Australia Clarifies Superannuation Penalties

by Mary Swire, Tax-News.com, Hong Kong

01 June 2011

A new practice statement has been released by the Australian Government which provides guidelines for remitting administrative penalties where an individual or super provider does not comply with their excess contributions tax (ECT) release authority obligations.

Penalties are imposed to encourage compliance; encourage the prompt withdrawal of excess non-concessional contributions tax from the super system; and ensure that no more than the ECT amount is removed from the super fund.

The tax office says that it will consider each case individually when deciding whether it should remit any part of the penalty. If it finds the individual or super provider has made a genuine attempt to comply with their obligations, it may remit the penalty in full. However, if the tax office finds the individual has made little or no attempt to meet his obligations, it may not remit the penalty at all.

The practice statement provides examples that show what the tax office will consider when working out whether to impose or remit these penalties. The statement provides guidelines for the remission of administrative penalties where an individual does not give a release authority for excess non-concessional contributions tax to a superannuation provider within 21 days after the date of the release authority; an individual gave a release authority to the superannuation provider and the total amount released in accordance with the release authority was more than the amount required to be released; or a superannuation provider does not release the required amount within 30 days after receiving the release authority.

It does not deal with the administrative penalty imposed where a superannuation provider fails to provide a statement of the payment under a release authority to the Commissioner, and a copy of the statement to the individual within 30 days, or the imposition or remission of the general interest charge (GIC), which is independent of the penalties in relation to a release authority.

Where an individual or superannuation provider is liable to a penalty for failing to comply with their obligations in relation to a release authority, the Commissioner must consider whether it is appropriate to remit all or a part of the penalty. Therefore, a remission decision must be made before a penalty notice is issued.

The facts of each case determine whether the Commissioner should exercise the discretion to remit the penalty. For this reason, the statements, and levels of penalty remission reflected in the examples within the practice statement, are to be used as a guide only.

In determining whether it is appropriate to exercise the discretion, the Commissioner will consider information provided by the individual or superannuation provider; consider evidence of the individual's or superannuation provider's attempt to comply with their obligations in relation to a release authority; consider facts which are relevant to the appropriateness of the penalty in the circumstances; act in accordance with the principles of the compliance model and the Taxpayers' charter; and apply the good decision-making model.

A relevant consideration in determining whether to exercise the Commissioner's discretion to remit the penalty will be the level at which the individual or superannuation provider has attempted to comply with their obligations in relation to a release authority.

If an individual or superannuation provider has made a genuine attempt to comply, the Commissioner may consider it appropriate for any relevant penalties to be remitted in full. If they have made a moderate attempt to comply, the Commissioner may consider it appropriate for any relevant penalties to be partially remitted. If they have made no attempt to satisfy their obligations, the Commissioner may consider it is not appropriate to exercise the discretion to remit the penalty at all.

Where an individual or superannuation provider's failure to meet their obligations is attributable to circumstances and factors beyond their control, the Commissioner will consider those factors and the extent to which compliance was affected.

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