For the taxpayer in this case, that amounted to $22,100 and resulted in a Division 293 tax liability of $3,315, being 15 per cent of the $22,100 excess.

“While the standard concessional contribution cap for the 2022 financial year was $27,500, the taxpayer had a personal concessional contribution cap of $82,482 as they had unused concessional contribution cap space of $54,982 carried forward from previous financial years,” Hallinan said.

“The curious aspect of the case is that for the taxpayer to apply the unused cap space to the 2022 financial year, they must have had a total superannuation balance as at 30 June 2021 of less than $500,000. However, the taxpayer’s total superannuation balance, ignoring investment earnings, would at the end of the 2022 income year have been less than $600,000.”

Division 293 was, Hallinan said, introduced to claw back a portion of the tax concession in respect of concessional contributions of “high-income earners”.

“In this case, the taxpayer has only become a high-income earner for the 2022 financial year by reason of the application of the unused cap space and they could only apply the unused cap space by having, for high-income earners, a relatively modest total superannuation balance.”

Since the 2019 financial year, if a taxpayer’s concessional contributions amount for a financial year is less than the standard concessional contributions cap for that year, the unused portion of the cap can be carried forward to the next financial year.

“Consequently, the concessional contribution cap for the taxpayer for the following year will be the standard cap for that year increased by the unused cap for the previous year,” Hallinan said.

“There are two significant limits to the carry forward of unused cap space. The first is that unused cap space can only be applied in a financial year if the taxpayer’s concessional contributions amount for the financial year exceeds the standard cap for that year. The second is that unused cap space must be applied in the order in which they arose and they cannot be carried forward for more than five financial years.”

In the MTBW case, the taxpayer argued the carry forward of the unused cap space only applied at the taxpayer’s election and that no such election had been made.

“If this argument was accepted then the taxpayer’s income for the 2022 financial year for Div 293 purposes would fall under the $250,000 threshold, thereby not triggering the application of Div 293,” Hallinan said.

“This argument was supported by the wording on the ATO website relating to the carry forward of unused cap space which states ‘you can use the caps’ suggesting the application of the higher concessional contribution cap is at the election of the taxpayer and not mandatory.”

The taxpayer argued that this election interpretation was supported by the guide to Division 291. This states that the taxpayer “can carry forward unused concessional contributions cap from the previous five financial years”.

“While the tribunal found the website text and the guide, when read in isolation, is consistent with the taxpayers’ argument, neither the text nor the statutory guide could override the plain meaning of the statutory provisions,” Hallinan said.

“The plain meaning of the statutory provisions was that if a taxpayer has unused cap space from one of the previous five financial years, it is automatically carried forward and the taxpayer has no election in the matter.”