4.1 Stakeholders raised concern that the present level of ATO advice and guidance given on the ECT regime was insufficient. Specifically, these concerns include:
- a lack of publicly available guidance on different aspects of the ECT, such as the nature of contributions; and
- the inability to obtain legally binding advice from the ATO.
Availability of public guidance on the ECT
4.2 Stakeholders have raised concern with the availability of public guidance on the ECT regime as it is often difficult to access or difficult to comprehend. Notwithstanding the information presently available on the ATO website, and other channels as discussed in Chapter 1, stakeholder submissions raise concern that given the complexity of the regime, and its interactions with SG and income tax, many taxpayers and advisers are still unlikely to appreciate the nuances of their obligations within this area. This is especially so in relation to taxpayers from non-English speaking backgrounds who may face difficulties identifying relevant material and understanding the material as it applies to their own situation.
4.3 Specifically, submissions note that confusion may arise in areas such as:
- the definition of what constitutes a contribution, what are concessional and non-concessional contributions and how these are made;
- the start and end dates for calculating the years in which the 'bring forward' is active;
- when and how the 'bring forward' provision may have been triggered;
- interactions between the ECT and the Superannuation Industry (Supervision) Regulations 1994 (SIS regulations);213
- provisions dealing with defined benefit funds and SMSFs;
- rules governing rollovers to complying superannuation funds; and
- eligibility and processes to claim deductions for personal contributions.
4.4 Stakeholders also raised concerns regarding the availability of public guidance on the ATO's de minimis approach and exercise of the Commissioner's discretion. These issues have been discussed earlier in Chapter 3.
4.5 Given the complexity of the superannuation system and having regard to the recent legislative changes, it is imperative that the ATO's public guidance is clear, concise and up to date. It should enable taxpayers and their agents to easily discern the impacts and consequences of any proposed actions they wish to take.
4.6 Overall, the IGT notes that there is a large amount of publicly available guidance in relation to aspects of the ECT such as the nature of contributions, the different classes of contributions and how these are made.214 Material relating to defined benefit funds,215 SMSFs,216 rollovers217 and deductions for personal contributions218 were also available through searches on the ATO's website. Material relating to more niche topics such as the interaction between the ECT regime and SIS regulations has also been published, albeit more difficult to locate.219
4.7 However, the IGT has identified some instances of out-of-date information on the ATO website, such as the ECT learner's guide.220 There is a risk that taxpayers or tax professionals may unwittingly rely on out-of-date information to their detriment, notwithstanding ATO caveats for taxpayers and advisers to undertake independent research to obtain the latest information.
4.8 Furthermore, the ATO's guidance in some areas seeks to inform taxpayers of relevant matters, rather than provide specific practical guidance or roadmaps to assist them to comply with their obligations. For example, despite the details provided in relation to the nature of contributions, there appears to be ongoing confusion regarding what is and isn't a contribution for the purposes of ECT as illustrated in recent litigation.221
4.9 Similarly, while the ATO has provided information on the 'bring forward' provision,222 a critical area of the ECT concerning non-concessional contributions, there were no details which assisted taxpayers or provided practical guidance on how to identify whether the 'bring forward' provision has been triggered. As stakeholders noted in submissions, determining whether the 'bring forward' provision has been triggered in any one year, may require taxpayers looking back on their contributions history for up to three years prior.
4.10 The IGT notes that while ATO guidance on ECT matters should serve to inform taxpayers and practitioners, it should also, where appropriate, be practical so as to assist taxpayers to comply with their obligations. Such practical guidance may include, for example, a checklist of questions or a calculator for taxpayers to use when determining their contribution levels. The IGT notes that such practical applications are already provided in relation to other areas of tax on the ATO's website.223
4.11 Moreover, for the guidance to be relevant, it must also be topical and timely. To this end, the IGT considers that the ATO could draw upon its observations of taxpayer behaviour through litigated cases, applications for exercise of the discretion or through telephone contacts to discern areas most of in need of guidance and to update and bring these to more prominent attention on its website and other publications.
4.12 The ATO has consolidated general guidance on the ECT and superannuation contributions caps on a single page on its website with links to relevant material elsewhere (the supercaps page).224 Importantly, such consolidation promotes greater taxpayer certainty as existing materials are easier to access. The ATO's correspondence to taxpayers in relation to the ECT provides a reference to the supercaps page. However, taxpayers who seek general guidance without having first being contacted by the ATO may find the ATO's website difficult to navigate. As the supercaps page is not clearly marked through the Individuals Super tab, it is not easily reachable where taxpayers do not have the precise hyperlink.
4.13 While taxpayers may be able to use the ATO's website search function to find the relevant information, the IGT's tests of the search function revealed that the supercaps page was only brought up as one of the first three results where the search term 'excess contributions tax' was entered. Other variations of the search term yielded some relevant results but did not highlight the supercaps page.
4.14 Notwithstanding the level of information currently published, where ATO information is not readily accessible, taxpayers may seek to rely on other sources such as word of mouth, financial advisory websites, superannuation fund websites and media commentators. Taxpayer reliance on media reports and commentary may be common and, in some circumstances, problematic. This may be due to a number of different reasons including that information communicated to the media outlet is incomplete or inaccurate, the media outlet misinterprets or misreports such information or the taxpayer misunderstands the nature of the report.225
4.15 To assist taxpayers access the most complete and accurate information, the IGT considers that the ATO should review its website information on the ECT to ensure that this information is readily apparent, accessible and comprehensible.
The IGT recommends that the ATO:
- review, update and consolidate information on the ECT on its website and seek to tailor these to developments, trends or issues that taxpayers may experience;
- ensure that this information is comprehensible and easily accessible through clearly labelled links and flexible search terms; and
- where possible, develop practical tools to assist taxpayers to comply with their ECT obligations.
Inability to obtain legally binding advice
4.16 Taxpayers were concerned that they were, generally, unable to request a private ruling from the Commissioner in respect of the ECT or contributions on which it was calculated. This is because the ECT, despite falling within the ITAA 1997, is not an income tax, nor is it one of the other taxes on which the Commissioner may rule.226
4.17 During the review, however, the law was changed to treat excess concessional contributions as assessable income and, therefore, these types of contributions were effectively brought within the ambit of the rulings regime.227 The same is not true of excess non-concessional contributions. In these circumstances, the Commissioner may provide taxpayers with Administratively Binding Advice (ABA) where private rulings are not available.228
4.18 In practical terms, an ABA would likely have the same effect as a private ruling. However, on some occasions, the Commissioner will have no choice but to depart from the earlier advice and taxpayers who have relied upon it will not have the legal protection afforded to private rulings.229 In such cases, taxpayers who have relied upon the ABA will only be protected against false and misleading statement penalties and interest. In the context of the ECT this level of protection may not be sufficient as their primary concern relates to the imposition of additional tax.
4.19 Moreover, as ABAs are not legally binding, taxpayers who disagree with the ABA may seek internal review of the decision but cannot otherwise avail themselves of the review and appeal rights afforded under Part IVC of the TAA 1953.230
4.20 The use of ABAs within the ECT context has not been extensive, though in 2011-12 the numbers of requests has increased from the prior two years. Statistics provided by the ATO to the IGT on the number of ABA applications lodged in the 2009-10, 2010-11 and 2011-12 financial years indicate that use of ABAs has generally been low, with each of the years reporting 32, 15 and 47 applications, respectively. It should be noted that a number of these involve multiple taxpayers requesting advice on the same issue (for example, an employer sought advice in circumstances where continued SG payments would result in ECT liabilities for the employees).231
4.21 A brief review of these requests show that taxpayers and employers have sought ATO assistance on a range of issues including rollovers, recontribution, the interaction between the SG and the ECT, the exercise of the Commissioner's discretion, the 'bring forward' provision, personal injury structured settlement contributions and timing issues relating to contributions.232 Having regard to the complex issues which may arise in respect of superannuation transactions and the ECT, the breadth of topics which are the subject of ABAs is not surprising.
4.22 It is somewhat anomalous that a taxpayer may be able to seek legally binding advice in respect concessional contributions but not in respect of non-concessional contributions especially as the former may be counted when determining whether the latter are in excess of the relevant cap.
4.23 As a result, a taxpayer seeking advice on both aspects may lodge separate requests for a private ruling in respect of concessional contributions and an ABA in respect of non-concessional contributions. This may have time and cost consequences for taxpayers who may need to engage advisers to lodge multiple applications and later to review, analyse and advise on multiple ATO responses.
4.24 Alternatively, the burden may be shifted to the ATO where taxpayers may lodge one application and the reviewing ATO officer is required to determine what advice may be issued as a ruling and what needs to be provided in an ABA. This alternative increases the administrative time and cost on the ATO and its officers. It also carries with it an inherent risk that where the ATO officer does not correctly delineate between the private ruling content and the ABA content, both may contain information which cannot be readily relied upon by the taxpayer, resulting in further costs, disputes, time and uncertainty.
4.25 The IGT considers that, in order to assist taxpayers to comply with their taxation obligations, taxpayers should have access to binding advice that is timely, certain and cost-effective. As the ECT regime touches on transactions affecting retirement savings, the latter point is all the more important.
4.26 While it would appear desirable to bring excess non-concessional contributions within the private rulings regime, the IGT notes that the ATO's ABA statistics have not demonstrated a material level of demand for binding advice in relation to the ECT. Accordingly, it is arguable that amending the law may not be warranted.
4.27 However, one reason for the low levels of ABA applications may be the lack of taxpayer and ATO officer awareness regarding their availability, particularly in the context of the ECT. In reviewing publicly available information on ABAs, the IGT was only able to locate a small amount of information on the ATO's website233 together with a link purporting to be instructions for the requesting ABAs but which redirects the taxpayer to instructions on applying for private rulings.234 In addition to this, some further information is contained within PSLA 2008/3. However, the IGT was unable to locate any specific references to the availability of ABAs for ECT purposes.
4.28 To better understand the actual levels of demand for binding advice on the ECT, the IGT considers that the ATO should ensure that taxpayers and their advisers are informed of the availability of ABAs as a source of specific ATO advice in relation to the ECT. Moreover, the ATO should reaffirm the availability of ABAs with all relevant staff, including call centre staff, and ensure that appropriate advice and escalation channels are communicated to assist taxpayers.
4.29 If the increased promotion of ABAs leads to a greater demand of binding advice in respect of the ECT, the IGT considers that the ATO should provide appropriate advice to Government regarding the benefits of bringing non-concessional contributions within the rulings regime.
4.30 In addition to the above, the IGT also considers that there is scope for the ATO to provide public advice through the issue of taxation determinations or ATOIDs on those frequently raised issues in ABAs or private rulings. Such an approach to issuing greater public advice is consistent with the ATO's agreement to recommendation 2.4 of the IGT's Review into improving the self assessment system.235
The IGT recommends that the ATO:
- communicate the availability of ABAs for ECT issues through its website and its consultative forums;
- reaffirm the use of ABAs with relevant staff, including call centre staff, to ensure that queries are responded to and matters escalated in an appropriate and efficient manner;
- monitor and provide advice to Government regarding the demand for binding advice within the ECT regime and whether there are benefits in bringing non-concessional contributions within the rulings regime; and
- identify the ECT issues that are frequently raised and provide public advice on these issues to the extent permitted by law.
213 For example, the interaction between section 292-85 of the ITAA 1997 and regulation 7.04 of the Superannuation Industry (Supervision) Regulations 1994.
214 Above n 11; ATO, Excess contributions tax and how funds report your contributions (14 June 2012).
215 ATO, Super contributions - for defined benefit funds and constitutionally protected funds (15 May 2013).
216 ATO, Understanding tax and SMSFs (16 December 2013); ATO, Running a self-managed super fund (12 February 2014).
217 ATO, Accepting contributions and rollovers (6 March 2014); ATO, Rollovers and transfers (3 March 2014).
218 ATO, Claiming deductions for personal super contributions (6 March 2014).
219 ATO, NTLG Superannuation Technical Sub-group, Minutes of the 5 June 2007 meeting, item 5.7(f).
220 Above n 66.
221 See for example, McLennan and Commissioner of Taxation  AATA 311.
222 ATO, Bring forward provision for people under 65 years old (7 February 2014).
223 See for example, ATO, Simple tax calculator (accessed on 7 March 2014).
224 Above n 11.
225 See for example, Tran and Commissioner of Taxation  AATA 123.
226 TAA 1953, sch 1 s 357-55.
227 TAA 1953, sch 1 sub-s 357-55(a).
228 Above n 49, paras  and .
229 ibid, paras - and .
230 ibid, para .
231 ATO communication to the IGT, 14 February 2013.
233 ATO, Taxpayers' Charter — helping you to get things right (30 June 2010).
234 ATO, How to apply for a private ruling (10 July 2013).
235 Above n 173, p 42.