• Release authorities

    A release authority is a written notice authorising the person to withdraw money from a complying super plan.

    We must give a release authority to a person as soon as practical after making an ECT assessment. A valid and correctly given release authority meets a condition of release under the SISR. A release authority fulfils two roles. It:

    • assists the person to pay the ECT as otherwise they would be paying tax on amounts they did not have access to
    • ensures that the super system is not used inappropriately to stream assets into the concessionally taxed super environment.

    Subsection 292-405(1)External Link provides that release authorities will be issued for each of the taxes - excess concessional contributions tax and excess non-concessional contributions tax.

    In accordance with subsection 292-410(1)External Link, a release authority can be presented to any super fund that holds a super interest for the person (other than a defined benefit interest), within 90 days of the date of the release authority.

    There are four types of release authorities:

    Compulsory release authority

    A compulsory release authority (CRA) ensures that the excess non-concessional contributions tax amount is withdrawn from the concessionally taxed super environment by requiring the person to withdraw the amount from their super fund.

    To allow excess non-concessional contributions to remain in their super fund would provide a person with a benefit they are not entitled to.

    Attention

    A super fund includes a provider paying a pension.

    End of attention

    Subsection 292-410(2)External Link provides that if the release authority is for excess non-concessional contributions tax, the person must give the release authority to the super fund within 21 days after the date of the release authority.

    Failure to comply may result in the person being liable to an administrative penalty of 20 penalty units, as imposed by section 288-90External Link of Schedule 1 of the TAA.

    Attention

    A penalty unit is currently $110 under section 4AAExternal Link of the Crimes Act 1914.

    End of attention

    Voluntary release authority

    A voluntary release authority (VRA) enables a person to obtain the release of monies from super funds (not defined benefit interests) to pay the excess concessional contributions tax liability.

    If the VRA is not given to the super fund within 90 days it is not valid and the person will not be able to access their super (unless they meet some other condition of release) to pay the ECT.

    Attention

    Section 26-75External Link states that the payment of ECT is not an allowable deduction.

    End of attention

    Commissioner's compulsory authority to release excess contributions

    This release authority is given directly by the ATO to the person's super fund to remove the amount of the ECT liability from their super interest.

    It is sent to a super fund when the person has not complied with the compulsory release authority to remove the excess non-concessional contributions from the fund.

    In accordance with subsections 292-410(3) and (4),External Link the Commissioner may give a release authority to one or more super funds that hold a super interest (other than a defined benefit interest) for the person if all the following apply:

    • The release authority is for excess non-concessional contributions tax.
    • A super fund holds a super interest for a person (other than a defined benefit interest).
    • Any of the following conditions are satisfied
      • the person does not give the release authority to a super fund holding a super interest for the person in a complying super plan within 90 days after the date of the release authority
      • if the person has made one or more requests as mentioned in paragraph 292-415(1)(a)External Link to the release authority within 90 days after the date of the release authority, the total of the amounts (if any) paid by super funds in the release authority falls short of the amount of the excess non-concessional contributions tax stated in the release authority
      • the total of the values of every super interest (other than a defined benefit interest) held for the person by a super fund to which the release authority is given falls short of the amount of the excess non-concessional contributions tax stated in the release authority.
       

    Payments under a release authority

    Under subsections 292-415(1) and (2),External Link the amount a super fund is required to release is the least of the:

    • amount of ECT stated on the release authority
    • amount specified by the person or the ATO
    • sum of the values of every super interest (other than a defined benefit interest) held for the person.

    As well as an accumulating super interest, payment can be made from a person's pension.

    A person may present a release authority to more than one fund, but must specify the amount to be released to each provider. A release authority cannot be used to release more that the total amount payable on the ECT notice of assessment.

    Example: release authorities

    Bettina receives an excess non-concessional contributions tax assessment of $500 for the 2009-10 income year.

    She receives a compulsory release authority from the ATO.

    She can complete one release authority for Fund A requesting an amount of $300 be released and another for Fund Z requesting an amount of $200 be released to satisfy the ECT liability.

    If a fund receives a release authority directly from the Commissioner they must pay the lesser of the:

    End of example
    • amount of ECT stated on the release authority
    • sum of the values of every super interest (other than a defined benefit interest) held for the person.

    Super funds must pay the amount within 30 days of receiving the release authority.

    Subsections 304-15(2) and (3)External Link provide that the released amounts are not assessable income and not exempt income (to the extent they do not exceed the amount of ECT stated in the release authority).

    A person can direct their super fund to release money either to themselves or directly to the ATO. Payments made to the ATO by a super fund are taken to be made in satisfaction (in whole or in part) of the person's ECT liability stated in the release authority, in accordance with subsection 292-415(3)External Link.

    Subsection 292-415(5) states that the proportioning rule, which determines what proportions of super benefit components are paid out, does not apply to amounts paid under a release authority.

    Reporting amounts paid under a release authority

    A super fund is required, under section 390-65External Link of Schedule 1 of the TAA, to report to the ATO details of any amounts paid in accordance with a release authority.

    The statement must be given within 30 days after the amount has been paid from the fund, be in an approved form and must include at a minimum the:

    • amount paid
    • details of the super fund
    • person for whom the release authority is given.

    A copy of this statement must also be given to the person to whom the release authority relates within the same timeframe. The approved form is the same document as the release authority.

    Attention

    The fund need not use the ATO release authorities, but must report all the information required in the approved form.

    End of attention

    Failure to provide a statement in accordance with the requirements of the TAA may result in an administrative penalty for failing to lodge documents on time in accordance with section 286-75External Link of Schedule 1 of the TAA.

    Accessing amounts exceeding the authorised release amount

    Subsection 304-15(4)External Link states that if a person accesses more than the amount authorised for release, that amount will be included in their assessable income and subject to income tax at their marginal rate.

    In addition, the person will be liable for an administrative penalty in accordance with section 288-100External Link of Schedule 1 of the TAA.

    ECT may be offset or added to other income tax debits or credits of the person. However, a person will still be required to withdraw the amount equal to their excess non-concessional contributions tax liability from their super fund.

    Due date and interest

    The due date for ECT is consistent with other income tax liabilities.

    Section 292-385External Link provides that the ECT assessed for a person for an income year is due and payable at the end of the 21 days after the notice of assessment for ECT is given.

    Furthermore, in accordance with section 292-390External Link, a person is liable for general interest charge (GIC) if the ECT remains unpaid after the time by which it is due and payable.

    If a valid release authority has been given to a super fund, the provider must pay the required amount to the person or the ATO within 30 days after receiving the release authority under subsection 292-415(1)External Link.

    As a fund has 30 days from the date of receipt of the release authority to pay the money the person may not have access to the amount before the liability is due and payable.

    Remission of GIC

    Despite the legislative timeframes for release authorities to be actioned, as mentioned above, an ECT liability is due and payable 21 days after the notice of assessment is given.

    In effect, the timeframes potentially expose a person to GIC provisions even if they and the super fund comply with the release authority requirements.

    If payment is received after the due date and the person demonstrates that the release authority was forwarded to their super funds within 21 days, GIC may be remitted in full, provided that the funds paid the released amount within a reasonable time of the release of the money from the super fund.

    If the person is also a trustee of the super fund, remission may not be appropriate when the delay is due to the fund's failure to release within the required timeframe.

    If payment is received after the due date and the person directly or indirectly contributed to the delay, partial remission of GIC may be appropriate depending on whether the person has taken steps to mitigate the circumstances causing the delay.

    Attention

    GIC is calculated in accordance with Part IIA of the TAA.

    End of attention

    Section 8AAGExternal Link of the TAA provides that the Commissioner has power to remit all or a part of the GIC payable by a person.

    Section 255-10External Link of Schedule 1 of the TAA provides the Commissioner with the power to defer the time at which an amount of a tax-related liability is, or would become, due and payable considering the person's circumstances.

    Shortfall interest charge

    Under section 280-102AExternal Link of Schedule 1 of the TAA, a liability for the shortfall interest charge arises if an additional amount of ECT becomes payable as a result of an amended assessment.

    The liability for the charge is for each day in the period:

    • beginning at the start of the day on which ECT under the first ECT assessment for that year was due to be paid
    • ending at the end of the day before the day on which the Commissioner gave the notice of the amended assessment.

    If an amended assessment reinstates all or part of an ECT liability reduced by an earlier amended assessment, the period for the reinstated liability begins at the start of the day on which ECT under the earlier amended assessment was due to be paid.

      Last modified: 22 Nov 2013QC 34181