The Australian Taxation Office last Friday provided an update to the Excess Contributions Tax (ECT) statistics. Many in the industry have been waiting to see the impact of the Labor Government’s decision to halve the concessional contributions cap for the 2009-10 financial year. As you can see from the chart below, it was significant, with 45,330 ECT notices issued for breaches of the concessional contribution cap. This represented a 296% increase over the previous financial year, collecting $130.9 million in taxes.
Whilst it is encouraging that both the Federal Government and ATO have now responded to these issues of excess contribution tax (see ‘once-off refund’ and ‘de-miminis test’), it is quite clear that ‘horse had bolted’ by this stage, given the amount of assessments issued in for 2009-10 financial year… and aren’t finished yet for that financial year!!
Interestingly when looking at the following chart, we have progressively seen a reduction in the level of excess concessional and non-concessional contributions (however, not where caught with both CC & NCC). The average excessive concessional contribution for 2009-10 is $2,888, well inside the proposed ‘once-off’ ECT refund limit of $10,000. Non-concessional contributions have dropped extensively as well.
It appears only now are people who contribute to superannuation understanding the importance of appropriately planning and managing their contribution limits. This problem has not only impacted members, but also professional service providers (e.g. advisers, accountants, etc.) who may have been implicated in any cap breach.
People impacted by inadvertent breaches where small amounts have triggered large excess contributions tax liabilities are currently being refunded these tax amounts by the ATO. For the rest of us (including Minister, Bill Shorten), breaching your excess contributions tax limit can become a costly exercise that requires greater attention.