.

The letter from your employer advises the salary sacrifice amount of $xxxx.xx was paid to your fund along with an SG amount of $xxxx.xx.

The member benefits statement for the year ended shows that all contributions are recorded as having been received by the fund on the last day of each month that the salary sacrifice was made.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 292-20.

Income Tax Assessment Act 1997 section 292-25.

Income Tax Assessment Act 1997 section 292-465.

Other references

Practice Statement law Administration (PS LA) 2008/1

Reasons for decision

Summary

Based on the facts provided, special circumstances do exist in this case and it would be consistent with the object of Division 292 of the ITAA 1997 to reallocate or disregard an amount of $xxxx.xx of your concessional contributions contributed in the financial years 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. Please note that the ITAA 1997 has recently been amended to allow applications received on or after 17 November 2010 to be considered prior to an excess contributions tax assessment being issued provided the relevant contributions have been made.

In this case your correspondence was received prior to 17 November 2010 and 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 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.

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

· an amount of your concessional contribution made in the financial year would be more appropriately allocated to a different financial year; and

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

Practice Statement Law Administration PS LA 2008/1 provides guidance to staff 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.

In your letter you state that you were unaware that the salary sacrificed amount was not being forwarded to your fund in the month the salary sacrifice was made. You have provided copies of your fund member benefits statement for the years; all of which indicate that contributions for superannuation were being allocated to your fund for both your salary sacrificed and employer superannuation contributions in the month to which they referred.

The error in not recording the payments made by your employer is a result of the method used by your fund when compiling the annual member benefits statement based on the month in which the salary sacrificed contributions were made by you, however, when reporting to the ATO, your fund show the contributions based on the month of receipt of the contributions.

The payment of the contributions was not within your control and you were not responsible for making the payments personally. You believed that the payments were being made in the month to which they related.

Conclusion

Based on the facts of your case it is considered that special circumstances exist and it would be consistent with the object of Division 292 of the ITAA 1997 to disregard or reallocate an amount of $xxxx.xx, concessional contributions for the year.

Should you receive an excess contribution tax assessment you may apply to the Commissioner to issue a determination to reallocate the contributions at that time. Please include a copy of this letter with your application.

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