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30 Nov 11 Taxpayer Alert TA 2010/2 (Circumvention of Excess Contributions Tax) withdrawn

The ATO has withdrawn Taxpayer Alert TA 2010/2 entitled "Circumvention of Excess Contributions Tax".

The withdrawal notice states (in part) as follows:

"Following a review of these arrangements, the ATO has concluded that some trust deed clauses may prevent a payment to a trustee of a superannuation fund from forming part of the fund and therefore from being a contribution for excess contributions tax and other purposes.

Whether a particular clause has that effect, and whether it applies to all or only some categories of payments, depends on the proper construction of the clause considered in the context of the surrounding provisions of the trust deed and the deed as a whole.

If a clause has the effect of preventing payments from being contributions, the payer is not entitled to the income tax deductions available for superannuation contributions. Such payments are likely to be subject to a separate trust. The beneficiary of the separate trust must account for income tax on the earnings of the trust in accordance with the income tax law. Failure to account for income tax in accordance with the clause and keep proper records may give rise to penalties and interest liabilities.

If the trustee does not take proper care to determine whether payments form part of the superannuation fund and wrongly intermingles payments that do not form part of the fund with assets of the fund, the trustee will breach its duties as trustee. This may be relevant to whether the trustee is a fit and proper person to act as trustee of a self managed superannuation fund."

Note that on 29 November 2011, the Government announced that it will ensure the integrity of the annual superannuation contribution caps by ensuring that certain trust deed clauses cannot be used to avoid what would otherwise be excess contributions from being counted against the caps. Under this measure, the fund will be deemed to have accepted such contributions, notwithstanding the trust deed clause, if the contributions have not been returned promptly and have in effect been intermingled with assets of the fund.


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