The SMSF Professionals’ Association of Australia (SPAA) is calling for a flat fee to be charged in relation to refunded excess non-concessional contributions instead of the proposed withdrawal of earnings associated with these cap breaches.
“The associated earnings issue is likely to be complex and our preferred position is to have a flat charge similar to the concessional excess contributions charge we already have,” SPAA technical and policy senior manager Jordan George told the 2014 SPAA State Technical Conference in Melbourne last week.
“How do you approach a fund and say these earnings were aligned to this contribution and then say pull those earnings out?
“We think it would be quite complex.”
George said the idea would be for the flat charge to make up for any tax that should have been incurred on any of the income generated directly from the breach of the non-concessional cap.
“In some situations that might not be fair, but it is going to be a lot simpler and we’re speaking to Treasury as to how to progress this,” he said.
He revealed Treasury had recognised the urgency to get the legislation to allow the refund of excess non-concessional contributions in place as soon as possible.
“Treasury thinks it will have the legislation in place by the end of 2014,” he said.
“The idea with this is that the first excess contribution tax assessments for the 2013/14 year will be issued by then, so hopefully the legislation will be in place to allow us to do the refunding or withdrawing of those excess contributions by that stage.”
He clarified trustees could elect to leave the excess non-concessional contributions in the fund, but they would be taxed heavily if they did.
“If the taxpayer chooses to leave the excess non-concessional contributions in the fund, then they’d be taxed at the top marginal tax rate, which is now 49 per cent,” he said.
