An expert in the SMSF sector has suggested the government should make it possible for trustees to refund inadvertent breaches of the non-concessional contributions cap in the same way they can with concessional cap breaches to make for a more streamlined compliance regime.
So far the government had indicated it would more than likely increase the discretionary powers of the Australian Taxation Office (ATO) to deal with non-concessional contributions cap breaches, AMP SMSF head of policy and technical Peter Burgess told selfmanagedsuper.
“Last year the coalition tried to pass an amendment to a bill to widen the power of the ATO to exercise discretion to redirect contributions that would trigger a breach to another year and they wanted to include inadvertent breaches as another specific reason for the use of discretionary power,” Burgess said.
The government went as far as formulating a definition of what constituted an inadvertent breach, which included elements such as wrong advice where a financial planner had made an error, he said.
“That amendment didn’t go through, but is that what we can expect to see from the coalition as to how they will address this issue? Are they planning on giving the commissioner more discretion?” he said.
“My view on that is we would welcome any attempt to address this, but my only concern is that they’re likely to clog up the system. If you can imagine how many instances the commissioner will be asked to use his discretion, there would be a backlog there.”
He said there was a better way to deal with the problem that would be consistent with the treatment of concessional cap breaches.
“Perhaps an alternative way to deal with this is to allow a refund of the excess non-concessional contributions. We’ve got a precedent now with the concessional contributions caps and that to me would be a simpler process,” he said.
“I’m not suggesting that people should get off scot-free, there should still be a penalty, but it should work similarly to what we’ve got with concessional contributions where there is a penalty applied.
“I think it is inevitable that’s where we will end up with this issue, so it will be interesting to see how this will play out.”
