AAT rules unused super caps must apply

A recent decision by the Administrative Appeals Tribunal (AAT) has confirmed superannuants cannot exclude carry-forward concessional contributions from previous years when calculating their tax liabilities as these amounts are automatically applied under the law.

The case, WTBW and Commissioner of Taxation [2024], centered on a dispute about how Division 293 tax should be applied to a taxpayer’s concessional superannuation contributions for the 2022 financial year.

The ATO assessed the applicant for a tax liability of $3315 under Division 293 of the Income Tax Assessment Act 1997 (ITAA). The applicant objected to the assessment, but the tax commissioner rejected their objection and the taxpayer then sought a review by the tribunal.

The taxpayer argued they should have the option to exclude unused concessional contributions carried forward from earlier years, citing an explanatory guide on the ATO website and section 291 of the ITAA.

If successful, this could have reduced their excess concessional contributions and potentially eliminated their Division 293 tax liability for that year.

However, the AAT upheld the ATO’s decision, ruling the application of carried-forward concessional contributions is mandatory and not subject to individual discretion.

It stated once the conditions for carrying forward unused contributions are met, these amounts must be applied automatically, regardless of the taxpayer’s preference.

“In my view, an ordinary reading of section 291-20(3) indicates that application of the carried-forward unused concessional contributions cap is mandatory rather than, as the applicant asserts, optional at the taxpayer’s election,” AAT senior member Robert Olding stated.

“That statutory language does not refer to or suggest a discretion or election on the part of the taxpayer or the commissioner. As noted, it does not provide any mechanism, such as a written election, for the taxpayer to opt to apply only part of the taxpayer’s unused concessional contributions cap, which would be expected if the unused amount is to be applied only to the extent chosen by the taxpayer.

“It is my decision an unused concessional contributions cap amount carried forward from previous years applies by force of law. It does not require a taxpayer to elect to apply the unused amount carried forward or permit a taxpayer to choose not to apply it.”