Data released by the Australian Tax Office shows more taxpayers are avoiding the pitfalls of excess superannuation contributions, with fewer falling victim to paying more than the legal caps allow in any one year.
The statistics, released this week, show the number of excess contributions tax assessments issued by the ATO fell from 50,049 in 2009-10, to just 35,999 in 2010-11. There are so far no statistics released for the 2011-12 year.
The issue of excess contributions has come under scrutiny in recent years. The superannuation industry has continued to argue being forced to pay a 47.5% tax on excess contributions, when made accidentally, is unfair.
However, Graeme Colley, technical director for the Self-Managed Superannuation Fund Professionals’ Association of Australia, told SmartCompany this morning the decline may not continue.
He points out in the 2012-13 financial year, the concessional contributions cap was reduced to $25,000. This change, he says, could have caught out people who were unaware of the change.
“I do think it will have improved, and that there could be a decrease, but there is a possibility that it may increase as well.”
The controversy over excess contributions has been a sore point in the superannuation industry for some time. Experts have long been critical of the excess contributions tax of 47.5% to be paid on earnings made over the contributions limit.
Cases heard before the ATO have shown many of these excess contributions to be accidents, although they still attract the higher tax. In one particular case, a company director contributed an extra $90,000 and was charged an effective tax rate of 93% on the excess.
This is why Colley says the industry was relieved to see the government introduce new initiatives for excess contributions in the recent wave of superannuation reforms. Now, taxpayers will be able to withdraw excess funds and escape paying the tax.
The contributions cap will also be raised to $35,000.
Colley says he believes the extra noise around excess contributions has resulted in fewer cases, even though the release of the 2012-13 figures could still yet reveal more have fallen victim.
“If there is a rise, there are other factors, such as the government’s announcement, which will dampen that effect.”