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14 Jun 2019 Super contribution tax deduction

MEMBER 153 writes: 

Hi Tax Institute and hello ATO – I know you are reading, 

Could we please get some comfort from the ATO around making superannuation contributions via the Small Business Superannuation Clearing House pre-30 June and the employer’s ability to claim a tax deduction. 

The ATO website shows a ridiculous view that payments via the Small Business Clearing House are only considered deductible when the superannuation fund receives the payment, not when the payment is made by the employer. 

https://www.ato.gov.au/business/super-for-employers/paying-super-contributions/small-business-superannuation-clearing-house/ 

  • When claiming a tax deduction for SG payments and keeping track of contributions for contributions caps, payments made via the SBSCH are considered to be received in the income year that the superannuation fund receives the payment. 

Last year we had an instance where an employer had paid money to various employee’s super funds via the ATO’s small business clearing house on 27 June (Wednesday). They had paid this a few days ahead of 30 June on our advice to ensure that the funds cleared their bank account. 

The employer has evidence on their bank statements of it leaving their bank account on 27 June to go to the ATO small business clearing house. 

The money had gone to the big black hole that is the Government’s consolidated revenue in what is supposed to be an automated process to automatically direct funds to the super fund bank account. One of the employee’s was a director of the company who had his own self-managed super fund.  The cash did not appear in the SMSF bank account until 2 July, some 5 days later. 

Apart from in the instance where the director controls both the employer and the super fund bank account, the employer would have no visibility of when the funds arrive in the super fund bank account. 

Section 290-60 (3) merely requires that “you can deduct the contribution only for the income year in which you made the contribution”. The law does not say that you make a contribution when the dollars appear in the ATO bank account. That is the ATO’s view only. 

The term ‘you made’ the contribution surely signifies that the employer had done something, an act (in this case paid money to a clearing house). Once it is out of the employer’s control, their act has finished. Therefore, in my view by completing the clearing house electronic forms and paying the money to the clearing house signifies making a contribution. 

In this case it was the Government clearing house inefficiency that caused the funds not to appear in the super fund until 5 days later. Surely the ATO cannot penalise an employer via loss of tax deduction for the Government’s own inefficiency. 

If the ATO continue with the ridiculous notion that a deduction cannot be claimed until the superannuation fund receives the funds, I suggest that the law be amended requiring the Clearing House be directed to the superannuation fund within 1 day of receiving the funds from the employer, or the Clearing House is penalised to provide compensation to employers for loss of a tax deduction. Further, the employee’s super fund should be provided a 10% interest charge for the Clearing House inefficient handling. The ATO also need to provide clarity as to how the employer is supposed to find out from each employee’s fund the date they received the contribution from the clearing house. 

Or, the ATO could take a practical view (that most employers and tax agents do) that as long as there is evidence of the payment being made to the clearing house on or before 30 June, that the contribution has been made on that date.  

Could the ATO please have some common sense around this area and provide some practical guidance. 30 June is fast approaching and it falls on a Sunday this year.

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