Edited version of private advice

Authorisation Number: 5010087334214

Date of advice: 24 October 2022

Ruling

Subject: Excess non-concessional 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 disregard part of your potential non-concessional contributions for the 20XX-XX financial year, for the purposes of excess contributions tax?

Answer

Based on the facts provided special circumstances do exist and it would be consistent with Division 292 of the ITAA 1997 to disregard part of your potential non-concessional contributions for the 20XX-XX 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

Your advice is based on the facts stated in the description of the scheme that is set out below. If your circumstances are 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.

We sent a letter to the Taxpayer advising that based on super contributions and total superannuation balance reported to us for the 20XX-XX financial year, the bring-forward arrangement had been triggered, with the bring-forward period being 20XX-XX to 20XX-XX financial years and the non-concessional contributions (NCCs) cap for the period being $300,000.

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

You applied to the Commissioner for a determination that the Taxpayer's marginal NCC for the 20XX-XX financial year be disregarded.

We allowed the discretion, which changed year 1 of the bring-forward arrangement.

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 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

Taxation Administration Act 1953 s 131-15

Income Tax Assessment Act 1997 ss 292-465(3)

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

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 disregard part of your non-concessional contributions for the 20XX-XX financial year, for the purposes of excess contributions tax?

Summary

The Commissioner considers that the facts of your case do demonstrate circumstances which are sufficiently unusual or out of the ordinary to be considered special circumstances.

Detailed reasoning

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 (PS LA 2008/1) provides a guide for the exercise of discretion to disregard or reallocate contributions for a 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 291 or 292 of the Income Tax Assessment Act 1997 (ITAA 1997).

Special circumstances are those which are unusual or out of the ordinary which result in an unfair, unintended or unjust outcome.

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 a super fund. This action was allowable under the legislation because the taxpayer did not make a valid request in response to an excess NCC determination. The RA was issued subsequent to the Commissioner's discretion being exercised with the discretion resulting in a change to year 1 of the bring-forward arrangement.

PSLA 2008/1 states:

It is not possible to lay down precise rules for what constitutes special circumstances. The core idea of special circumstances is that there is something unusual to take the case out of the ordinary course which results in an unfair, unintended or unjust outcome.

The issue to be considered is whether there are special circumstances in relation to all or part of the contributions that have resulted in, or will give rise to, the excess contributions determination or tax assessment. Accordingly, the focus of consideration is whether there are special circumstances that concern the contribution made in the relevant financial year that caused the individual to exceed their contributions cap.

However, circumstances relating to contributions made in earlier financial years may be relevant where those contributions have some relevant relationship with the circumstances relating to the contributions made in the financial year that have resulted in, or will give rise to, the excess contributions determination or tax assessment.

On balance, special circumstances exist as the facts take the case out of the ordinary course which results in an unfair, unintended or unjust outcome.

Making a determination would be consistent with the object of Division 292 of the ITAA 1997 to ensure that the amount of concessionally taxed super benefits that an individual receives results from contributions that have been made gradually over the course of the individual's life.

The Taxpayer was aware of the NCC caps and bring-forward arrangement conditions and had structured and controlled NCCs to be made gradually to fit within the NCC caps, such that they would align with the legislative limits in relation to restricting NCCs in the contributions phase.

The Commissioner will be able to consider the exercise of discretion to disregard the contributions after an excess non-concessional contributions determination (ENCCD) has been made for 20XX-XX financial year.