Taxman looks to super

The Australian Taxation Office released this week its compliance program for 2008-09, giving a detailed insight into where tax officers will pay particular attention over the next 12 months. It is well worth a close look.
(See: http://www.ato.gov.au/content/downloads/COR_0015516_CP0809.pdf)

Prominent among the ATO's targets are the over-claiming of tax deductions for super contributions, and contributions that exceed the annual contribution caps. This is the first time, in my recollection, that the compliance program has singled out super contributions for such special attention.

"Superannuation funds are required to report annually all details of member contributions," the compliance statement reads. "We match this information against income tax returns to check that claims for contributions match what the fund received and also to make sure that the contribution caps have not been exceeded."

Where the contributions caps have been overshot, the tax office will send an assessment to the fund members for excess contributions tax. And if the non-concessional contributions cap - currently $50,000 a year or $100,000 a year if over 50 - is exceeded, it will issue a so-called compulsory release authority for the tax amounts to be withdrawn from the super funds.

The tax office's focus on super contributions will undoubtedly intensify each year as Australia's rapidly ageing population saves for retirement.

Superannuation contributions can provide highly valuable tax breaks - but the extra tax payable from overshooting the annual contribution caps can be breathtaking high. Smart Investing will look closely over the next few weeks on tax payable on excess contributions. You may be very surprised.