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In media release No 2010/03 issued on 29 March 2010, the ATO announced the issue of Taxpayer Alert TA 2010/2 entitled "Circumvention of Excess Contributions Tax".

In the media release, the ATO warns that it has looked at self managed super fund (SMSF) trust deeds that include clauses that seek to avoid excess contributions tax. Excess contributions tax is payable when an individual’s super contributions in a financial year exceed certain thresholds known as contributions caps.

Under the arrangement a clause is inserted into the SMSF trust deed to restrict the trustee from accepting all or part of a contribution if it would cause the member to exceed a contributions cap. If the trustee does accept the contribution the trust deed directs the trustee to hold the contribution in a separate trust, even though the amount has been treated as a contribution and mixed with other assets of the super fund.

The Commissioner, Michael D’Ascenzo, said that the ATO considers that these amounts represent superannuation contributions.

“These clauses are an attempt to avoid the excess contributions tax if they exceed the relevant cap, even though the amount in question was clearly intended as a contribution and was treated as part of the super fund by the trustee,” Mr D’Ascenzo said. “The ATO has reviewed these arrangements and considers that they are ineffective. The member may still have to pay excess contributions tax on these amounts, even if the trustee repays the amount back to the member."


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