In cases such as cash or cash equivalents, the time of receipt is when the cash is received. However, in circumstances such as cheques, EFT, BPay or in specie contributions, the timing or receipt of contributions can become difficult to ascertain.

The following illustrates the dangers of not making a contribution on time which resulted in significant excess contributions tax in a number of cases.

In Liwszyc v Commissioner of Taxation [2014] FCA 112, Justice McKerracher confirmed the ATO’s position, as follows:

"… in the case of a contribution of funds by way of an electronic funds transfer, the contribution will be made when the amount is received by the superannuation provider..."

In Rawson v FCT [2012] AATA 322, Mr Rawson contributed CCs by NAB’s BPay service on 29 June 2009 which were not received by his fund until 1 July 2009. The terms and conditions for BPay stated the following:

"If you are submitting a bill payment instruction on ... a business day after 6.30pm (AEST/AEDT) The Biller will receive the funds (in most cases) ... within 2 business days."

The tribunal commented that:

"… Ignorance on the part of … NAB's banking practice … is not a "special circumstance"."

In Colless v Commissioner of Taxation [2012] AATA 441 the taxpayer used Colonial First State’s service called ‘SuperSplit’, which allows for single payment via this service which then pays monies into various accounts of the numerous funds managed by Colonial — the primary purpose was to reduce administrative burdens for small businesses. The contribution was made on 29 June but not recorded by the superannuation fund until 2 July. The tribunal commented that:

"… PDS of SuperSplit made it clear that it was only a holding account, and contributions should not be regarded as made until they are allocated from the SuperSplit account to the particular funds."

In Davenport and Commissioner of Taxation [2012] AATA 760 an employer contribution was made by EFT on 27 June 2008 with no employee identification. On 1 July 2008 an employer remittance slip dated 27 June 2008 was received by the fund by post and the contribution was allocated to Mr Davenport on that day. The tribunal did not find any special circumstances and the ATO’s excess contribution assessment was therefore affirmed. Paragraphs 56 and 58 from the Davenport decision are extracted below:

"56. The Tribunal has recently found, on a number of occasions, that contributions are "made" when they are actually received by the superannuation fund and credited to the relevant member's superannuation fund account: See Colless v Commissioner of Taxation [2011] AATA 5317 at [8]; Chantrell v Commissioner of Taxation [2012] AATA 179 at [14] – [15], [19]-[21]; Peaker v Commissioner of Taxation [2012] AATA 140 especially at [8]-[9]; Rawson v Commissioner of Taxation [2012] AATA 3222 at [53] to [67]; and Paget v Commissioner of Taxation [2012] AATA 334 at [47] to [59].

"58. Further, according to paragraph 13 of TR 2010/1, the Commissioner considers that where funds are transferred by ETF to the superannuation provider (as was the case here), the funds are received ("made") when the funds are credited to the relevant member's superannuation fund account. Paragraph 183 and … 186 … of TR 2010/1 state:

"183. A contribution of funds as cash or an electronic funds transfer, is made when the account is received by the superannuation provider and credited to the relevant account.

"186 When a financial institution agrees to accept a payment instruction it notifies the receiving institution of the details of the payment. In Australia there are several different clearing systems for the transferring of information and netting of amounts to be transferred between institutions. The clearing rules of these systems bind the financial institutions but not the customers. Most small payments between financial institutions are not processed in real time but are subject to deferred net settlement which occurs overnight [:Thomson Legal Online, Law Relating to Banker and Customer, paragraphs 4.1860, 4.1980, and 4.2090]. As such,it is not until an amount is credited to a bank account of the superannuation provider that a contribution will be taken to be made."

In Verschuer and Commissioner of Taxation [2013] AATA 12 there were no special circumstances and the assessment for excess CCs and NCCs was confirmed for FY2009 (ie, prior to the changes in the excess tax regime introduced in mid-2013). Professor Robert Deutsch, Deputy President of the AAT stated:

"[19] The excess concessional contributions tax is worked out as 31.5 per cent of $89,314.21, being the excess (i.e. $28,133.97), and the non-concessional contributions tax is worked out as 46.5 per cent of the same amount (i.e. $41,531.10). In other words, the excess is counted as both an excessive concessional and as an excessive non-concessional contribution. When added together, and taken as a percentage, this gives rise to the much referred to rate of 78 per cent (i.e. $28,133.97 plus $41,531.10 divided by $89,314.21 as a percentage). [Note, this 78 per cent excess contributions tax was on top of the 15 per cent tax applicable to CCs in the fund, ie, a total notional tax on some contributions of 93 per cent.]

"[32] One complication relates to the use by superannuation providers of what are loosely described as ‘clearing accounts’. Clearing accounts are commonly established by superannuation providers. They are essentially accounts into which monies are placed by employers in respect of one or more employees (usually many more) until such time as the exact identity of each employee, and the amount attributed to each employee, can be determined…

"[35] The clearing account is not itself a superannuation fund. It is not an account held by a superannuation fund... As far as I can ascertain … the clearing account … is opened by Colonial First State in the name of the employer… The clearing account merely facilitates the payment of certain superannuation contributions by requiring the employer to pay only one amount for all its employees, rather than individual amounts for each individual employee..."

Let us now consider an example.

Example 1

Consider ABC Pty Ltd and their bookkeeper Mary.

Mary makes a contribution to a superannuation fund on 30 June 2015 by BPay. However, the superannuation fund only receives the payment in their accounts on 1 July 2015.

As the payment is only received by the superannuation fund on 1 July 2015, the contribution will be received in FY2016.

These facts have been adopted from the case of Liwszyc v Commissioner of Taxation [2014] FCA 112. See also the extract from Rawson v FCT [2012] AATA 322; Colless v Commissioner of Taxation [2012] AATA 441; and Davenport and Commissioner of Taxation [2012] AATA 760 above.

Naturally, particular care should be taken where a contributor attempts to transfer real property in specie to an SMSF trustee. TR 2010/1 addresses this scenario specifically providing as follows:

"A contribution by way of a transfer of an asset will be made when the superannuation provider obtains ownership of the asset from the contributor. The Commissioner accepts the superannuation provider obtains ownership of an asset when beneficial ownership of the asset is acquired and that beneficial ownership can be acquired earlier than legal ownership."

Accordingly, real property will be taken to be received, when the SMSF trustee has received everything necessary to effect the transfer of the beneficial interest in the property from the contributor.

Example 2

Consider David and his SMSF.

David wishes to contribute his investment property into his SMSF. The property is used 100 per cent in business and is clearly business real property (residential property cannot be acquired from a related party under s 66 SISA). David signs the relevant transfer of land form and gives it to the SMSF trustee on 30 June 2015. However, the SMSF trustee only lodges the form with the relevant state revenue office on 15 July 2015 and will then seek a transfer of title via the title’s office once duty is paid.

The SMSF trustee possesses everything required to effect the transfer of beneficial ownership of the property on 30 June 2015, and accordingly the contribution will be received in FY2015.

Daniel Butler, director, DBA Lawyers