Excess Non-concessional contributions - Bill passed and almost law

The amendment bill which finally solves the problem of excess non-concessional contributions  -  Tax and Superannuation Laws Amendment (2014 Measures No 7) Bill – has now been passed by both the House of Representatives and the Senate.

The Bill will be enacted once Royal Assent is given – which, at the time of preparing SUPERCentral News, is likely to be imminent.

Once enacted, the problem of excess non-concessional contributions will have been solved in respect of contributions made on or after 1 July 2013.

In respect of contributions made before 1 July 2013 the problem remains.  What can a member do if they have excess non-concessional contributions in relation to 2012/13 or earlier financial year?

Essentially the affected member can only (in order of preference):

• First - check that there is no mis-reporting of contributions – such as a rollover reported as a contribution, or double reporting of the same contribution, a CGT contribution reported as an ordinary non-concessional contribution or a contribution for one member reported as a contribution for a another member;

• Secondly - check whether one or more contributions have been accepted contrary to the SIS contribution acceptance rules – such as a contribution which was accepted before the member satisfied the “40 hour/30 days” test or that the contribution exceeded the fund capped contribution limit;

• Thirdly - check whether the bring forward rule has been triggered in an earlier year by a small contribution (eg under the ATO’s administrative practice to disregard very minor contributions – the de minimus exception);

• Fourthly - check whether the contribution was made under a mistake which is sufficiently material to warrant a court order for rescission of the contribution being made; and

• Finally, - claim that there were special circumstances which would justify the ATO exercising its discretion to disregard or to reallocate the contribution to another financial year.

While the fourth response (contribution made under an operative mistake) may apply, the cost of seeking an order for rescission may make this response unrealistic unless the amount of excess non-concessional contributions is very significant.