The new rules contained in the exposure draft dealing with the reimbursement of super fund excess concessional contributions are set to influence taxation matters beyond superannuation if left in their current form.
Under the proposed legislation amendments, the commissioner of taxation will issue a notice to a superannuation fund that a member has breached the concessional contributions cap.
If this breach is under $10,000 and is a first offence, the trustees of the fund will have the option of taking up the Australian Taxation Office's (ATO) offer to refund the breach or allow this opportunity to pass and pay the associated excess contributions tax.
Should the trustees chose to refund the excess contribution to the member, the commissioner of taxation will then issue the superannuation fund a release authority and the trustees will pay the amount to be refunded back to the ATO for distribution back to the member.
According to Institute of Chartered Accountants in Australia head of superannuation Liz Westover, having to remit the refund amount to the ATO could lead to problems as the refunded amount might satisfy the definition of a credit within the Taxation Administration Act.
"If that is the case, the commissioner can actually do what he likes with that credit in so far as paying other tax obligations. This means the commissioner can also affect family tax benefits, child support and things like that in this situation," Westover said.
"My concern is that while I understand the commissioner should be able to retain that portion of the refund to pay the tax liability that would otherwise be attached to that refund, had the super fund member received the amount as declarable income in their tax return, does he have the right to use the balance of that refund for other purposes?
"That particular aspect of the refund should be directed to the tax payer and should be exempted from the definition of a credit under the Taxation Administration Act because it would be consistent with the concept that this legislation was meant to provide relief."
