Assistant treasurer Josh Frydenberg announced the changes yesterday. In a statement, he said the Tax and Superannuation Laws Amendment (2014 Measures No.7) Bill will make the “taxation of excess after-tax superannuation contributions fairer”.
“This honours our election commitment to make sure inadvertent breaches of the non-concessional contributions cap do not incur a disproportionate penalty," he said.
The new approach will be fairer to those who make mistakes, while discouraging those who embark on aggressive tax planning strategies, the assistant treasurer said.
“Passage of this Bill represents another important step towards as a stronger, more sustainable economy and a fairer tax system,” he said.
While welcoming the new tax rules, AMP has warned a number of outstanding issues are yet to be addressed.
The new provisions will provide those who have inadvertently breached their non-concessional cap with additional options, but AMP SMSF’s head of policy, technical and educational services, Peter Burgess, told AccountantsDaily's sister publication SMSF Adviser there are still issues relating to the way commissioner discretion works.
“Even though we [now] have the refunding rules in place, it’s still in most cases a better outcome for clients to seek discretion and [have] that excess re-allocated or disregarded,” said Mr Burgess.
“They will avoid paying a concessional contribution charge if it’s an excess concessional contribution or having to pay tax on the associated earnings component if it’s a non-concessional.”
Although successfully receiving commissioner discretion will generally result in a better outcome for clients than using the new refund rules, Mr Burgess said this remains difficult to obtain.
“There’s a very narrow interpretation and definition of special circumstance and I think that’s one area that still needs attention,” he said.
Mr Burgess said the new rules will, however, see some improvement in the fairness of the system.