A Christmas Message

I’d like to take this opportunity to wish all my readers a very Merry Christmas and Happy New Year.  I trust you have enjoyed my posts throughout the year and look forward to an even bigger and better 2013.

Next year will see a fresh new look for the blog, along with some exciting new initiatives around content to further engage with the SMSF community.  I’m also very excited about the launch of our new SMSF online course, SMSF101 in early February 2012, a joint initiative of The SMSF Academy and Money101.  With the course having recently received 49 CPD points from the SMSF Professionals Association of Australia (SPAA), I believe it will be a ‘game-changer’ for the industry in the delivery of education and training.  Most importantly,  it will provide individuals with a fantastic pathway towards becoming an SMSF specialist.

I look forward to you joining me again in 2013.

All the very best,

Aaron Dunn


Family Law & SMSF Webinar

The SMSF Academy is pleased to announce its next SMSF webinar on Family Law & SMSFs.

This session includes Accredited Specialist in Family Law, Melissa Cantwell as a guest panelist.  Melissa will discuss key issues of family law when dealing with SMSFs and the important role of the advisor when dealing with payment splitting of superannuation benefits.

This session comes with SPAA & FPA CPD points.

Find out more about this session and how to register.



Latest ATO statistics on excess contributions

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.

de minimis to help with contribution maximus

For several years now, many people and professional bodies within the financial services industry have been pushing to address the inequalities in respect to excess contributions tax (ECT).  So it was pleasing recently to read via Peter Burgess, National Technical Director of SPAA that the Australian Taxation Office (ATO) had recently indicated in a Superannuation Consultative Committee (SCC) meeting that they will now look to apply the ‘de-minimis’ test in deciding whether or not to raise an ECT assessment.

What is the de minimis test?

This is a Latin term, which is a shortened form of the expression “de minimis non curat lex” meaning ‘the law does not care about very small matters’. It is often considered more efficient to waive very small amounts of duties and taxes rather than collect them.  For ECT purposes, it appears that the ATO is looking to apply this rule to small amounts that have created sizeable excess contributions tax liabilities.

How will the de minimis test apply?

To understand further, let’s take a look at an example:

Ben during the current financial year (2011/12) made self-employed contributions totalling $50,000 in which he wishes to claim a tax deduction.  He also made $150,000 of non-concessional contributions.  At the start of the following financial year (2012/13), he makes a further $450,000 non-concessional contribution.  When completing Ben’s tax return, his accountant advises that the maximum self-employed tax deduction that can be claimed is $49,900.  As a result, $100 is now treated as a non-concessional contribution, which triggers the bring forward rule in the 2011/12 financial year ($150,100).

In the 2012/13, Ben now has an excess non-concessional amount of $150,100, meaning an excess contributions tax liability of $69,797 ($150,100 + $450,000 – $450,000 = $150,100 x 46.5%).

Applying the de minimis test, the ATO will appear to disregard the $100 contribution that triggered the ECT liability.

What amount is a “small amount” and how could it apply?

Good question, no indication has been provided on these matters.

In terms of how it could apply, the above example is just one way how the ATO may apply the de minimis rule.  Similar scenarios with small contributions made by an employer on behalf of a member may also apply (i.e. insurance policy premiums).  How else do you think it could apply?

I believe the ATO has commenced reviewing individual cases and contacting those with inadvertent breaches.  These ECT liabilities to be refunded will go back to the introduction of Simpler Super from 1 July 2007.  Furthermore, refunded amounts will be allowed to be returned to the super fund without impacting contribution caps of these individuals

With the Labor Government committed to providing a ‘fairer’ superannuation system, this outcome appears certainly a step in the right direction…

Scaled advice: Advisers prepare for ‘revolutionary’ change

Watch the video on Wealth Professional TV how scaled advice is set to ‘revolutionise’ the financial planning industry:

(C) The SMSF Academy 2012
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