Dymocks director’s super slip-up leads to $70,000 tax bill shock
Tuesday, January 22, 2013/
Business owners have once again been warmed of the importance of making sure they don’t exceed superannuation caps, following the decision of a judge to uphold a $70,000 tax bill for a director of bookstore chain Dymocks.
Experts say it’s crucial to be on top of the many changes to the superannuation system in the last few years.
“I think people are pretty much up to speed with it now,” says CPA policy head Paul Drum, “but it’s an example of the traps and pitfalls which can come with over-contributing to superannuation.”
The Administrative Appeals Tribunal has upheld a 78% tax rate, which will be applied to an $89,000 overpayment made by director Ann Verschuer, who is the partner of Dymocks chairman John Forsyth. Verschuer breached concessional and non-concessional caps during the same financial year.
The tribunal heard Dymocks approved an increase to Verschuer’s super account in 2008, but due to an error, was paid in the 2009 financial year. Later that same year, Verschuer contributed $90,000 tax to her self-managed fund, breaching the $100,000 cap.
That breach would bring a 31.5% penalty, but Verschuer was also affected by a 46.5% tax due to breaching both concessional and non-concessional caps. Together, the tax adds up to 78%, and with 15% tax on super comes to 93%.
And while AAT member Robert Deutsch said in the ruling the tax rate is far too high, it doesn’t warrant waiving the tax.
“Whilst this is clearly a rate of tax that is itself unacceptably high by almost every standard (with the possible exception of recently announced French taxes), it is the prescribed outcome declared in unambiguous terms by the Federal Parliament,” Deutsch said.
The case is similar to one heard last year, which involved late contributions too close to the June 30 deadline.
Paul Drum says given the case occurred a few years ago, it’s fit to point out many superannuation fund members have become accustomed to the new rules. But he says this comes at a cost – more members are wary of adjusting their super.
“I think with negative returns on their super, a lot of people have taken much more interest since the global financial crisis. As a result, it means they may not have been contributing as much.”
Find out more about super changes by reading tax expert Terry Hayes’ recent article, ‘A truckload of super and tax reforms for 2013’.
This story first appeared on SmartCompany.