The Australian Taxation Office (ATO) has announced its intention to send out approximately 300,000 letters before Christmas to individuals who would have exceeded the new superannuation contributions cap limits had they been implemented last year, according to a specialist superannuation technical manager.
Advisers also need to prepare to explain this correspondence to their clients, he said.
“Anyone that contributed more than this year’s cap last year is going to get a letter from the tax office saying ‘if you do this again you’ll be taxed concessionally,'” Cavendish Superannuation technical services manager Tim Miller said.
Last year, the ATO sent out around 20,000 of these contributions cap warning letters and 20 per cent of the recipients made enquiries as to the implications of the correspondence, according to Miller.
Examining the level of responses last year and translating that statistic to this year means approximately 60,000 queries will be generated from sending out these letters.
In this event financial advisers, especially those servicing the self-managed superannuation sector, should be readying themselves to answer questions from their clients regarding this subject, Miller said.
“Clients will probably ring and ask what this is about and it’s just information from the ATO,” he said.
“The ATO don’t give out information well and they don’t write letters very well so it will probably be a scary letter where the client will say: ‘hey – how come I’ve got this 31.5 per cent tax liability?’ Well the short answer is you don’t unless you have exceeded the cap this year.”
The ATO have not provided the industry with a draft copy of the letter but may have already begun sending them out, Miller said.
