15 Apr 11 Preamble - Friday 15 April 2011
In last week’s member feedback, Member 56 raised the issue of excess superannuation contributions tax (ECT) and asked if we are pushing to change this law. The answer is a resounding “yes, we are!”
Amending the ECT laws is a top priority for The Tax Institute that we have been pursuing for many months now and we are continuing to push for changes. We know it is an important issue, because we have many members coming to us with examples of taxpayers tripping up on the caps, usually through inadvertence or misunderstanding of the complex law and being left with huge tax bills, up to 93% of the original excess contribution.
Member 56 asks why the ATO does not exercise his power of discretion. The Commissioner has set out the very limited “special circumstances” where he will exercise his discretion in a practice statement and fact sheet. The issue has also been litigated, with the AAT finding in the Commissioner’s favour.
Given that the Commissioner appears to be constrained by the law, The Tax Institute has focussed its efforts on getting the law changed. In addition to addressing the issue in our federal budget submission, we have written to the Government on numerous ocassions; most recently we wrote to the Assistant Treasurer setting out a detailed proposal on how we consider that the law could be changed. The basis of our proposal was set out in an opinion piece that appeared in this Tuesday’s Australian Financial Review. We are urging the government to amend the law such that excessive contributions are returned to the contributors, rather than imposing the ECT. We believe this solution will mean that the caps can be respected, but ensure that taxpayers who breach them are not unfairly penalised.
We remain hopeful that Minister Shorten will take up our suggestion. At our National Convention in March, he disclosed that he had received an ECT bill himself and he seems to appreciate that the law is unfair. We will continue to work for members to make our position clear and to assist the government to improve the tax system.