It should not be necessary to remind people about the traps of making superannuation contributions too close to June 30 each year. The essential trap is that the contribution gets treated as falling into the next year, with all the adverse consequences that flow from that.
But if a reminder is needed, it has come in the form of two recent decision of the Administrative Appeals Tribunal (AAT). One involved a late BPAY super contribution and the other a late EFT contribution. In each case, the person’s intention was clear, but the law didn’t accommodate their wishes in the circumstances.
Late BPAY payment
In the first case, the AAT upheld an excess superannuation contributions tax assessment and affirmed the Commissioner’s decision that there were no “special circumstances” under the law to warrant reallocating an excess contribution received late via BPAY.
Mrs Rawson was employed by her husband who carried on a motorcycle repair business as a sole trader. On June 29, 2009, a concessional superannuation contribution of $97,127 was initiated by her husband via BPAY to her superannuation fund. However, the employer did not initiate the contribution until 7.21pm on June 29, 2009 so that the BPAY payment was not received into the superannuation fund’s bank account until July 1, 2009.
The bank’s terms and conditions of BPay provided that a payment would normally only be treated as “received” by the biller on the next business day if the BPAY payment was made before the bank’s cut-off time of 6.30pm.
The Commissioner treated the $97,127 amount as a concessional contribution “made” in the 2010 year (rather than the 2009 year as intended). To make matters worse, subsequent concessional superannuation contributions in October 2009, January 2009 and June 2010 brought Mrs Rawson’s total concessional contributions to $147,127 for the 2010 year.
She was aged over 50 years so her concessional contributions cap was $50,000 for the 2010 year (down from $100,000 for the 2009 year). In July 2011, the Commissioner issued her with an excess contributions tax (ECT) assessment of $30,595 (i.e. 31.5% on her excess concessional contributions of $97,127 for 2010).
Mrs Rawson requested the Commissioner to make a determination to disregard or reallocate the excess contributions to another financial year (i.e. the 2009 year). The Commissioner refused that request on the grounds that her case did not demonstrate “special circumstances” as they were not sufficiently unusual or out of the ordinary.
The AAT agreed and upheld the ECT assessment. It ruled that the concessional contribution by BPAY on 29 June 2009 was not “made” in the 2009 year as the amount was not “received” by the superannuation fund until July 1, 2009 (i.e. in the 2010 year).
The Tribunal also found no special circumstances existed as the mere fact that a transfer of funds, initiated on the last business day of the financial year (given it was made after the BPAY cut off on June 29), but was not credited to the superannuation fund until the following business day, was not in any way “unusual or out of the ordinary”.
The late EFT payment
In the second case, the AAT also upheld an excess contributions tax assessment after ruling that there were no “special circumstances” to reallocate an excess contribution made via an electronic funds transfer.
In late June 2009, the taxpayer, Mr Paget, requested his employer to bring forward a superannuation contribution that would ordinarily be paid in July 2009 (in respect of June 2009 wages). On June 30, 2009, his employer initiated an electronic funds transfer (EFT) of $8,286 from BankWest to Mr Paget’s superannuation fund in Sydney. However, the contribution was not received into the superannuation fund’s bank account until July 1, 2009.