Q: I salary sacrifice into my super. My super contribution for the month of June 2011 is not available to my super fund until July 2011. Will this contribution fall under the 2010 financial year limit or the 2011 financial year limit?
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.
