The ATO’s unwillingness to apply discretion to the early access of superannuation funds also exists in regards to penalties for making excess contributions, according to an SMSF lawyer.
Cooper Grace Ward senior associate Steven Jell said the ATO had stated where it would apply discretion in regards to early access in PS LA 2021/D3, which was released in December 2021, and indicated that discretion would be applied sparingly and only in special circumstances.
Jell added a number of court cases indicated the SMSF regulator had taken a similar approach to excess contributions and pointed to the case of SQQM and Commissioner of Taxation (Taxation)  AATA 298, which was heard in February, as indicative of its approach.
Speaking at last week’s Cooper Grace Ward Annual Adviser Conference, he said SQQM, who was a member of an industry fund, made $100,000 of non-concessional contributions in five separate transactions during the 2019 financial year while having a total super balance (TSB) of $2.5 million.
“The TSB creates a position where the member cannot make those non-concessional contributions … and the ATO said that because of the excess contributions there were penalties associated with doing those things,” he said.
He added the member argued the fund’s website had encouraged them to make the contributions and their accountant had not told them about changes to contributions limits in 2017, but at the same time they had not asked about them either.
“The expectation was the accountant should be telling the member about these things and if they were making a contribution to an industry fund, they should know the member was doing these things and telling them [about the limits] in advance,” he said, adding the member claimed an ongoing post-traumatic stress disorder condition as part of mitigating circumstances.
“The ATO said those are not special circumstances and not sufficient to justify us to exercise our discretion to waive those penalties.”
He said the ATO’s response raises the question about what special circumstances are.
“It’s got to be something that goes beyond what is usual or ordinary in all circumstances and into where something that is unfair, unintended or unjust has occurred. The court basically said difficult personal circumstances are not relevant,” he noted.
“The member also stated the personal circumstances related to a previous financial year and special circumstances must be relevant to the year in which the contribution was made, and the fact that the accountant didn’t give the advice when it wasn’t requested also does not equate to special circumstances.”
“Ignorance is no excuse. That’s something that everyone has heard before but it has been reconfirmed in this situation with respect to these types of contributions and the outcome was that there were penalties associated with those additional contributions.”