Edited version of administratively binding advice

Authorisation Number: 1011958125220

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Advice

Subject: Superannuation Contributions

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 a contribution made in the 2011-12 financial year to the 2010-11 financial year?

Answer: 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 a concessional contribution made in the 2011-12 financial year to the 2010-11 financial year.

This advice applies for the following period:

1 July 2010 to 30 June 2012.

Relevant facts and circumstances

Your 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 ATO advice.

You will be aged over 60 years in the 2010-11 and 2011-12 financial years.

The concessional contributions cap applicable to you for the 2010-11 and 2011-12 financial years is $50,000.

You wrote to the ATO to request that a contribution which is yet to be made in the 2011-12 financial year be allocated to the 2010-11 financial year because you had made a contribution in the 2010-11 financial year but the cheque was dishonoured and you wish to issue a replacement cheque for this contribution.

Relevant legislative provisions

Income Tax Assessment Act 1997 Division 290

Income Tax Assessment Act 1997 Division 292

Income Tax Assessment Act 1997 section 292-465

Reasons for decision

Summary

Based on the facts provided, the Commissioner considers that a contribution made in the 2011-12 financial year in replacement of a contribution made in the 2010-11 financial year which was dishonoured, does not constitute special circumstances which are sufficiently unusual or out of the ordinary for the Commissioner to disregard or allocate the concessional contribution to another financial year.

Detailed reasoning

The ITAA 1997 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.

However, this application can only be made after the relevant contributions sought to be disregarded or reallocated have been made. We are therefore providing you with 'Administratively binding advice' on whether there are special circumstances under which the Commissioner may consider making a determination to disregard or allocate all or part of your concessional contributions to another financial year.

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:

· a contribution made in one financial year should be more appropriately allocated to a different financial year;

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

· the extent to which the person had control over the making of the contributions; and

· any other relevant matters.

By definition, most circumstances are not 'special circumstances'. Australia's courts have made it clear that 'special circumstances' are limited to circumstances that make a case different from the ordinary or usual case. Circumstances are only special if the ordinary application of the law would provide a result that is manifestly unjust, unfair or otherwise inappropriate. We must apply the same approach as adopted by the courts when we make our decisions.

Law Administration Practice Statement PS LA 2008/1 The Commissioner's discretion to disregard or reallocate concessional and non-concessional contributions for a financial year provides guidance to ATO staff in the exercise of the Commissioner's discretion contained in section 292-465 of the ITAA 1997.

The decision in McMennemin & Anor v. FC of T [2010] AATA 573 outlines previous authorities on the meaning of 'special circumstances' and goes on to state that the tribunal's decision is consistent with the Commissioner's explanation of special circumstances in PS LA 2008/1.

Paragraphs 23 to 26 of PS LA 2008/1 explains the meaning of special circumstances and specifies that special circumstances are unusual circumstances or circumstances which are out of the ordinary. Whether circumstances are special vary from case to case but for the purposes of excess contributions tax they must make it unjust, unreasonable or inappropriate for a liability for excess contributions tax to be imposed.

When is a contribution made?

Taxation Ruling TR 2010/1 Income tax: superannuation contributions (TR 2010/1), is a tax ruling that covers a range of topics as to what constitutes a "contribution" to a superannuation fund. In essence TR 2010/1 defines a contribution as anything of value that increases the capital of a superannuation fund where the contributor's purpose was to benefit one, some or all of the members.

As a general rule, contributions will be made when the funds are received by the trustee of the superannuation fund.

Paragraphs 154 and 188 of TR 2010/1 explain when a contribution is made if it has been made by cheque. The ruling goes on to say that a contribution made by cheque is made when the cheque is received by the trustee of the fund. However, if the capital of the fund is to be increased, there must be an actual transfer of funds to the superannuation provider. No payment will be made if the cheque is not honoured.

Special circumstances

In this case you have requested that a contribution, which is yet to be made, in the 2011-12 financial year be reallocated to the 2010-11 financial year. You have stated that you made a contribution before 30 June 2011 which was receipted by your fund before 30 June 2011 and subsequently dishonoured after 30 June 2011. You have advised you would like to issue a replacement cheque for this contribution and have it recorded as being received in the 2010-11 financial year even though the replacement cheque will be paid to the superannuation fund in the 2011-12 financial year.

As explained above if a superannuation contribution cheque is dishonoured no contribution has been made. There are no provisions in the legislation to allow for a backdating of superannuation contributions.

A superannuation contribution made by a cheque that is subsequently dishonoured is not of itself sufficiently unusual or out of the ordinary to be considered as a special circumstance. No other information has been provided that constitutes a special circumstance and therefore, 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 allocate superannuation contributions made in the 2011-12 financial year to the 2010-11 financial year.

However, should you make the contribution and be issued with an excess contributions tax assessment for the 2011-12 financial year, 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 consider discretion at that time. The law as it exists then must be applied to the facts as established at that time.