The Superannuation (Excess Concessional Contributions Tax) Act 2007 (Cth.) and the Superannuation (Excess Non-concessional Contributions Tax) Act 2007(Cth.) which impose rates of tax of 31.5% and 46.5% respectively continues to cause concern to savers.
These taxes are imposed on delinquent savers or contributors to complying superannuation funds who for whatever reason exceed the cap on their contributions as enacted by the Tax Laws Amendment (Simplified Superannuation) Act 2007 (Cth.) and the amendments to the Income Tax (Transitional Provisions) Act 1997 (Cth.).
A case in point is where the Commissioner issues an assessment on the ground that there has been an excess concessional contribution when the taxpayer has suffered a tax loss for the financial year and finds that it answers the description of an excess non-concessional contribution.
Section 26-55(2) of the Income Tax Assessment Act 1997 (Cth.) (the Act) works to limit a taxpayers’ concessional deductions available to them with respect to the financial year.
It is contended that the section does not deny that taxpayers have made deductible concessional contributions. What the section does is to deny the concessional contributions inclusion in the tax loss to be carried forward to be deducted against the assessable income of later financial years. The extent of this limitation can be in part or in full. This is consistent with the long standing treatment given to concessional deductions under the Income Tax Assessment Act 1936 (Cth); for example under s. 80(1) and s. 79C and which by s.1-3(2) of the Act, the ideas expressed are not to be taken to be different just because a different form of words were used.
Paragraph (aa) of sub-section (1) of s. 292-90 of the Act is apparently invoked to treat these contributions as non-concessional contributions.
It seems that the Commissioner treats concessional contributions as non-concessional contributions when they fail to answer the description of a concessional contribution and as such do not satisfy s. 292-90(1) (b) of the Act.
The reference in s. 292-90(1)(aa) and to 292-90(4)(b) of the Act described as an ‘integrity measure’ in the Explanatory Memorandum, should be read as referring to the decisions of the Commissioner to disallow an amount of the kind referred to in s.290-150(2) as illustrated by paragraph 1.22 and Example 1.4 where the 10% rule was not satisfied.
Relevantly s. 292-90(4) of the Act says that:
An amount is covered under this subsection if it is any of the following:
(b) the amount of any contribution made to that plan in respect of you in
the year that is covered by a valid and acknowledged notice under
section 290-170, to the extent that it is not allowable as a deduction
for the person making the contribution;
It is submitted that the section works by denying deductions because they do not satisfy the conditions set out in s. 290-150(2). This would seem to be consistent with the example given in para 1.22 of the explanatory memorandum. See s. 15AB (2)(e) Acts Interpretation Act 1901 (Cth) (the Interpretation Act).
In short, a contribution is denied because it doesn’t satisfy the sections listed in s. 290-150(2) and not because it carries the label of a concessional deduction. There it is disallowed not for the current financial year but against inclusion in the tax loss to be carried forward by reason of s. 26-55(2) of the Act. The limit is equal to the difference between the other or non-concessional deductions and assessable income.
In this respect it is submitted support for this interpretation is given by s. 15AA(1) of the Interpretation Act:
….. a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object.
In CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384, Brennan CJ, Dawson, Toohey and Gummow JJ (omitting footnotes) with Gaudron J concurring said:
It is well settled that at common law, apart from any reliance upon s 15AB of the Acts Interpretation Act 1901 (Cth), the court may have regard to reports of law reform bodies to ascertain the mischief which a statute is intended to cure Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses “context” in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy. Instances of general words in a statute being so constrained by their context are numerous. In particular, as McHugh JA pointed out in Isherwood v Butler Pollnow Pty Ltd. if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent.
See also Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 538 per McHugh, Gummow, Kirby and Hayne JJ at paras 69-71 and 78.
13 March 2013
© Bryan Pape
The purpose of this Blog is to make general commentary and not to provide legal advice. Readers should seek their own independent legal advice relevant to their own facts and circumstances.