Edited version of private advice

Authorisation Number: 1052388678866

Date of advice: 29 April 2025

Ruling

Subject: Excess non-concessional contributions

Question

Based on the facts provided, under subsection 292-465(3) of the Income tax Assessment Act 1997 (ITAA 1997), do special circumstances exist and would it be consistent with the object of Division 292 of the ITAA 1997 to disregard part of your potential non-concessional contributions for the 20XX financial year, for the purposes of excess contributions tax?

Answer

Based on the facts provided, under subsection 292-465(3) of the ITAA 1997, special circumstances do not exist and it would not be consistent with Division 292 of the ITAA 1997 to disregard part of your potential non-concessional contributions for the 20XX financial year.

This advice applies for the following period:

Year ending 30 June 20XX

The arrangement commences on:

1 July 20XX

Relevant facts and circumstances

We issued an excess NCC determination to the taxpayer, stating that excess NCCs were made for the 20XX financial year.

We advised the taxpayer that we had previously issued them with an excess non-concessional contributions determination and as we did not receive a valid election to release amounts from super, we asked the taxpayer's super fund to release an amount as detailed in the original determination.

The amount was successfully released, and the taxpayer requested administratively binding advice (ABA) on whether their circumstances would be considered special and disregarding the recontributed amounts in a future year would be consistent with the object of the relevant legislation.

Relevant legislative provisions

TAA 1953 - paragraph 131-5(4)(b

TAA 1953 - subsection 131-15(2)

TAA 1953 - subparagraph 131-20(1)(b)(i)

ITAA 1997 - 292-465(3)

ATO view documents

Practice Statement Law Administration PS LA 2008/1 The Commissioner's discretion to disregard or reallocate concessional and non-concessional contributions for a financial year.

Reasons for decision

The discretion to reallocate or disregard non-concessional contributions can only be exercised where there are both special circumstances and making the determination is consistent with the object of Division 292 of the Income Tax Assessment Act 1997 (ITAA 1997).

As noted by Greenwood J in Commissioner of Taxation v. Dowling [2014] FCA 252:

The Commissioner's power to exercise the discretion is constrained, at the threshold, by the mandatory requirement that he or she "considers" that there are "special circumstances" warranting a constructive change to the actuality of the contributions either by disregarding or re-allocating some or all of those contributions giving rise to the liability, and that he or she considers that doing so is consistent with the object of Div 292.

These s292-465(3)(a) and (b) considerations are absolute pre-conditions to the exercise of the discretion.

Therefore, even if one of the conditions is satisfied unless the other is also satisfied the discretion cannot be exercised.

When making a decision about your case, we considered 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 (PS LA 2008/1).

Special circumstances are those which are unusual or out of the ordinary which result in an unfair, unintended or unjust outcome. There is no strict formula or checklist to work out what special circumstances are, so each case will be considered on its own merits.

The object of the Divisions is to ensure that the amount of concessionally taxed superannuation benefits that a person receives, results from contributions that have been made gradually over that person's lifetime.

Other factors we may consider include the amount of control you had over the making of the contributions, whether it was reasonably foreseeable there would be excess contributions and any other relevant factors.

In this case, the Commissioner issued a release authority (RA) to the taxpayer's super fund for the release of $XXX,XXX.XX which was released to us on XX XX 20XX. This action was allowable under the legislation, because the taxpayer did not make a valid request in response to the NCC determination.

The taxpayer's legal representative has advised that, in addition to triggering a bring-forward arrangement by contributing the maximum amount of $360,000 in the 20XXfinancial year, the taxpayer wishes to make further NCCs of $XXX,XXX.XX. This would effectively return to the superannuation environment, the amount released in XX 20XX under the Commissioner's RA.

In these circumstances, excess NCC of $XXX,XXX.XX would arise.

Consequently, a request for the Commissioner to exercise his discretion was lodged, to disregard the potential NCC of $XXX,XXX.XX for the 20XX financial year.

The taxpayer contends that an error or oversight caused them to exceed their contributions cap in 20XX financial year. An error or oversight is not of itself a 'special circumstance'.

In their, application the taxpayer contends that there are special circumstances because the Fund's tax agent lodged the Fund's 20XX income tax return incorrectly reporting the transfer of $XXX,XXX.XX to the Fund as a non-concessional contribution. The taxpayer was under the belief that all of the transactions had been reported correctly.

Paragraph36 of PS LA 2008/1 states:

Ignorance of the law - a claim that a person was ignorant of the law would not, generally speaking, be regarded as 'special circumstances' unless other factors exist which would make the ignorance or misconception reasonable or understandable in the circumstances, such as where incorrect advice was provided to the person by the ATO.

The courts have confirmed this position. In Peaker v. Commissioner of Taxation [2012]AATA 140 Member Webb held that ignorance of superannuation arrangements was not 'special circumstances'. In reaching that decision Member Webb followed the earlier decision in Schuurmans-Stekhoven v. Commissioner of Taxation [2012]AATA 62 where Senior Member McCabe made a similar finding.

In Liwszyc v. Commissioner of Taxation [2014] FCA 112, at paragraph 77 McKerracer J held:

An innocent mistake or ignorance of the law does not in itself constitute a 'special circumstance' nor do simple errors, albeit innocent errors or other mistakes which are made in good faith. Equally, the fact that an error was made by another person does not in itself constitute 'special circumstances'.

Whilst we recognise that the taxpayer did not intend to exceed their 20XX contributions cap, such intent alone does not establish 'special circumstances'. Excess contribution tax is simply a consequence of their financial transactions.

The taxpayer has been disadvantaged, but the onus should be on the Fund's tax agent, the Fund's trustee or the Fund's auditor to rectify any financial detriment suffered by the Fund's member, given their obligations to ensure accurate reporting. This may include compensating the Fund's member for any financial loss or disadvantages the error has caused.

The taxpayer contends that 20XX NCC determination issued, was mailed to the taxpayer's tax agent, and was not received.

While we do acknowledge that the taxpayer's tax agent did not receive NCC determination, we note that the NCC determination's address matches the taxpayer's postal and business address that was active in the ATO's records for the period from XX XX 201X until XX XX 202X. It is the taxpayer's responsibility to ensure that their address details are reliable.

The taxpayer contends that RA issued was invalid.

The Commissioner's action in issuing the RA without valid request is allowed under the superannuation law.

If the Commissioner issues an excess non-concessional contributions determination to an individual for a financial year or issues a notice under paragraph 131-5(4)(b) of the Tax Administration Act 1953 (TAA 1953) stating that there is an unreleased amount for such a determination, the Commissioner may issue a release authority to one or more superannuation providers that hold superannuation interests for the individual (subsection 131-15(2)). The amount to be released from one or more superannuation interests must be worked out so that the total amount stated for all release authorities for the applicable determination does not exceed the total release amount stated in the determination (subparagraph 131-20(1)(b)(i)).

Accordingly, special circumstances do not exist as the facts of the case show that the taxpayer was in a position to ensure that the contributions did not exceed the cap in the 20XX financial year.

The discretion to reallocate or disregard contributions can only be exercised where there are both special circumstances and making the determination is consistent with the object of Division 292 of the ITAA 1997.

In summary, special circumstances do not exist to disregard NCCs of $XXX,XXX.XX for the 20XX financial year.