The excess-contributions tax system is broken and the federal government needs to review it as a matter of urgency. This was the message to delegates on the opening morning of the SMSF Professionals’ Association of Australia’s (SPAA) national conference in Melbourne from technical director Peter Burgess.

Introduced as an SMSF “guru”, Burgess began with an update on recent legislation affecting SMSF trustees and their advisers, sparing no regulatory body or side of government in his assessments. “The system designed to discourage individuals from paying superannuation in excess of a prescribed limit requires urgent reform,” he said. “There is no shortage of evidence to show the system is not working.”

As an example, Burgess cited a recent excess-contributions tax case in which the tax commissioner’s decision was overturned by the Administration Appeals Tribunal (ATT). The Australian Tax Office claims it made the correct decision by not exercising discretion, but it was also open for the ATT to conclude it 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,” he added.

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

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

“Looking at these recent cases, it is not difficult to conclude that the system is not working and changes need to be made.”

Tax the rich?

Burgess also took aim at the federal government for its lethargy in introducing proposed legislation that would see high-income earners – those earning more than $300,000 a year – pay double the current tax rate on their superannuation contributions.

The government announced the move in its budget last year but the trail has since gone cold. “Where is it?” asked Burgess, adding that policy makers may be having trouble deciding what to call the new tax to prevent confusion with the 15-per-cent contributions tax.

Burgess said he accepts that superannuation is a hot election issue. “Since the introduction of excess-contributions tax in 2007, $450 million has been collected by the ATO,” he said.
“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.

 

 Day 1 newsletter of the 2013 SPAA SMSF National Conference
Photos and videos from day 1

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