Minister Shorten confirms review into Excess Contributions Tax


It was very pleasing to read today in the Australian Financial Review, that Assistant Treasurer and Minster for Financial Services & Superannuation, Bill Shorten has confirmed that Treasury is reviewing the current Excess Contributions Tax (ECT) penalty regime and is looking at options to change the laws.

The Minister was quoted as saying, “I am fully alive to it and hopefully will have an answer soon.”

With more than 188,000* people having already been potentially caught with excess contributions tax, and 65,000 excess contribution breaches in 2009/10, this issue appears to have become a political time bomb for a government already under-fire.   The collection of excess contribution tax revenue in respect to the 2009/10 tax year hasn’t even started, which we know is the big issue as a result of the government halving the concessional contributions cap!!

Listen to my recent webinar on Dealing with Excess Contributions Tax

I attended a breakfast last week where Minister Shorten shared his concerns on this issue.  His views appeared to support the fact that a 93% tax regime is grossly unfair and that action needed to be taken to remedy this issue.  The statistics raised by the Minister suggested less than 1,000 individuals have been subject to the 93% penalty tax, which only applies where both the concessional and non-concessional contribution caps have been breached.  I feel we will see positive action taken in respect to this matter in the Federal Budget next month (May).

I don’t have the same feeling though with changes occurring in respect to the existing ECT penalty tax regime for concessional contributions, where an additional 31.5% tax is applicable on top of the 15% contributions tax. Whilst Minister Shorten even acknowledged that he has been caught out with an ECT assessment, the fiscal reality is that the Federal Government has made a significant commitment to return the economy back into surplus by 2012/13.  As a result, I believe there is little scope for the government to currently consider making significant changes to the current revenue collections for ECT.

The ‘cynic’ in me says to expect more positive news on this issue and improvements to the contribution caps in the lead into the next Federal election, not the next Federal Budget.

It is important to remember that without an appropriate penalty regime to act as a deterrent, we may see individuals abusing superannuation retirement policy, knowing that there is little or no penalty by not complying with the law. However, there is surely a better balance between policing the contribution caps and encouraging people to save for retirement.  Hopefully, this is the start of finding the right balance!!

Click here to download my webinar of Dealing with Excess Contributions Tax

* Thomsons Reuters, 9 March 2011, Excess superannuation contributions tax – how much is collected?

Webinar now uploaded on Dealing with Excess Contributions Tax


After a successful webinar today on the topical issues of “dealing with excess contributions tax”, I am pleased to advise that this session has now been uploaded to view.

Click here to watch the recorded webinar.  A copy of this recording can also be downloaded from thedunnthing box (right-hand side of the page).

Areas covered in this session included:

  • The growing issue of Excess Contributions Tax (ECT)
  • ATO Guidance & Developments about ECT
  • Common problems
  • What strategies are available?
  • Methods to manage contributions; and
  • Unresolved matters relating to contributions & ECT
(C) The SMSF Academy 2012
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