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The Tax Institute calls for excess super change in budget

Publication date: 12 Apr 11 | Source: THE TAX INSTITUTE

The Federal Government must use this budget to reform excess superannuation contribution laws that are expected to trip up as many as 30,000 taxpayers this year, The Tax Institute said today.

Excess contributions tax (ECT) has been an area of concern for taxation professionals since the current regime was introduced in May 2006.

“Contribution caps are in place to ensure people approaching retirement don’t load up their superannuation to enjoy tax breaks,” said Institute senior tax counsel Robert Jeremenko.

“While we agree with the policy intent of imposing caps, this is an area where excess contributions can be made accidentally, or by employers without the knowledge of a taxpayer.”

The tax on excess contributions can be up to 93 percent.

The Commissioner of Taxation has discretion to disregard or reallocate contributions where there are “special circumstances” – but ATO figures show this is exercised in as few as two percent of all assessments.

Mr Jeremenko said a person with multiple employers may breach the caps because the companies they work for have simply fulfilled their compulsory superannuation guarantee obligations.

“An employee may also find that they have breached a cap where an employer pays a contribution out of cycle with the financial year or their retirement planning,” Mr Jeremenko said.

“Taxing the excess contribution at a rate of up to 93 percent in these circumstances is extremely harsh and has no equivalent anywhere in the world.”

The Tax Institute says harsh penalties should apply to anyone trying to rort the system.

“But the Government should change the legislation to ensure superannuation funds reject excess contributions without honest taxpayers being penalised,” Mr Jeremenko said.

Mr Jeremenko said rules to reject excessive contributions can be combined with other integrity measures to ensure that caps are effectively policed.


The Tax Institute is Australia’s leading professional association in tax.  It aims to improve the taxation system and the delivery of tax services through education, sharing of information and consultation.

For more information: Robert Jeremenko, Senior Tax Counsel, The Tax Institute,   T: 02 8223 0011, M 0468 987 300

Craig Regan, Lighthouse Communications, 02 9692 8811, 0408 448 527.