Could you be dealt Excess Contributions Tax?

The Federal Court recently heard a case where the Commissioner had penalised a taxpayer with excess contributions tax (ECT) after, unbeknown to the taxpayer, his bookkeeper had made payments to his superannuation funds on the wrong date, resulting in multiple payments being recorded for the one financial year. In upholding the decision of the Commissioner not to reallocate the contributions made in the one financial year to that of those surrounding it, the Federal Court made it clear that the delegation of contribution payments in itself is not a factor that makes it favourable for the Commissioner to exercise its discretion to reallocate.

In the case, the combination of early and late payments made by the taxpayer’s bookkeeper saw contributions that were meant to be made in the 2009 and 2011 financial years lumped in with those made in 2010.

The bookkeeper went to make two payments on 30 June 2009, one being a salary sacrifice payment and one being an employer contribution for the 2008/09 financial year. The problem with these payments was that they were not received by the superfund and applied to the relevant account until 1 July 2009, appearing as contributions made in the 2009/10 financial year.

If that wasn’t unlucky enough, the bookkeeper then made a salary sacrifice payment to the super account on 27 May 2010, two months earlier than it was meant to be paid. This resulted in the payment also being considered as a 2009/10 contribution.

As a result of the multiple payments being made in the 2009/10 financial year, the taxpayer was issued with a notice of assessment for ECT in excess of $19,000, of which the taxpayer disputed. The taxpayer took the matter to the Federal Court, arguing that the Commissioner erred in not exercising its discretion to reallocate the contributions made in the 2009/10 financial year to their intended 2008/09 and 2010/11 financial years.

While the Federal Court did confirm that the Commissioner does have the discretion to reallocate contributions made if deemed appropriate, the Court found that there were no factors in favour of such discretion being exercised in this instance as the taxpayer, although he did not actually oversee the payments that were being made by his bookkeeper, was in a position where he could oversee and control such payments.

The experienced team of tax lawyers and accountants here at The Quinn Group can help you with all your tax needs. If you have any questions about your tax obligations, call 02 9223 9166 to book an appointment, or submit an online enquiry at