“The benefits of diversification were clearly evident in 2011. Although both Australian shares and international shares fell, by 11% and 5.3% respectively, by being well diversified across a wide range of growth and defensive asset sectors, the loss for the median growth fund was limited to 2%,” explains Chant.

“The same comment applies when we look back over the past five years. This period, which includes both the GFC and the more recent sovereign debt-driven crisis, has been highly unusual in that both Australian and international shares have gone backwards. Yet, by finding alternative sources of return, including unlisted growth assets such as infrastructure, property and private equity, even some growth funds have produced a small positive return.”

Background: Your super fund invests in a mix of asset classes to generate an investment return on your super account, which means that some of your super money is likely to be invested overseas, a fair chunk invested in Australian assets, and a portion squirreled away in cash. The super money of most Australians is invested via a balanced or growth investment option, typically 61-80% of assets are in growth-style assets such as shares, property and alternative investments, and 20-40% are in income-style assets such as cash and fixed interest (bonds). If you choose your own investment option, or you run your own super fund, then you decide on the mix of asset classes for your super savings, including whether you have exposure to international assets, and whether you have exposure to foreign currency movements (that is, unhedged).

Briefly, when a super fund hedges your international investments against movements in the Australian dollar or foreign currency, your investment return is solely based on the merits of the investment rather than the strength or otherwise of the Australian dollar. If your super fund chooses not to hedge your international investments, then the return you may receive on this part of your portfolio may have very little to do with the merits of your investment. I explain the significance of hedging in more detail in my article Ban unhedged international shares in default investment options.

According to figures from rating company, Chant West, the top-performing asset class for the 12 months to 31 December 2011 was Private Equity with a 12-month return of 12.1% closely followed by Australian Bonds (11.4%) and International Bonds (hedged) (10.5%). Coming in fourth was Unlisted Infrastructure (9.6%) and a close fifth was Australian Unlisted Property (9.3%)

The table below sets out the performance figures for 13 asset classes (or sub-categories) for investment periods of 3 months, 6 months, 1 year, 3 years, 5 years, and, if applicable, 7 and 10 years.

Top performing asset classes for 10-year and 5-year periods to 31 December 2011

The top performers among the 13 asset classes (or sub-categories) are different when you look over a longer timeframe. For example, over a 10-year period, International Bonds (hedged) has outperformed all asset classes with an average annual return of 8.2%, followed by Australian Bonds with an annual return of 6.5%, and then Australian shares with an annual return of 6.1%.

Note: Figures over the 10-year and 7-year period to 31 December 2011 don’t include performance statistics for private equity, global listed property (hedged), global listed infrastructure (hedged), Unlisted Australian property, and unlisted infrastructure, due to the relatively recent development of these asset sub-categories.

The devastating effects of the Global Financial Crisis (GFC) can be seen in the 5-year performance figures for the higher risk asset classes, such as shares, listed property and private equity. The top performers over the 5-year period are international bonds (hedged) with an average annual return of 8.7%, followed by Australian bonds (7.4%), Unlisted infrastructure (6.5%), Cash (5.5%) and then Australian unlisted property (5.3%).

Australian shares have delivered a depressing loss of 2.4% a year over the same 5-year period, and international shares (hedged) a pathetic loss of 3.5% a year. Even worse, international shares (unhedged) delivered negative 7.5% every year for the past 5 years, on average, while Australian listed property, that is A-REITs delivered a shocking negative 15.2% every year for the past 5 years. What this means for investors in A-REITs, is that their A-REIT investment is a quarter of what it was worth five years earlier.

Source: Chant West, 23 January 2012 media release (www.chantwest.com.au)

Table notes: The table contains gross investment returns, that is, investment returns before fees and taxes have been deducted. The asset classes and categories listed are the main asset sectors that super funds invest in. Chant West has used market indices for performance figures for all sectors other than private equity and unlisted infrastructure. For those two categories, Chant West has used the returns of a major super fund in the Chant West survey that is representative of those sectors.

Related posts:

1. Asset classes: Naming the investment winners for 2011
2. Super funds deliver 9.2% for 12 months (2010/2011 year)
3. Super funds deliver 10% for 2009/2010 year

The Top 10 performing super funds for the 2011 calendar year (January 2011 to December 2011), and the top 10 super funds for the seven-year period to 31 December 2011 are listed in the tables below.

The performance data is based on Chant West figures, and the table ranking is based on individual investment options offered by a superannuation fund, and the investment options involved in the ranking process look after assets worth more than $500 million.

Note: Based on Chant West’s rankings, a growth fund typically holds between 61% and 80% in growth assets such as shares and property. Some super funds may describe this type of asset allocation as a ‘balanced’ investment option, and this type of investment option is the typical default option for super funds (where you don’t actively choose your investment options for your super account). At least 80% of all super fund members have their superannuation money invested via a growth or balanced investment option. If you don’t actively choose your investment options for your super account, then your retirement savings will be invested in the default option. If you do actively choose your investment option/s then your super savings may be invested in another type of investment option such as conservative or high growth.

Top 10 performing super funds for 12 months to 31 December 2011

The top 10 performing growth super funds consist only of not-for-profit funds (seven industry funds, two public sector funds and one corporate super fund).

Source: Chant West, 23 January 2012 media release (www.chantwest.com.au)

*Performance is net of investment fees and taxes. It does not include administration fees or adviser commissions..

Top 10 performing super funds over 7 years – industry funds win, again

A poor investment performance for one year doesn’t doom you for a poverty-stricken retirement, and likewise a great investment performance for one year does not create a healthy retirement balance many years down the track. What then does this mean for anyone considering whether the super fund they have is the best-performing super fund over the long term?

In 2010, Warren Chant, principal of rating company Chant West, gave some practical advice for super fund members. He said: “From the member’s point of view, I think the message – now more than ever – is to keep an eye on your fund’s performance regularly, and at least every year. Don’t be too concerned if it underperforms in the short term, but if it consistently underperforms over a few years, try to find out why and maybe look at some alternatives.”

Upon the release of the 2011 calendar year results, Chant West reports that the impact of the Global Financial Crisis (GFC) still dominates the medium-term and longer term results. Chant says:

“… there were four negative years out of the [past]19, which averages one year in almost five, so the risk objective was not quite met, but very nearly. Again, though, it’s worth noting that three of the four negative years occurred in the past decade, which included not only the GFC and before that the ‘tech wreck’. In the previous nine years, only one was negative. So when we talk about objectives like ‘a negative return once in every 5 years’, it’s important to remember that we’re talking averages, not a predictable regular occurrence. That’s why you should really look back as far as you can to see the long-term picture and make judgements.”

Industry super funds dominate in Chant West’s table for the top 10 performing super funds over 7 years, although a corporate super fund – CBA OSF Mix 70 – tops the list, with an average annual return over 7 years of 6%.

Note: The cash rate for the same 7-year period is also 5.6%.

Source: Chant West, 23 January 2012 media release (www.chantwest.com.au)

*Performance is net of investment fees and taxes. It does not include administration fees or adviser commissions. The performance data is based on Chant West figures, and the table ranking is based on individual investment options offered by a superannuation fund, and the investment options involved in the ranking process look after assets worth more than $500 million.

Related posts:

1. Top 10 performing super funds for 2010/2011 year
2. Super funds deliver 4.7% for 2010 calendar year
3. Super funds lose 2% for 2011 year (12 months to December 2011)

Looking longer term, the median superannuation growth fund has returned 5.9% each year, on average, for the 3-year period to December 2011. The median growth fund has delivered an unimpressive 0% each year, on average, for the 5-year period to December 2011, and a somewhat disappointing 4.7% each year, on average, for the 10-year period to December 2011, according to Chant West.

Chant West director, Warren Chant believes that medium and long-term returns are still overshadowed by the impact of the global financial crisis (GFC): “… everyone needs to remember that they are dominated by the ‘black swan’ event that was the GFC. That produced a huge negative return of 21.5% in 2008 [for calendar year], which was unprecedented. It drags down the medium- and long-term averages, and will continue to do so for a few years yet.

“To judge whether funds are meeting their objectives, you really need to look to look further back to the introduction of compulsory super in July 1992. … The typical objectives for a growth fund are to beat inflation by 3 to 4% (after investment fees and tax) over rolling five year periods, and to post a negative return no more frequently than one in every 5 or 6 years on average. If we look back over the 19 calendar years since the introduction of compulsory super, we can see that funds have broadly achieved those objectives,” says Chant.

“The annualised return over that period was 7%, the annual CPI increase was 2.7%, so the outperformance averaged 4.3% per annum. So the return target has actually been exceeded over that extended period.”

Based on Chant West’s rankings, a growth fund typically holds between 61% and 80% in growth assets such as shares and property. A median is simply choosing the return for the fund in the middle of the list.

Although the term ‘growth fund’ covers those super funds with investment options having a 61% to 80% allocation to growth assets, some super funds describe the identical asset allocation as ‘balanced’ option. Chant West’s description of ‘balanced’ however is 41% to 60% in growth assets.

The returns for Chant West’s version of ‘balanced’ option are 0.6% for the 12 months to 31 December 2011, and a gain of 1.9% for the 3 months to December. You can find more detail on the investment returns for growth or balanced options in the table below.

The balanced/growth asset allocation is the default option for most large super funds which means that at least 80% of all super fund members have their superannuation money invested via a growth or balanced investment option. If you don’t actively choose your investment options for your super account, then your retirement savings will be invested in the default option.

If you do actively choose your investment option/s then your super savings may be invested in another type of investment option such as conservative or high growth.

The table below lists the performance figures for the five main asset allocations for: 3 months, 6 months, 1 year, 3 years, 5 years, 7 years, and 10 years.

Note: Performance is shown net of investment fees and tax. It does not include administration fees or adviser commissions. Negative returns appear as follows: -2.0% means a loss of 2.0%.

Source: Chant West 23 January 2012 media release (www.chantwest.com.au)

Industry funds outperform retail funds over the long term

According to Chant West, the growth investment options for industry super funds outperformed similar investment options in master trusts/retail super funds for the 12 months to 31 December 2011, with industry funds suffering a loss of -0.7% compared with the larger loss of -3.1% suffered by master trusts/retail funds.

Note: If this discrepancy in returns were to occur over a long period, then a member of a retail super fund would end up with a substantially smaller super benefit than the member of the industry super fund, assuming everything else was equal. Over 10 years to the end of December 2011, industry funds outperformed master trusts by 1.4% per annum, returning 5.3% against 3.9%, according to Chant West.

Chant says: “Industry funds as a group finished slightly ahead of master trusts because they tend to have lower allocations to listed shares and listed property. The corollary is that they also have higher allocations to unlisted assets such as private equity, unlisted property and unlisted infrastructure (20% versus 3%), which performed well for them.

“Over the longer term, the strategic allocation policies of industry funds have served them very well. In particular, those allocations to unlisted assets have added to performance and reduced volatility, or risk. They do mean slightly higher investment costs, but those extra costs have been more than justified by the added benefits.”

Related posts:

1. Super funds lose 5.1% in 3 months (to September 2011)
2. Super funds gain 3.1% for October 2011 (but lose 2.4% for year to date)
3. Super funds deliver 9.2% for 12 months (2010/2011 year)

As an employee, you have your employer helping you with your retirement plans by making compulsory super contributions.

If you’re self-employed, your super future is left entirely in your hands, which can be either exciting or daunting.

The eight-step program to super success is a practical tool to help you make the most of your superannuation. Consider following this program to achieve success with your super:

1. Choose your fund

Since 1 July 2005, most Australians have been able to choose their own fund. You may even decide to set up your own super fund. Or, you may be one of the minority who still are unable to choose the type of fund you wish to join. Note that the fund you’e already in may be the best choice for you.

2. Get to know your super fund

There are plenty of no-cost ways you can get to know your super benefit and your super fund by doing a little bit of leg work and asking a few questions. Every superannuation fund member needs to do this as a bare minimum, even if you’re not interested in getting more involved with your superannuation investment. Your fund may also offer you other benefits such as low-cost financial planning services and cheaper home loans.

3. Choose your investment options

Most of Australia’s major superannuation funds give you different levels of choice about where to invest your super.

4. Choose the right level of insurance

If you become ill or have an accident, paying your everyday bills is a bigger concern than saving for your retirement. Most super funds now offer competitive premiums for death or disability insurance, and income protection insurance.

5. Decide how much you want to contribute

Contributing to your super fund is where you can have the greatest control and flexibility over your super, whether you’re an employee, self-employed or not employed. Making personal or voluntary contributions can mean a bigger retirement benefit, which means you decide what your retirement lifestyle can be rather than relying solely on the Government Age Pension.

6. Make additional contributions by taking advantage of salary sacrificing.

If you’re an employee, a tax-effective way of topping up your super may be to use salary sacrificing, which is another way of describing the fact that you’re paying your additional super contributions out of before-tax dollars.

7. Keep an eye on your employer

You can check your super fund to see when your employer paid your superannuation contributions.

8. Keep watch over your fund’s trustees or become a trustee yourself

The annual report you receive from your super fund contains the names of your trustees and, usually, gives you some idea of the skills they hold to do the job. If you’re an employee and you belong to a fund run by your employer, you may be able to select your fund trustees. If you run your own fund, you are the trustee of your fund.

Related posts:

1. Super in 3 steps: You’re probably richer than you think
2. Fund choice: Comparing super funds in 8 steps
3. Retirement planning in six steps

Each year, SuperGuide publishes a super checklist for our readers. Use this list as a kick-start for your 2012 super resolutions. You may not keep all of your resolutions, but if you do just a handful of the tasks listed in the checklist below, you can strengthen the chances of a financially secure retirement.

If you do nothing else…

Check that your super fund has your tax file number (TFN). If your super fund doesn’t have your TFN, your concessional (before-tax) contributions are hit with penalty tax, and you won’t be permitted to make non-concessional (after-tax) contributions, and you’ll be excluded from the co-contribution scheme. For more information, see SuperGuide.com.au article Super for beginners, part 14: Save tax – Supply TFN to your super fund.

Combining super accounts can save you thousands of dollars in fees. If you’re not sure how many super funds you currently have, then locating these accounts and consolidating your super can add thousands of dollars to your retirement savings in an instant. For information on how to find your super accounts see SuperGuide.com.au articles Super in 3 steps: You’re probably richer than you think and Find lost super in 4 steps, and make quick cash.

Ensure you have clear plans about what happens to your super benefits and non-super assets in the event of your death. Doing some planning now can save your family a lot of heartache, and possibly save thousands of dollars in tax. Identifying who receives your super benefits when you die (by ensuring you nominate your beneficiaries) becomes more important when you plan to leave your super benefits to a non-dependant for tax purposes, such as an adult child. For more information on your life expectancy, who can receive your super benefits when you die, and the tax treatment of those benefits, check out the following articles:

• Life expectancy: Will you outlive your retirement savings?
• Estate planning: Dear Dad, Tax for everything
• Estate planning: Beware the dastardly death tax

If your tolerance for ‘New Year’ super resolutions, or in this case, Autumn super resolutions, has already reached its limit, then the SuperGuide.com.au article 8 steps to super success provides a quick overview of what I believe is the bare minimum for anyone hoping for a reasonable superannuation balance on retirement.

Now, for some more super-boosting strategies…

The first step is to work out when you plan to retire and what type of income you want to have in retirement. You can then calculate how much money is necessary to finance your preferred retirement income from the age you retire until the day you die (or beyond if you have dependants you want to look after). Work out how much super and other savings you have now and what type of cash you will have if you continue your current savings strategy. If there is a gap between how much you’ll have and how much you want then you have even greater motivation to make the most of the latest super changes. Alternatively, if you have substantial assets sitting outside the super system you may want to consider shifting some or all of your super assets within the super environment. For more information, check out our special section How much super do I need?, or alternatively, as a starting point, check out the following articles:

• A comfortable retirement: how much super is enough?
• Moving targets: Come on, how much do I really need?
• Setting a retirement target: Living on more than $50,000 a year

The level of income you earn will generally determine whether you make after-tax or before-tax contributions. If you pay more than 15 cents in the dollar tax, then super starts looking attractive from a tax saving point of view. You may also be interested in making before-tax contributions if you want to offset a large capital gains tax bill.

For information on concessional contributions check out the following article: Super concessional contributions: 2011/2012 survival guide

Warning: Anyone considering making further super contributions, or anyone on a high income, needs to be mindful of the contributions caps. If you exceed the concessional contributions cap, expect to be hit with penalty tax. NOW is the time to check the level of super contributions that you make, or are made on your behalf by your employer, to ensure that you don’t exceed the contributions cap inadvertently.

The annual non-concessional contributions cap is $150,000 for the 2011/2012 year. If you’re under the age of 65, you can bring forward up to two years’ worth of non-concessional contributions. For more information check out the following articles:

• Your 2011/2012 guide to non-concessional (after-tax) contributions
• Turning 65: Maxing out your after-tax contributions cap

Note: If you are a small business owner you may be eligible for a $1.205 million after-tax contribution limit for the 2011/2012 year (indexed), which is lifetime contribution limit, in addition to the non-concessional contributions cap. The CGT exemption permits personal contributions resulting from the disposal of qualifying small business assets. If you believe that you may be eligible then seek independent advice because the rules that apply to this exemption are complicated.

Anyone under the age of 65 can make super contributions regardless of whether they are working. If an individual is aged 65 or over, then he or she must work 40 hours in a 30-day period during the financial year in which they plan to make the contribution. For more information, check out the following articles:

• For over-65s: Ten super tips when making contributions
• I’m retired. Can I make super contributions?
• Maxing out the after-tax contributions cap

The co-contribution is a tax-free super contribution from the Federal Government when you make a non-concessional (after-tax) contribution. For more information check out the following articles:

• Cashing in on the co-contribution rules (2011/2012 year)

If you’re willing to spend some money…

If you’re making major financial decisions, particularly decisions with significant tax implications, then consider seeking independent tax or financial advice from an accountant or financial adviser who understands the super rules and charges a fee for advice rather than accepts commissions from product providers for giving you advice. Independent advisers are difficult to find, but not impossible. For more information, check out the following articles:

• THE SOAPBOX EXCLUSIVE: How to spot an independent adviser
• Help! How can we find independent investment advice?
• Six dangers when seeking super fund advice

Related posts:

1. For over-65s: Ten super tips when making contributions
2. Super concessional contributions: 2011/2012 survival guide
3. Your 2011/2012 guide to non-concessional (after-tax) contributions

You will need to confirm the specifics with your accountant, but whether income from a super pension is counted towards assessable income depends on the age of the recipient of the superannuation income stream. If the recipient is aged 60 or over, the pension income from a taxed source doesn’t count towards assessable income. If the recipient is under the age of 60 (and the benefit from a taxed source includes a taxable component), then the taxable component counts towards assessable income.

Note: the pension income (more specifically, the taxable component) of a benefit from an untaxed source is counted towards assessable income, regardless of the age of the recipient.

Background: The ATO states on its website: “Assessable income – This is a person’s ordinary income and statutory income before deductions are taken into account. Reportable employer super contributions do not form part of a person’s assessable income, but are added to it for a number of income tests that use expanded definitions of income.”

Pension income is not employment income, and nor is it self-employed income but it may form part of assessable income if the recipient is under the age of 60 and the pension income includes a taxable component; or if the recipient is any age and receives a benefit from an untaxed source.

I assume when you refer to ‘total income’ you are referring to the special income tests applicable for different entitlements such as, the ability to claim a super tax deduction or to be eligible for the co-contribution.

For example, looking at the co-contribution rules, you must satisfy two income tests both involving ‘total income’ definitions. The first test is the income threshold test, and the second test is the 10% eligible income test.

Total income for the income threshold test (quoting directly from the ATO website) is:

• your assessable income for the income year
• your reportable fringe benefits total (RFBT) for the income year
• the total of your reportable employer super contributions

less

• your allowable business deductions.

Total income for the 10% eligible income test is not reduced by allowable business deductions to ensure that self-employed individuals are not disadvantaged by low profit margins. According to the ATO, “For an individual to satisfy the 10% eligible income test, 10% or more of his or her total income must come from employment-related activities, carrying on a business or a combination of both. These amounts are referred to as eligible income amounts.”

Again, we are an information site rather than advisory site, and you will need to confirm your own circumstances with your accountant, or the ATO.

Related posts:

1. Is my super pension income counted when applying for the Commonwealth Seniors Health Card?
2. Deduction amount still applies for Age Pension income test
3. Does my superannuation pension income affect tax payable on other income?

A: The short answer is ‘no’. Although the Federal Government intends to remove the age limit for receiving Superannuation Guarantee contributions (effective from July 2013), the existing rules for voluntary superannuation contribution rules remain in place.

The existing rules relating to upper age restrictions for super contributions are:

• Voluntary concessional (before-tax) contributions can be made until the fund member turns 75.
• Non-concessional (after-tax) contributions can be made until the fund member turns 75.

Note: Anyone aged 65 years or over must satisfy a work test to be eligible to make a super contribution. Any super contribution made by an individual aged 74 must be received by the super fund within 28 days of the end of the month in which an individual turns 75. For example, if Gerard turns 75 in May, then his super contribution must be registered by his super fund by 28 June. Note that 28-day limit relates to when it is recorded as received by the fund, not when paid by the fund member.

I explain the over-65s work test, and the proposed removal of the age limit for SG contributions, in the following articles:

• Over-65s work test: How does it operate again?
• SG to be paid for over-70s from July 2013

Related posts:

1. I’m retired. Can I make super contributions?
2. Super contributions: Juggling two caps is not excessive
3. 65 and over: making super contributions

I am not permitted to give advice, but I can provide you with a general answer. Generally speaking an individual who makes a contribution greater than $150,000 triggers the bring forward rules for the following two years. For example if an individual made a non-concessional contribution greater than $150,000 in 2008/2009, then the total contributions allowed over the 3 years (2008/2009, 2009/2010 and 2010/2011) would have been $450,000. The individual can then take advantage of a new bring forward in the 2011/2012 year, which is $450,000.

The general rule is that if an individual is under the age of 65 on 1 July of a financial year, then that individual can contribute more than $150,000 in non-concessional contributions in a single financial year, triggering the bring-forward rules. If such an individual makes the contribution after turning 65 in that financial year, then he or she must satisfy a work test.

You will need to verify your personal circumstances with your accountant, or the ATO.

The following articles should also provide more information on your question:

• Super contributions: Turning 65 part-way through the year
• Beef up your super using a bring forward
• Bring forward rule: 10 facts you should know
• Turning 65: Maxing out the after-tax contributions cap

Related posts:

1. Non-concessional contributions: Tread carefully when age 63 or 64 or 65
2. Non-concessional (after-tax) cap also cut by Budget
3. Your 2011/2012 guide to non-concessional (after-tax) contributions

The work test involves some paid activity rather than passive income, although you will need to verify your personal circumstances with an accountant or the ATO.

The following articles provide further background:

• Over-65s work test: How does it operate again?
• For over-65s: Ten super tips when making contributions

Related posts:

1. Over-65s work test: How does it operate again?
2. Tax-deductible contributions: Meeting the 10% income test
3. Super contributions before and after age 65

The ATO has issued some information on the question that you asked. Generally speaking, the contribution is counted in the financial year that the super fund receives the money rather than the financial year in which the employer/individual pays the money. In certain cases however, the ATO will exercise its discretion to treat a contribution as having been made in a different financial year.

You can access the relevant ATO publications by clicking on the links below:

• Super contributions – too much super can mean extra tax
• Practice Statement Law Administration (in particular Example 7, which is outlined below. The example talks about excess contributions, but the issue of timing is the same)

I suggest you confirm the treatment of your super contributions with the ATO.

47. Example 7 37

George is 45 years of age. George’s employer contributes $50,000 each year to his superannuation plan under the terms of an effective salary sacrifice agreement. However, George was unaware that his employer’s contribution for the 2008 financial year was made late, on 3 July 2008. The employer’s contribution for the 2008-09 financial year was made on time on 29 June 2009. This resulted in George having no concessional contributions in the 2008 financial year but concessional contributions of $100,000 in the 2009 financial year. George is issued a concessional contributions tax assessment for the 2009 financial year based on excess concessional contributions of $50,000. George applies to the Commissioner to exercise his discretion and reallocate $50,000 in contributions to the 2008 financial year.

The following factors are relevant matters to consider in this example:

• Of the total contributions made on George’s behalf in the 2009 financial year, $50,000 is more appropriately allocated to the 2008 financial year.
• George could not control the timing of the contribution to his plan. George’s employer controlled the timing of the contribution. However, it is clear from his salary sacrifice agreement that George intends to spread his contributions evenly across financial years.
• George could not reasonably foresee that the superannuation contribution made under his salary sacrifice agreement would be made outside the financial year to which the contribution related.
• Had George’s employer made the 2008 financial year contribution within that year, George would not have had an excess concessional contributions tax liability for the 2009 year.

In these circumstances, a decision maker may consider that special circumstances exist and decide that the contribution of $50,000 made by George’s employer on 3 July 2008 should be reallocated to the 2008 financial year. An excess contributions tax liability in this case could be regarded as unjust, unreasonable or inappropriate because it has arisen as a direct consequence of the actual timing of the employer’s contributions which were meant to be made annually and would have been expected to be made in different years. Also, reallocating the contribution to the appropriate financial year is consistent with the object of Division 292, to ensure that superannuation contributions are spread over the person’s life.

This example describes the situation where the timing of salary sacrifice contributions made by an employer causes an artificial distortion or bunching of contributions in one financial year but where the contributions relate to different financial years. Exercising the discretion to reallocate the contributions to the appropriate year spreads the contributions and aligns them with the financial year in which the employer’s obligation arises. This is consistent with the object of Division 292.

The way in which the Superannuation Guarantee (Administration) Act 1992 (SGAA) operates may also result in timing issues. Contributions made within 28 days after the end of the quarter are taken into account for the purposes for the SGAA as if they had been made in that quarter.38 A contribution made by 28 July for example, will therefore be counted for the purposes of the SGAA as a contribution made for the quarter commencing 1 April of the previous financial year, but for Division 292 purposes it is counted as being made in the next financial year. It is possible that counting the contribution for that later year could produce excess concessional contributions. If excess contributions tax arises, the applicability of the contributions for SGAA purposes to an earlier year might form part of special circumstances and would then be a relevant matter to consider.

Related posts:

1. How is contributions tax deducted from salary sacrifice contributions?
2. That’s not fair! (No 1): Salary sacrifice can cause a SG pay cut
3. How does salary sacrifice for super work?

I’m sorry to read about your predicament. I assume the ATO has sent you a letter regarding your appeal options, which is a starting point for you. SuperGuide has previously published some information on what the ATO will consider as a legitimate reason for the ATO to exercise its discretion. I have provided the links to these articles (set out below):

• THE SOAPBOX: Show mercy on contributions caps, for votes’ sake (this article includes this link to the ATO document explaining the process for having your excess contributions disregarded by the ATO)
• Super tax alert: Have you counted your super contributions lately? (this articles includes this link to an ATO practice statement outlining some scenarios where the ATO forgives excess contributions and where it doesn’t)
• Making super contributions: cracking concessional cap means more tax

If you believe your financial adviser gave you incorrect advice, you can make a complaint about that advice to the Financial Ombudsman Service (FOS). FOS may then be able to broker a financial settlement for you. You can find out more by clicking on this link.

You may also be able to take legal action against your adviser, but that can be an expensive process.

Related posts:

1. Non-concessional contributions: Tread carefully when age 63 or 64 or 65
2. Making super contributions: cracking concessional cap means more tax
3. Super contributions: Juggling two caps is not excessive