How do employees treat contributions made under the SG amnesty?
Once an employer has made a disclosure to the ATO under the SG amnesty and the relevant amount has been paid as a contribution to the employee’s superannuation fund (either by the ATO or directly by the employer where the contribution has been offset against their SGC liability), the contribution will be treated as a concessional contribution for the employee.
When such concessional contributions are made to an individual’s superannuation fund, tax consequences may arise for the individual, particularly where large one-off contributions are being made. Specifically, individuals must ordinarily consider whether the contributions will result in excess concessional contributions for the individual or whether they have a Division 293 tax liability. However, amendments made by the Amnesty Bill address unintended consequences that would otherwise arise in relation to concessional contributions made under the SG amnesty.
Contributions made by the ATO under the SG amnesty will not result in excess concessional contributions
The SG amnesty may result in employers paying the SGC to the Commissioner that represents late payment of SG covering a number of years. When the commissioner subsequently pays these amounts to the superannuation funds for the relevant employees’ benefit, these will be considered concessional contributions and may cause employees to exceed their annual concessional contribution cap (i.e., $25,000 in the 2020 income year). Excess concessional contributions are included in the individual’s assessable income and the individual would also be liable to pay the ‘excess concessional contributions charge’.
Pursuant to S.291-465 of the ITAA 1997, the Commissioner is provided with the discretion to disregard concessional contributions or reallocate them to a different income year. Generally, this discretion can only be exercised once an individual has applied for a determination and the Commissioner considers there are ‘special circumstances’, and that making the determination is consistent with the excess concessional contribution provision.
However, new S.291-465(2A) of the ITAA 1997 provides an exception to the requirement of an individual to apply for this Commissioner discretion. This exception allows the Commissioner to make a determination (without receiving an application from the individual) to disregard or reallocate concessional contributions, where:
- the determination relates to a contribution made by the Commissioner under Part 8 of the SGAA (i.e., after the employer has paid the SGC to the ATO); and
- the amount paid represents an amount of SGC paid by an employer to the ATO as a result of a disclosure made under the SG amnesty; and
- the employer qualified for the SG amnesty in relation to the SG shortfall to which the SGC payments relates.
The above exception from making an application to the Commissioner to apply the discretion to disregard or reallocate contributions only applies with respect to contributions made by the ATO (i.e., following SGC payments made by the employer to the ATO under the SG amnesty).
That is, the exception does not apply where an employer has made a late contribution directly to an employee’s fund and used the contribution to offset their SGC liability (even if that late contribution qualifies for the SG amnesty). In such cases, employees must still apply to the Commissioner to exercise the discretion to disregard or reallocate all or part of these contributions if they would otherwise have excess concessional contributions.
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- Superannuation Guarantee Amnesty (1) – Employers’ Obligations
- Superannuation Guarantee Amnesty (2) – Consequences for Not Meeting SG obligations
- Superannuation Guarantee Amnesty (3) – Eligibility for The SG Amnesty
- Superannuation Guarantee Amnesty (4) – Benefits from The SG Amnesty
- Superannuation Guarantee Amnesty (5) – Increased Minimum Penalty for Employers Ignore the SG amnesty
- Superannuation Guarantee Amnesty (7) – Contributions Made Under the SG Amnesty (2)