Verschuer’s Case [2013] AATA 12 - Clearing Accounts are not Super Funds and choosing to ignore contributions is not a solution to subsequent excess contributions problems

In this case the taxpayer’s employer transferred about $90,000 on 27 June 2008 to a superannuation clearing account operated by Colonial First State.  While the $90,000 was deposited into the clearing account before 30 June 2008, the Trustee of the Super Fund only allocated the money to the account of the taxpayer in July 2008 after receiving the relevant contribution information from the employer.

The taxpayer (on the understanding that the $90,000 contribution related to the 2007/08 financial year) then made concessional contributions of about $98,000 and non-concessional contributions of $450,000 in May 2009. 

Unsurprisingly the ATO aggregated the July 2008 allocated $90,000 concessional contributions with the subsequently made concessional contributions of $98,000 and issued an excess contributions tax assessment for excess concessional contributions of about $89,000 as well as $89,000 of excess non-concessional contributions.  The double counting of the $89,000 arises since it is both excess concessional and also excess non-concessional contributions.   The total tax bill was about $69,000.

The taxpayer requested the ATO to re-allocate the $90,000 July 2008 contribution to the 2007/08 financial year (as was intended by the taxpayer).  The ATO declined on the basis that the July 2008 contribution was correctly treated as being counted in the 2008/09 financial year and there were no special circumstances in relation to the contribution which would justify the re-allocation.

On appeal to the AAT, the AAT, reluctantly, held the July 2008 contribution was correctly treated as a contribution for the 2008/09 financial year as it was initially paid to a clearing account (even though operated by the Trustee of the Super Fund but this is not relevant) and a clearing account is not a superannuation fund.  The amount was only allocated to the member account within the Superannuation Fund in July 2008 when the required information was provided by the employer.  

Further the AAT held that there were no special circumstances in relation to the contribution which would entitle the ATO to have re-allocated the contribution.

One curious matter in the case was that someone had in fact accessed the contribution records of the Super Fund which showed that the June 2008 contribution was treated as being received by the Fund in July 2008.  This access occurred shortly before the May 2009 contributions were made.   The  taxpayer denied being the person who accessed the contribution.

The important points to note are

• A payment to a super clearing account is not a payment to a superannuation fund – even if the clearing account is opened by and operated by the super fund.

• Claiming that the discretion should be exercised because of delays over which the taxpayer has no control only has merit if there is an established practice of making contributions in a timely fashion (which, had the established practice taken place the contribution would have been received in time).

• Making a contribution a few business days before the end of the financial year is not the means to ensure that the super fund receives the contribution before the end of the financial year.

• Suffering the (acknowledged) excessive tax rates (when a contribution is treated as excess concessional and also as an excess non-concessional) is not itself a special circumstance – but merely the intended outcome of the relevant statutory provisions.

• Requesting exercise of the discretion in the face of knowingly making a contribution which is likely to be treated as being excessive is unlikely to motive the ATO to exercise the discretion.