Complicating excess superannuation contributions

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Key Points

  • The Institute has submitted a response to Treasury’s exposure draft on the refund of excess concessional contributions
  • The submission discusses the government’s previous budget announcement to refund up to $10,000 of excess concessional contributions for individuals
  • The Institute says the proposed refund also adds complexity and confusion to the superannuation system.

Proposed legislation that would refund excess concessional superannuation contributions up to $10,000 does not go far enough in rectifying the harsh, unfair penalties currently in place, according to the Institute.

In its submission in response to Treasury’s exposure draft, Refund of Excess Concessional Contributions, the Institute says the proposed refund adds complexity and confusion to the superannuation system and does not go to the heart of the policy intent; specifically, to provide relief to Australians inadvertently making excessive contributions.

Liz Westover, the Institute’s Head of Superannuation, says the availability of the relief is limited and it does not do enough to truly address the inequities of the excess contributions tax regime.

'While we support the government’s initiative to provide some relief to individuals who have made minor breaches to their caps, a significant overhaul that enables the refund of all excess contributions is needed to ensure the tax is equitable and appropriate,' Ms Westover says.

The submission also discusses some of the details contained in the government’s proposed legislation, including:

  • Obligations of superannuation providers
  • Entitlements to credits
  • Variations of refunded excess concessional contributions determinations.

The government initially proposed the new opportunity for a one-off refund in May 2011, during its announcements regarding the federal Budget.

'At a time when many of the rules around superannuation are quite complex, Australians need to have confidence in the superannuation system to ensure they can comfortably save for retirement. A simplified system is the best way to achieve this outcome; however, the proposed legislation does not align with this objective,' says Ms Westover.

Article last updated 10 November 2015

Comments on this article

  • Mark Edwards 1 Feb 2012 11:16am

    Hi ICA If the breach has been unintentional then there should be no penalty. Based on the facts surely the ATO can ascertain if there has been intentional breach. In my experience if the financial planner has been involved in the setting up of any life insurance within super this may have escaped the notice of the employee however they receive a penalty. Short of suing the financial planner there is nothing they can do. I would like the Institute to request that people in this situation have the opportunity to pay the tax at normal marginal rates and not be penalized for something they did not know about. Also request for retrospectivity as the ATO seem to do. I am sure it was not the intention to unfairly penalize the retirement funds of these unfortunate people. In some situation the employee has received no benefit via salary sacrifice. The life policy has been issued in lieu of other insurance due to the particular employees circumstance and that is available to other employees. There should be no limit such as the $10,000.


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