House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

Chapter 4 Superannuation - refund of excess concessional contributions

Outline of chapter

4.1 Schedule 4 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997), the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 , the Taxation Administration Act 1953 (TAA 1953), and the Taxation (Interest on Overpayments and Early Payments) Act 1983 to allow eligible individuals the option to effectively have excess concessional contributions of $10,000 or less refunded to them. However, if the refund is accepted, the excess concessional contributions will be assessed as income for the year of the excess contributions, rather than paying excess contributions tax.

Context of amendments

4.2 Concessional contributions are generally those contributions which are included in the assessable income of a complying superannuation fund or a retirement savings account (RSA) and are counted towards the concessional contributions cap. Concessional contributions include all employer contributions (including compulsory superannuation guarantee and salary sacrificed amounts) and personal contributions for which a deduction is allowed (generally restricted to those self-employed and those not employed). 'Concessional contributions' are defined in section 292-25 of the ITAA 1997.

4.3 As set out in Subdivision 295-H of the ITAA 1997, concessional contributions that are included in the assessable income of a complying superannuation fund form part of the low tax component of the fund's taxable income. Subdivision 295-H also provides that concessional contributions included in the assessable income of an RSA form part of the RSA component of the RSA's taxable income. These components are subject to 15 per cent tax payable by the superannuation entity as set out in sections 23 (RSAs) and 26 (superannuation funds) of the Income Tax Rates Act 1986 .

4.4 An individual's concessional contributions are subject to an annual contributions cap.

4.5 The concessional contributions cap are set out in subsection 292-20(2) of the ITAA 1997. For the 2011-12 financial year, the concessional contributions cap is $25,000. For those aged 50 or over a transitional cap of $50,000 applies for the 2011-12 year, as set out in section 292-20 of the Income Tax (Transitional Provisions) Act 1997 . The Government has announced that those aged 50 and over with superannuation balances below $500,000 will be subject to a $50,000 cap from 1 July 2012.

4.6 As outlined in section 292-15 of the ITAA 1997, individuals are liable to pay excess contribution tax if they have excess concessional contributions for a financial year. An individual has excess concessional contributions for a financial year if the amount of the individual's concessional contributions for the financial year exceeds the individual's concessional contributions cap for the financial year. Excess contributions tax is in addition to any tax paid by the superannuation entity in respect of the contribution.

4.7 Section 5 of the Superannuation (Excess Concessional Contributions Tax) Act 2007 imposes excess contributions tax at 31.5 per cent of a person's excess concessional contributions for a financial year. The purpose of excess contributions tax is to remove the concessional tax treatment that would otherwise apply. The rate of excess contributions tax was also set at a high level to encourage individuals to comply with the concessional contributions cap as there is no other limit to the amount of assessable contributions that can be made.

4.8 If an individual has excess concessional contributions, the Commissioner of Taxation (Commissioner) must issue an excess contributions tax assessment. The Commissioner may also amend assessments within certain timeframes. Excess contributions tax is due and payable at the end of 21 days after the Commissioner gives the individual notice of the excess contributions tax assessment. These rules are covered in Subdivisions 292-E, 292-F and 292-G of the ITAA 1997.

4.9 A person may apply to the Commissioner for a determination that their excess concessional contributions for a financial year be disregarded or reallocated to another financial year. The Commissioner can only make this determination if there are special circumstances and making the determination is consistent with the object of the law. This is covered in Subdivision 292-H, in particular section 292-465 of the ITAA 1997.

4.10 When the Commissioner has information indicating that an individual has excess concessional contributions, the Commissioner sends a pre-assessment letter to the individual. The individual then has an opportunity to verify the contribution amount reported by their fund. If the information is incorrect, the individual will usually ask their fund to correct the information they have provided to the Commissioner. The individual may also request the Commissioner to exercise the discretion to disregard or reallocate contributions at this stage, as set out in section 292-465 of the ITAA 1997. However, the letter itself is not an excess contributions tax assessment. If the Commissioner subsequently issues an excess contributions tax notice of assessment, the individual can object to any assessment with which they are dissatisfied as outlined in section 292-245 of the ITAA 1997.

4.11 The Commissioner must give an individual a 'release authority' as soon as practicable after making an excess contributions tax assessment. If the excess contributions tax is for excess concessional contributions an individual may choose to give the release authority to their superannuation provider within 90 days after the date of the release authority. The release authority has two important functions. First, it allows the superannuation provider to pay out a part of a member's benefits. Secondly, it allows the individual to pay their excess contributions tax liability from their superannuation monies. If the release authority is used, the individual may specify the amount to be released. The release authority may be given to more than one superannuation provider, but the total amount released must not exceed the excess contributions tax. Alternatively the individual can pay the excess contributions tax out of non-superannuation sources and not use the release authority. Collection of the excess contributions tax is outlined in Subdivision 292-G of the ITAA 1997.

4.12 Excess concessional contributions are also included in an individual's non-concessional contributions. This is to prevent high income earners from circumventing the non-concessional contributions cap by making unlimited excess concessional contributions. The meaning of 'non-concessional contributions' is set out in section 292-90 of the ITAA 1997.

4.13 These amendments provide an option for eligible individuals to pay the excess contributions tax under current processes or effectively have excess concessional contributions of $10,000 or less refunded to them and have the amount of excess concessional contributions taxed as assessable income at their marginal tax rate(s).

Summary of new law

4.14 An eligible individual will have an option to have 85 per cent of their excess concessional contributions taken out of their superannuation fund and the full amount of the excess concessional contributions assessed at their marginal income tax rate rather than incurring excess contributions tax. The Commissioner will, in making or amending that assessment, allow the individual a refundable tax offset equal to 15 per cent of the excess concessional contributions. This measure only applies where an individual has excess concessional contributions of $10,000 (not indexed) or less and did not have excess concessional contributions for an earlier financial year commencing on or after 1 July 2011.

Comparison of key features of new law and current law

Detailed explanation of new law

Release authorities for refunded excess concessional contributions

4.15 The Commissioner may issue a release authority to a superannuation provider if the Commissioner makes the determination discussed in paragraph 4.25. [ Schedule 4, item 1, subsection 292-420(1) of the ITAA 1997 ]

4.16 The release authority must state the amount to be released, which is usually 85 per cent of the excess concessional contributions to which the determination relates. The release authority must be dated and contain any other information the Commissioner considers relevant. Only 85 per cent of the excess concessional contributions will usually be stated because this takes account of the fact that the relevant excess will usually be attributable to contributions that are assessable and the superannuation provider will have reduced them by 15 per cent to provide for its income tax liability. [ Schedule 4, item 1, subsection 292-420(2) of the ITAA 1997 ]

4.17 The refund release authority under subsection 292-420(1) will be for an amount less than 85 per cent of the relevant excess concessional contributions if any excess contributions tax has already been released pursuant to a release authority given under section 292-415 for the excess concessional contributions. In this case, the Commissioner may issue a refund release authority for any difference. The Commissioner will not issue a refund release authority if the amount to be released is reduced to zero. [ Schedule 4, item 1, subsection 292-420(3) and paragraph 292-420(1)(c) of the ITAA 1997 ]

4.18 A superannuation provider that is issued with the release authority must:

•

pay to the Commissioner the amount stated in the release authority within 30 days of the date of issue of the release authority; and

•

provide to the Commissioner a statement in the approved form, within 30 days of the date of issue of the release authority or within seven days of payment, whichever is earlier, to advise the Commissioner of the payment.

[ Schedule 4, item 1, subsection 292-420(4) of the ITAA 1997 ]

4.19 A superannuation provider is not required to comply with the release authority if:

•

the sum of the values of the superannuation interests held by the provider for the individual (other than those described in the following dot point) is less than the amount stated in the release authority; or

•

the provider holds only one or more of the following superannuation interests for the individual:

-

a defined benefit interest;

-

an interest in a non-complying superannuation fund; or

-

an interest supporting a superannuation income stream.

[ Schedule 4, item 1, subsection 292-420(5) of the ITAA 1997 ]

4.20 If the superannuation provider is not required to comply with the release authority, the provider must, within 30 days of its issue date, advise the Commissioner, using an approved form, that it is not required to comply. The Commissioner may choose not to penalise a superannuation provider that does not pay an amount pursuant to a release authority if it provides a reason other than those listed under subsection 292-420(5). [ Schedule 4, item 1, subsection 292-420(6) of the ITAA 1997 ]

4.21 Before the Commissioner receives the amount requested in the release authority the Commissioner may vary or revoke the release authority. This will allow the Commissioner to make corrections if, for example, new information about an individual's concessional contributions is received. [ Schedule 4, item 1, subsection 292-420(7) of the ITAA 1997 ]

4.22 The individual is entitled to a credit for the amount paid by a superannuation provider to the Commissioner under the release authority. The time at which the individual is entitled to the credit, depends on whether the Commissioner receives the amount released by the provider before, or after, the individual's income tax assessment is made or amended. [ Schedule 4, item 1, subsection 292-420(8) of the ITAA 1997 ]

4.23 This means the Commissioner will hold the entire credit amount until an assessment or amended assessment is made. However, the Commissioner may be liable to pay the individual interest if any refund the individual is entitled to is delayed unduly.

Interest for late payments of money received by the Commissioner in accordance with the release authority

4.24 If the Commissioner is required to refund all or part of a credit as a result of an amount paid by a superannuation provider in accordance with the release authority and this is not done within 60 days of receiving that amount, interest will accrue on the amount that has not been refunded. The amount on which the interest is payable also includes any portion of the refundable tax offset that the Commissioner is required to refund. The interest is payable on a daily basis at the base interest rate for the period beginning 60 days after the day the Commissioner receives the payment and ending on the day of the refund. [ Schedule 4, item 2, section 292-425 of the ITAA 1997 ]

Refunded excess concessional contributions

4.25 If all of the following conditions are met, the Commissioner may issue an individual with a notice of offer for a refund:

•

the Commissioner is satisfied that the individual has excess concessional contributions for a financial year;

•

the amount of excess concessional contributions is $10,000 or less;

•

the individual does not have excess concessional contributions for an earlier financial year starting from 1 July 2011; and

•

the individual has lodged an income tax return for the relevant income year within 12 months of the end of that year, or within such longer period as the Commissioner allows.

[ Schedule 4, item 2, paragraphs 292-467(1)(a) to (d) of the ITAA 1997 ]

4.26 The conditions for an individual to be made an offer for a refund mean:

•

once an individual has excess concessional contributions in any financial year from 2011-12, they are no longer eligible for the refund option in any subsequent year. (Note: an individual's eligibility in a particular year could be affected by amendments to their excess contributions tax assessments in an earlier year that removes the individual from having made excess concessional contributions, for example, as a result of exercising the section 292-465 Commissioner's discretion.);

•

if the individual exceeds their concessional contributions cap in more than one financial year before receiving notification from the Commissioner then only the first year will be eligible for the refund; and

•

existing excess contributions tax processes apply for non-eligible individuals and for those who do not accept the refund offer.

4.27 The option does not apply retrospectively, that is, to excess concessional contributions made before the 2011-12 financial year. Individual circumstances before 1 July 2011 also do not affect eligibility for refund. This means that any excess concessional contributions for a year prior to 1 July 2011 are not relevant in determining eligibility.

Example 4.11 : Excess concessional contributions made prior to 1 July 2011 are not used to determine whether an individual is eligible for a refund offer

The Commissioner determines an individual has excess concessional contributions of $5,000 for the 2010-11 financial year. The Commissioner then issues an excess contributions tax notice of assessment for excess concessional contributions of $5,000.

Later, the Commissioner determines an individual has excess concessional contributions of $6,000 for the 2011-12 financial year and determines that the individual is eligible for a refund offer under this measure, because the earlier $5,000 excess concessional contributions was made prior to 1 July 2011, hence it is not relevant to the individual's eligibility for a refund.

Example 4.12 : Excess concessional contributions made prior to 1 July 2011 are not refundable

The Commissioner determines an individual has excess concessional contributions of $5,000 for the 2010-11 financial year. The Commissioner then issues an excess contributions tax notice of assessment for excess concessional contributions of $5,000, because the refund offer does not apply to excess concessional contributions prior to 1 July 2011.

Example 4.13 : The choice not to accept a refund offer means the individual is not entitled to a future refund offer.

The Commissioner determines an individual has excess concessional contributions of $5,000 for the 2011-12 financial year and determines that the individual is eligible for a refund offer under this measure. The individual chooses not to accept the offer and hence is assessed for excess contributions tax.

Later, the Commissioner determines an individual has excess concessional contributions of $6,000 for the 2012-13 financial year. The individual is not eligible for a refund offer under this measure, because the individual had $5,000 excess concessional contributions in the 2011-12 financial year.

4.28 If the individual accepts the refund offer, the Commissioner may make a determination that excess concessional contributions for that financial year are to be disregarded for the purposes of the excess contributions tax provisions (that is, Division 292 of the ITAA 1997). [ Schedule 4, item 2, subsections 292-467(1) and (3) of the ITAA 1997 ]

4.29 A refund determination does not result in a non-acceptance of a contribution, nor is it a return of a contribution. As a result the contributions that gave rise to a refund determination are still contributions in relation to the member and the superannuation entity, and hence continue to count towards satisfying an employer's superannuation guarantee obligations and where appropriate, remain assessable income of the fund. The refund determination merely changes the income tax treatment of the individual in relation to the excess concessional contributions. Where an amount is paid to the Commissioner as a result of the refund determination it should also be noted that the amount released from the fund is considered a superannuation benefit. The income tax treatment of the benefit is outlined in paragraph 4.58.

4.30 When the Commissioner issues a written notice of offer to the eligible individual, the individual may accept the refund offer within 28 days after the notice is issued or within such longer period as the Commissioner allows.

•

An offer can only be accepted using the approved form.

•

If the individual does not wish to accept the offer they could allow the offer to lapse, or contact the Australian Taxation Office (ATO), but they are not required to formally reject an offer.

•

A decision not to accept the offer will not result in the individual being entitled for a refund offer in a future year.

•

The choice that the individual makes is irrevocable. The Commissioner will proceed to assess excess contributions tax if the offer is not accepted on time.

[ Schedule 4, item 2, subsection 292-467(3) of the ITAA 1997 ]

4.31 The written notice of offer will be issued at a similar time to the existing letter the Commissioner sends to individuals prior to making an excess contributions tax assessment. This letter tells the individual they may have to pay excess contributions tax. While the individual cannot object to the offer, the individual will still be able to:

•

advise the Commissioner that the contribution amount is incorrect and discuss with their superannuation provider the need to have the amount of concessional contributions re-reported under section 390-115 of the TAA 1953; and/or

•

apply for Commissioner's discretion to disregard or reallocate to another financial year the excess concessional contributions under section 292-465 of the ITAA 1997.

4.32 In situations like these, the individual may be granted an extension of time to accept the offer from the Commissioner. [ Schedule 4, item 2, paragraph 292-467(3)(b) of the ITAA 1997 ]

4.33 If the individual accepts the offer, the Commissioner will make a determination that the excess concessional contributions are to be disregarded. The Commissioner must issue the individual notice of the determination. The Commissioner may also send a release authority to the relevant provider seeking to release an amount for the excess concessional contributions. [ Schedule 4, item 2, subsections 292-467(1) and (4) of the ITAA 1997 ]

4.34 The Commissioner will include the amount of excess concessional contributions in the individual's assessable income for the income year that corresponds with the financial year for the excess contributions. The Commissioner will make, or amend, the individual's income tax assessment accordingly and will therefore issue the individual a notice of the relevant assessment. Notice of the determination may be included in this notice of assessment. [ Schedule 4, item 2, subsections 292-467 (2) and (5) of the ITAA 1997 ]

4.35 The Commissioner will, in making or amending that assessment, allow the individual a tax offset equal to 15 per cent of the excess concessional contributions. This takes account of the fact that the relevant excess will usually be attributable to contributions that are assessable and the superannuation provider will have reduced them by 15 per cent to provide for its income tax liability. [ Schedule 4, item 2, paragraph 292-467(2)(b) of the ITAA 1997 ]

4.36 This tax offset is a refundable tax offset. [ Schedule 4, items 5 and 7, sections 13-1 and 67-23 of the ITAA 1997 ]

4.37 As mentioned in paragraph 4.22, the Commissioner will also allow the individual a credit for any amount paid to the Commissioner by a superannuation provider in accordance with a release authority. This will mean that most individuals will have no tax debt to pay as their income tax account with the Commissioner will be in credit.

4.38 Where an account is in credit, that is, the Commissioner owes money to the individual, the amount must be refunded to the individual. This is a credit the individual is entitled to under a taxation law for the purposes of paragraph 8AAZL(1)(b) of the TAA 1953.

4.39 However, the individual may receive a reduced refund, or no refund at all if:

•

the individual has an outstanding debt with the Commissioner for another type of tax - for example, the refund may be offset against an income tax debt that they owe (section 8AAZL of the TAA 1953); and/or

•

the individual has an outstanding debt to another Commonwealth agency which has required the Commissioner to pay any refund to them to cover other debts - for example, the Child Support Agency or Centrelink.

4.40 Where there is no superannuation provider that is required to comply with a release authority, the amount of excess concessional contributions will still be included in the individual's assessable income and the tax offset allowed. However, the individual is not entitled to a credit as no amount has been paid by a superannuation provider. If this means the individual's account is not in credit, they may have a tax bill to pay. [ Schedule 4, item 2, subsection 292-467(2) of the ITAA 1997 ]

Variation of refunded excess concessional contributions determinations

4.41 The Commissioner will have the power to vary or revoke a determination in certain circumstances if the Commissioner is satisfied that the amount of excess contributions previously determined is incorrect. [ Schedule 4, item 2, subsection 292-468(1) of the ITAA 1997 ]

4.42 However, there are practical limits to what can be achieved by such a variation or revocation, particularly where an amount has already been paid to the Commissioner by a superannuation provider under a release authority. These practical limits are recognised by restrictions on the Commissioner's power to vary or revoke a determination. [ Schedule 4, item 2, subsections 292-468(2) to (5) of the ITAA 1997 ]

4.43 Where a payment under a release authority has not been received by the Commissioner and the Commissioner is satisfied that:

•

the correct amount of excess concessional contributions is greater than $10,000; or

•

the individual has no excess concessional contributions.

The Commissioner may revoke the determination. [ Schedule 4, item 2, subsection 292-468(2) of the ITAA 1997 ]

4.44 If the correct amount of excess concessional contributions is greater than $10,000, the revocation of the determination will mean the Commissioner can make an excess contributions tax assessment for the correct amount. Further, the individual will not be eligible for the refund in any subsequent year.

4.45 If the individual has no excess concessional contributions, the revocation of the determination will mean the Commissioner will also revoke any release authority issued to a superannuation provider. There will usually be no income tax assessment (original or amended) to amend if no payment has been received. [ Schedule 4, item 1, subsection 292-420(7) of the ITAA 1997 ]

4.46 Where a payment under a release authority has not been received by the Commissioner and the Commissioner is satisfied that the correct amount of excess concessional contributions is not greater than $10,000, the Commissioner may vary the determination. [ Schedule 4, item 2, subsection 292-468(3) of the ITAA 1997 ]

4.47 Where there is a variation of a determination because the individual's excess concessional contributions have increased (but are $10,000 or less), the individual is not entitled to make a new choice in relation to the increased excess concessional contributions.

4.48 The Commissioner will issue a new release authority to give effect to the variation of the determination. This release authority will be for the difference between 85 per cent of the amount of the correct excess concessional contributions and the amount of excess concessional contributions stated in an earlier release authority. [ Schedule 4, item 2, subsections 292-468(7) and (8) of the ITAA 1997 ]

4.49 Where a payment under a release authority has been received by the Commissioner, the Commissioner cannot revoke that determination. [ Schedule 4, item 2, subsection 292-468(2) of the ITAA 1997 ]

4.50 Where a payment under a release authority has been received by the Commissioner, the Commissioner may vary the determination if satisfied the amount of excess concessional contributions to which the determination relates has increased, but is $10,000 or less. [ Schedule 4, item 2, subsection 292-468(4) of the ITAA 1997 ]

4.51 No other revocation or variation is allowed. [ Schedule 4, item 2, subsection 292-468(5) of the ITAA 1997 ]

4.52 Where information shows that an excess contributions tax assessment was incorrect and a refund determination could have been made, the existing law (Subdivision 292-F of the ITAA 1997) allows the Commissioner to amend the excess contributions tax assessment. The new provisions will allow the Commissioner to issue a determination for a refund offer.

4.53 Where an amount has been received by the Commissioner under a release authority issued pursuant to a refund determination and the Commissioner is satisfied the individual was not eligible for the determination because they actually had excess concessional contributions greater than $10,000, the Commissioner cannot vary or revoke the determination. Instead, the Commissioner will be required to assess the individual for excess contributions tax. However, the excess contributions tax assessment will be made by disregarding the amount of excess concessional contributions already included in the individual's assessable income. [ Schedule 4, item 2, subsection 292-468(9) of the ITAA 1997 ]

Example 4.14 : Excess concessional contributions of $10,000 or less change to more than $10,000 after the payment is received

The Commissioner determined an individual had excess concessional contributions for a financial year of $5,000 and was eligible for a refund offer under this measure. The individual accepted the Commissioner's offer to make a determination to disregard the excess contributions. The individual's superannuation provider paid $4,250 to the Commissioner under a release authority.

The Commissioner amended the individual's income tax assessment to include $5,000 in assessable income and allow an offset of $750. The Commissioner also applied a credit of $4,250 to the individual's tax liability.

The Commissioner receives new information about the individual's concessional contributions and is satisfied that the individual had $13,000 excess concessional contributions for the financial year (including the $5,000 disregarded in the determination).

The Commissioner cannot revoke or vary the determination. Instead, the Commissioner must assess the individual for excess contributions tax on $8,000.

4.54 Where the Commissioner is satisfied the individual had no excess concessional contributions, the individual will be eligible for a refund offer in a future year. [ Schedule 4, item 2, paragraph 292-467(1)(c) of the ITAA 1997 ]

4.55 The Commissioner will issue individuals a written notice of a variation or revocation. If an individual asks the Commissioner to vary or revoke a determination, the Commissioner will also notify the individual of any decision not to vary or revoke the determination. This notification will ensure the individual can exercise their right to object to the Commissioner's decisions. [ Schedule 4, item 2, subsection 292-468(6) of the ITAA 1997 ]

4.56 When the Commissioner varies a determination in accordance with section 292-468, the determination as varied has effect as if it were a determination under section 292-467. [ Schedule 4, item 2, paragraph 292-468 (7)(a) of the ITAA 1997 ]

Objections against determinations

4.57 Once a determination is made by the Commissioner under section 292-467, the individual may object to the determination in the manner set out in Part IVC of the TAA 1953. This right to object also applies to a varied determination made under section 292-468, a decision to revoke a determination made under section 292-468 and a decision made under section 292-468 not to vary or revoke a determination made under section 292-467. Part IVC of the TAA 1953 allows an individual to appeal to the Administrative Appeals Tribunal. Time limits are imposed on the period for objections. The objection must be made within 60 days after the relevant determination or decision. [ Schedule 4, item 2, section 292-469 of the ITAA 1997; item 13, paragraph 14ZW(1)(aac) of the TAA 1953 ]

Payments from release authorities for refunded excess concessional contributions

4.58 The payment made by a superannuation provider in accordance with a release authority is a 'superannuation benefit' as defined in section 307-5 of the ITAA 1997. However, as an amount is to be included in an individual's assessable income for the income year that corresponds to the financial year for which the individual has excess concessional contributions, this superannuation benefit is made non-assessable, non-exempt income. [ Schedule 4, item 3, subsection 303-15(1) of the ITAA 1997 ]

4.59 The proportioning rule does not apply to the released amount. This means that the taxable component of the superannuation interest from which the amount is paid will effectively be reduced without reducing the tax free component as well. [ Schedule 4, item 3, subsection 303-15(2) of the ITAA 1997 ]

Application and transitional provisions

4.60 These amendments apply in relation to excess concessional contributions for the financial year beginning on 1 July 2011 and later financial years.

4.61 No transitional provisions are required to give effect to the measure.

Other amendments

Items 6, 9, 10 and 12

4.62 A number of provisions of Commonwealth laws contain income tests that have regard to both:

•

assessable income or an amount derived from it such as taxable income, adjusted taxable income or total income; and

•

either:

-

reportable employer superannuation contributions; or

-

reportable superannuation contributions.

4.63 Where a refund determination is made under this measure for a particular financial year, an individual's assessable income for that year will be increased by the amount of their excess concessional contributions for that year. This increase will affect any amount based on or derived from assessable income. Further, if an individual has reportable employer superannuation contributions or personal deducted contributions, some or all of their excess concessional contributions may be attributable to the reportable contributions. This could result in an amount being counted twice, once as income and once as superannuation contributions.

4.64 These consequential amendments deal with cases where some or all of the excess concessional contributions that are the subject of the determination are reportable employer superannuation contributions or reportable superannuation contributions.

4.65 These amendments will ensure that the relevant excess concessional contributions subject to the determination are not included twice in the income test calculation for the individual. [ Schedule 4, item 6, subsection 61-570(3), item 8, subsection 290-160(3), item 9, subsection 290-230(5), item 10, definition of 'reportable superannuation contributions' in subsection 995-1(1) of the ITAA 1997; item 12, subsection 8(1A) of the Superannuation (Government Co-contributions for Low Income Earners) Act 2003 ]

Example 4.15 : Effect of accepting the refund offer on adjusted taxable income

Salary = $165,000:

•

superannuation guarantee contributions = $14,850 (@ 9%);

•

additional salary sacrificed contributions = $15,000;

•

reportable employer superannuation contributions = $15,000;

•

excess concessional contributions amount = $4,850 ($14,850 + $15,000 ? $25,000); and

•

adjusted taxable income = $180,000 ($165,000 + $15,000).

The individual chooses the refund of excess concessional contributions:

•

Assessable income increases by $4,850.

Adjusted taxable income:

•

increases by $4,850 (due to assessable income increase); and

•

decreases by $4,850 (adjustment to reflect assumed refunded reportable employer superannuation contributions).

There is no overall change to adjusted taxable income.

Items 8 and 11

4.66 The refund will not be used to reassess whether an individual is entitled to deduct personal superannuation contributions. [ Schedule 4, item 8, subsection 290-160(3) of the ITAA 1997 ]

4.67 Nor will the refund be used to reassess whether an individual has satisfied the 10 per cent income test in paragraph 6(1)(b) of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 . That test is one of several used to determine whether an individual is eligible to be paid a co-contribution under that Act. That test is also to be used for the proposed low income superannuation contribution. [ Schedule 4, item 11, subsection 6(3) of the Superannuation (Government Co-contributions for Low Income Earners) Act 2003 ]

Items 14 and 16

4.68 The amount a superannuation provider is required to pay in accordance with a release authority will be treated as a tax related liability of the provider. This will enable the ATO to take legal action against the superannuation provider for the amount if it is not paid as required. [ Schedule 4, item 14, subsection 250-10(2) of Schedule 1 to the TAA 1953 ]

4.69 No general interest charge is payable if the amount is paid late by the superannuation provider as there is no provision imposing it. However, a superannuation provider is liable for an administrative penalty for a failure to pay the amount on time. [ Schedule 4, item 1, note 1 in subsection 292-420(4) of the ITAA 1997; item 16, subsection 288-95(3) in Schedule 1 to the TAA 1953 ]

4.70 An administrative penalty also applies where the superannuation provider does not provide the accompanying payment statement to the Commissioner in time under existing subsection 286-75(1) in Schedule 1 to the TAA 1953. [ Schedule 4, item 1, note 2 in subsection 292-420(4) of the ITAA 1997 ]

Item 15

4.71 Individuals will not be liable for shortfall interest charge under the TAA 1953. It would not be appropriate to impose an interest charge in relation to an amount that could not have been included in the individual's assessable income at any time prior to the making of the determination. [ Schedule 4, item 15, subsection 280-100(4) of the TAA 1953 ]

Items 17, 18 and 19

4.72 Interest will not be payable to the individual under the Taxation (Interest on Overpayments and Early Payments) Act 1983 on the refund amount other than under the circumstances outlined in section 292-425 of the ITAA 1997. [ Schedule 4, items 17 to 19, subsection 3(1) of the Taxation (Interest on Overpayments and Early Payments) Act 1983 ]

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Refund of excess concessional contributions

4.73 This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

4.74 This Schedule amends the ITAA 1997, the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 , the TAA 1953, and the Taxation (Interest on Overpayments and Early Payments) Act 1983 to allow eligible individuals the option to effectively have excess concessional contributions refunded to them. The amount will be assessed as individual income.

4.75 These amendments give effect to the measure announced in the 2011-12 Budget to help reduce the financial impact of excess contributions tax on individuals.

Human rights implications

4.76 This Schedule does not engage any of the applicable rights or freedoms.

Conclusion

4.77 This Schedule is compatible with human rights as it does not raise any human rights issues.

Minister for Superannuation, the Hon Bill Shorten