The Administrative Appeals Tribunal (AAT) has released another decision which shows that it does not pay to participate in superannuation early access schemes.
The decision of Vuong and Commissioner of Taxation [2014] AATA 402 (23 June 2014) following the ATO disallowed two objections by the taxpayer in relation to an early access scheme they participated in, including a significant ‘fee’ paid to the promoter.
Summary of the facts:
- The taxpayer was aged 49 in 2008
- He was a member of a large APRA fund
- In 2008 he was referred by colleagues to a person who offered to help him access his super
- The fee for this ‘service’ would be 29% of the balance
- It appears that the taxpayer did not properly understand that this was not allowed
- Rollover forms were submitted to the APRA fund, and as a result $114,697.23 was deposited into a bank account not controlled by the taxpayer
- The 29% fee was taken, and the remaining $81,434 transferred to the taxpayer
- Questions were raised by the taxpayer’s tax agent, and the tax return for the relevant year was lodged, with the intention of amending it when the facts were known
- In 2011 the ATO audited the taxpayer, and included the full $114,697.23 in his assessable income, resulting in a tax shortfall of $45,298.64.
- The ATO also imposed a shortfall interest charge of $2,896.46.
- The ATO later imposed an administrative penalty of $11,324.65 – 25% of the shortfall
- The taxpayer lodged two objections – one over the imposition of the administrative penalty and the other over the wish to claim the 29% ‘fee’ as a tax deduction
- Both these objections were disallowed by the ATO, and then appealed to the AAT
Early Access Super included in Assessable Income?
Section 6.1 of the ITAA 1997 includes in Assessable Income amounts that are not Ordinary Income, called Statutory Income. Section 304.10, also of the ITAA 97, includes in Assessable Income the amount of a Superannuation Benefit if, among other things, the taxpayer receives a benefit from a complying superannuation fund where the benefit was received “otherwise than in accordance with payment standards prescribed under subsection 31(1) of the Superannuation Industry (Supervision) Act 1993″ unless the Commissioner “satisfied that it is unreasonable that it be included”. Section 307.15(2) of the ITAA 97 also provides that:
