Note: The IGT has now issued its findings and recommendations on the excess contributions tax regime. For information on the IGT report, see 2016 SuperGuide article Excess contributions tax: The most ridiculous super policy ever?
The Inspector-General of Taxation (IGT) is investigating the ATO’s administration of the excess contributions tax (ECT) regime and its compliance approach when dealing with taxpayers who exceed their contributions caps. The IGT is taking submissions but those submissions must be lodged by 18 DECEMBER 2012.
If you have received an ECT assessment, or you have had related dealings with the ATO on this issue, then the IGT invites you to provide a written submission in two parts:
- your experience dealing with the ATO on the excess contributions tax rules
- your suggestions to improve the process
If you know of anyone who has received an ECT assessment, please forward this article to them. We need the IGT to hear from as many people as possible.
I do believe that the ECT regime is bad law and policy and that the ATO has been forced to administer and accordingly can only implement what the law states. Even so, the lack of clarity from the ATO, and the apparent hard-line approach to interpreting what is deemed to be ‘special circumstances’ when deciding whether to disregard or re-allocate an excess contribution has caused a huge amount of anxiety for affected fund members.
The IGT appears to agree with my views, having listed four concerns with the ATO’s administration of the ECT regime:
- difficulty in understanding the basis for ECT liability determinations and checking the accuracy of ECT assessments
- inadequate consideration of taxpayer-provided information
- ECT assessments effectively penalising taxpayers for breaching the contributions caps in circumstances beyond the taxpayer’s control
- insufficient public guidance on ECT, particularly with respect to ‘special circumstances’ in which the Commissioner may exercise his discretion to disregard or re-allocated the excess contributions, leasing to a perception that there is a reluctance to, or inconsistencies in, the exercise of this discretion.
When making a submission, you will need to provide a detailed account of your experiences in dealing with the ATO, including perhaps, a time line outlining your key interactions with the ATO, and an estimate of the time taken to deal with the ECT issue. Your accountant may also choose to provide a related submission, or his or her own submission on the ECT regime and how the ATO has dealt with it.
The official name of the IGT review is: “Review into the Australian Taxation Office’s compliance approach to individual taxpayers – superannuation excess contributions tax”.
The terms of reference, submission guidelines (including IGT tips on what to include in your submission) and lodgement details are explained in this article, and the link to the IGT document is provided at the end of this article.
Review into the Australian Taxation Office’s compliance approach to individual taxpayers – superannuation excess contributions tax
Terms of reference
Quoting directly from the official review document, the terms of reference are:
In accordance with subsection 8(1) of the Inspector-General of Taxation Act 2003 (IGT Act 2003), the IGT will review the ATO’s administration of the ECT with a specific focus on:
1. The clarity and comprehensiveness of ATO advice and guidance on the ECT, including those relating to the Commissioner’s discretion to disregard or reallocate excess contributions.
2. The timeliness of the ATO’s ECT assessment.
3. The ATO processes for making ECT assessments, including:
- a. processes for verifying the accuracy of information upon which it relies;
- b. procedures for requesting and considering information provided by taxpayers and tax practitioners; and
- c. the consistency and appropriateness of the exercise of the Commissioner’s discretion to disregard or reallocate breaches of the contributions caps.
4. The quality of the ATO’s communications with taxpayers and tax practitioners on ECT matters, particularly the extent to which it enables the taxpayer to understand the case against them and actions they may take to address the ATO’s concerns.
5. The adverse impacts that the ATO’s administration of ECT can have on taxpayers and tax practitioners and the ATO’s support to minimise these impacts.
The submission guidelines produced by the IGT are reasonably easy to follow, and the key guideline is that they request you divide your submission into 2 parts:
- your experience dealing with the ATO on the ECT regime
- suggestions where there may be opportunities for improvement
Your experience in dealing with the ATO on ECT regime
In addition to providing a detailed account of your experiences in dealing with the ATO (including timelines of ATO communications, costs involved in process and potentially an adviser submission), the IGT recommends that you provide details of specific factors (including ATO practices and behaviours) that you believe delayed the resolution of the ECT issue and resulted in an increase in costs and detrimentally affected your personal or business affairs. The IGT also requests that you include any positive aspects to the ATO process.
The IGT provides 10 questions that you can ask yourself, which is designed to help you draft your submission. For example:
- How did you become aware that your contributions cap had been exceeded? If the ATO contacted you first, how did they do that? Did the ATO provide you with sufficient information for you to understand the reasons for the breach?
- What was the amount of the breach? What circumstances gave rise to the breach?
- Did you consult the ATO website, or any other published ATO advice or guidance regarding ECT prior to making your contribution?
Opportunities for improvement
The IGT also invites you to suggest improvements to improve the ATO’s administration of the ECT. If you wish, you can outline alternative frameworks, actions, practices or behaviours which could minimise costs or adverse impacts arising from the current system.
The IGT provides 7 questions to help you outline improvements that you may choose to suggest. For example
- Do you think the requirements of the ECT regime are easy to understand? Does the existing guidance provided by the ATO assist you to better understand its requirements and what you need to do to avoid breaching the caps?
- Could any other parties assist taxpayers to understand their ECT obligations?
- Could the monitoring of superannuation contribution levels be improved to minimise the risk of taxpayers exceeding their contributions caps?
You can find the full list of questions by clicking on the IGT link at the end of the article.
You must lodge your submission by 18 December 2012. Submissions can be sent by post, fax or email (firstname.lastname@example.org).
For full lodgement and submission details click on the IGT link below:
- Review into the Australian Taxation Office’s compliance approach to individual taxpayers – superannuation excess contributions tax
For more information about the role of the Inspector-General of Taxation check out the IGT website: www.igt.gov.au