The excess contributions tax system is broken – and the Federal Government needs to fix it.

Speaking at the SMSF Professionals’ Association of Australia’s 9 th national conference in Melbourne today, Technical Director Peter Burgess says: “The system designed to discourage individuals from paying superannuation in excess of a prescribed limit requires urgent reform.

“There is no shortage of evidence to show the system is not working.

“In a recent excess contributions tax case in which the Tax Commissioner’s decision was overturned by the Administration Appeals Tribunal (ATT), the ATO claimed they made the correct decision by not exercising discretion, but it was also open for the Tribunal to conclude they should have.

“It seems we have a system where both a decision to exercise discretion and a decision not to exercise discretion are both right – not a very good system!”

Burgess also drew attention to a recent AAT decision that affirmed the Commissioner’s decision to impose a 93% tax rate on an excess concessional contribution.

“A tax system that applies a 93% tax on individuals, who, in the main, have made an innocent mistake, is not system that could be considered remotely fair or equitable.

“Looking at these recent cases it is not difficult to conclude that the system is not working and changes need to be made.”
Burgess is not suggesting the ATO or the Tribunal have got it wrong. “It’s the underlying policy that is the problem here and this is what needs to be fixed.”

The revenue generated by individuals exceeding their limits will not pose an issue for the Government, says Burgess.

“Since the introduction of excess contributions tax in 2007, $450 million has been collected by the ATO. Reforming the excess contributions tax system will hopefully reduce this tax grab, but overall it would have a little impact on the Government’s budget position.

“Superannuation is already an election issue and SPAA wants this issue added to the list. We intend to lead the charge and we have already started the process with our Federal budget submission.”

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