Salary sacrifice strategies and concessional caps - case law
Clarke McEwan Accountants
A recent case has highlighted that early payment of superannuation leading to excess concessional contributions may not be considered a special circumstance allowing reallocation under s 291-465(2) ITAA 1997.
The facts of Oldenburger v Commissioner of Taxation show that the applicant and the employer had a verbal agreement to salary sacrifice into superannuation the difference between the applicable $25,000 concessional contributions cap and the compulsory employer contributions.
The applicant exceeded their concessional contributions cap due to early SG payments by their employer and applied for the Commissioner’s discretion. The request was denied on the grounds that early payment by an employer is not a “special circumstance” for excess contributions.
What constitute “special circumstances”
The term “special circumstances” has been considered on numerous occasions by the courts, with the consistent meaning coming down to the facts of the case and circumstances being out of the ordinary.
The ATO examines the evidence of the contributions made and the extent of control a taxpayer has over the amount and timing of the SG contributions and the payment of excess contributions in the foreseeable future.
Commissioner’s discretion to disregard or reallocate contributions
From the 2013–14 income year, an individual can apply to the Commissioner for a determination to disregard all or part of the individual’s concessional contributions or allocate them to a different financial year under s 291-465.
Any amount disregarded or reallocated by the Commissioner does not affect the taxpayer’s eligibility for a superannuation co-contribution or to claim a deduction in relation to those contributions.
Objection to Commissioner’s determination
A taxpayer who is dissatisfied with the Commissioner’s determination (as noted in the Oldenburger case) may object against the determination or the decision.The period in which an individual may object to this determination is the same as the period in which the individual could object to their income tax assessment on the same ground.
Remedial superannuation guarantee contributions
Employers sometimes make remedial SG contributions for late payments made for their current or former employees. A determination to disregard or reallocate any excess contributions to another financial year can be applied for by using ATO form NAT 71333.
Next steps
Two main takeaways from this case are:
- a written salary sacrifice agreement should be executed that sets out the timing of when the contributions must be made during a financial year to ensure all SG contributions remain within the annual concessional contributions cap.
- employers should monitor the dates when any compulsory or non-compulsory SG contributions are made during the year and have mechanisms in place that send a notification when the annual concessional/non-concessional caps may be exceeded during a financial year.
Please feel free to contact our office if you have any queries in relation to this matter at :
Clarke McEwan - Chartered Accountants
Brisbane: Level 4, South Tower, 339 Coronation Drive Milton Qld 4064 Ph 35050703
Sunshine Coast: Level 1, 63 The Esplanade Maroochydore Qld 4558 Ph 54754300
www.clarkemcewan.com.au
