Internet Banking: Not So Swift

A recent AAT case has highlighted the fact that internet banking transactions are not necessarily instantaneous and that the excess contributions rules are applied with draconian precision.

The taxpayer wished to make a $60,000 contribution to his self managed superannuation fund: $40,000 for himself and $20,000 for his wife.  The taxpayer made the contribution by way of internet banking.   On 30 June 2007, he transferred $60,000 from one account to the super fund’s bank account.

The taxpayer received a confirmation from the bank which appeared to indicate that the transfer had been effected on 30 June 2007: the transaction confirmation indicated that the $60,000 had been debited to the transferring account and credited to the receiving account.

Unfortunately, as 30 June 2007 was a Saturday, the bank did not credit the bank account of the super fund until Monday, 2 July 2007.

The ATO counted the $60,000 contribution as falling within the 2007/08 financial year rather than the 2006/07 financial year.  This obviously generated excess contribution issues for the 2007/08 financial year as the taxpayer made subsequent contributions in the 2007/08 financial year.

The taxpayer sought to argue that special circumstances existed and that the $60,000 should be counted in respect of the 2006/07 financial year.  The special circumstance being that the taxpayer could reasonably rely on the instantaneous nature of internet banking, had intended and clearly sought to make the contribution in respect of the 2006/07 financial year and that he had no control over the internet processes of the relevant bank.

Both the ATO at the objection stage and the AAT on review considered that there were no special circumstances to justify the ATO to count the contribution in the 2006/07 financial year.

The AAT held that the relevant principle is that a contribution made by way of internet banking is only made when funds are credited to the account of the superannuation fund.  The funds were credited on 2 July 2007 as shown by the account statements of the superannuation fund notwithstanding the transaction confirmations.  This finding is entirely consistent with Taxation Ruling 2010/1, which deals with contributions to superannuation funds.

Taxpayers wishing to make superannuation contributions should make those contributions a few business days before 30 June.

One curious aspect of this case is that, if the taxpayer had written a cheque for $60,000 dated 30 June 2007 and given the cheque to the trustee of the fund on 30 June 2007, then the contribution would have been treated as having been made in 2006/07 financial year.  This is on the basis that the cheque was deposited within a few business days of receipt and the cheque being honoured.

Case Reference: Chantrell v Commissioner of Taxation [2012] AATA 179