ATO, Tax

Excess transfer balance cap excuses rejected

excess transfer balance tax

Trustees have yet to find an acceptable reason to avoid excess transfer balance tax with recent cases proving the onus lay with them to get it right.

SMSF trustees attempting to argue they should not be forced to pay excess transfer balance tax have yet to meet with any success and are unlikely to do under current laws, an SMSF technical specialist has claimed.

Heffron SMSF technical and education services director Leigh Mansell said she had been tracking cases where trustees had argued why they should not be forced to pay the tax and had yet to see any successful arguments sustained by the ATO or the Administrative Appeals Tribunal (AAT).

Speaking as part of a recent webinar, Mansell said she had been examining the arguments used by individuals to avoid paying the tax penalties associated with exceeding their transfer balance cap (TBC)

Mansell pointed to two cases heard by the AAT in the second half of the year, both of which related to the information available to the trustee, where the trustee did not convince the tribunal they should not pay the tax.

“One of the most recent arguments that has gone to the AAT was along lines of ‘I only just found out I have an excess because the ATO only just told me, so it is not fair to go back to the time when I started to have the excess’,” Mansell said.

“The AAT noted that is not how the law works and that as soon as someone has an excess, that is the point in time when excess transfer balance earnings accrue.”

“At the same time, there is no discretion in the tax act to calculate the excess in a different way, nor is there discretion in act to allow the ATO to waive a tax liability.”

Mansell also made reference to the Lacey v Commissioner of Taxation case in which a trustee claimed he was not responsible for an excess amount under his TBC due to his reliance on information on a particular page on the ATO website.

She explained the AAT ruled it had no jurisdiction to deal with the accuracy of ATO statements and in a technical briefing document distributed by Heffron in conjunction with the webinar stated “the burden is placed on the taxpayer to prove that the ATO’s decision ‘should’ have been different – which he did not do”.

“There has not been much luck yet for anyone trying to argue their way out of transfer balance tax. An excess is an excess and people will just have to wear it.”

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