The 2011 federal budget has included a measure of relief for members of superannuation funds who breach the consessional contribution cap limit of $25,000.
“From 1 July 2011, individuals who breach the concessional contributions cap by up to $10,000 can request that these excess contributions be refunded to them,” Superannuation Minister Bill Shorten announced yesterday.
The ability to claim a refund will only apply to first-time breaches of the contribution cap.
The majority of industry commentators welcomed the initiative as a step in the right direction, but thought the relief provision potentially should have gone further.
“We’re pleased the government has actually acknowledged the excess contributions tax is an issue and have started to deal with it, so consequently they are moving in the right direction to address what is an inequitable tax, but we feel the measure falls well short of effectively addressing the problem,” Self-Managed Super Fund Professionals’ Association of Australia chief executive Andrea Slattery said.
“Inadvertent breaches are still gong to occur and excessive tax penalties will still be applied, so that hasn’t been addressed, but it will rectify concessional cap breaches that are only small.”
The fact the relief only came into play from 1 July this year was another disappointing aspect, according to Slattery.
“People who breach the cap in the 2009 and 2010 financial years will still have to endure the current excess contributions tax regime,” she said.
Institute of Chartered Accounts in Australia head of superannuation Liz Westover said it was a great initiative.
“It is a very much needed change to the operation of the excess contributions tax regime and I think it is going to help a lot of taxpayers that make these inadvertent minor breaches,” Westover said.
However, she pointed out super fund members still had to be vigilant about the contributions limits because the relief was only a one-off event and it was only for breaches up to $10,000 and not for the first $10,000 of a breach.
“It means if you make $20,000 worth of excess contributions you don’t qualify for these provisions,” she explained.
Macquarie Adviser Services executive director David Shirlow said he thought there should have been some relief for breaches of the non-concessional contributions caps as well, but did concede the refunding of smaller concessional cap breaches might eliminate flow-on non-concessional breaches anyway.
“But all of this is better than no measure, so it’s a really positive move in the scheme of things,” Shirlow said.
Australian Self Managed Super Fund Members Association (ASMA) chair Grant Abbott said on the surface the move looked good for members, but might pose an administrative nightmare due to the fact details of how the 15 per cent contributions tax would be treated when the excess monies were refunded had not been addressed.
