SMEs warned on excess super rules, as ATO bills exceed expectations

Small businesses are advised to exercise caution on their excess superannuation contributions, after it was revealed the Australian Taxation Office has issued more than $400 million in bills for excess payments.

The figure is more than double previously expected, the Australian Financial Review reports. At least $140 million has already been collected.

“The value of liabilities will continue to rise, reflecting the continual issue of new assessments,” an ATO spokesman told the AFR.

The figures revealed by ATO deputy commissioner, Neil Olesen, in a Senate estimates committee hearing, trace back to 2006-07, when investors were allowed to put $1 million in a one-off contribution into super after tax. The former Howard Government later introduced caps on annual contributions.

Under new rules released in the budget, taxpayers who breach the caps by up to $10,000 can ask for the excess contributions to be returned to them. But this option is only available for first-time breaches.

The executive director for the Council of Small Businesses of Australia, Peter Strong, says he does not believe small business owners are deliberately trying to break superannuation contribution rules.

“Normally people who break the rules deliberately are people with a lot of money,” he told SmartCompany this morning.

“As we know, small business owners don’t have a lot of money. Most of them are using their superannuation with the right intent and see it as their retirement fund.”

Strong recommends small business owners speak to their accountant or obtain advice from the Tax Office to avoid breaking the “confusing” rules.

And while Strong welcomed the changes announced in the May budget, he says more could have been done.

“If they [SMEs] happen to have broken a confusing law, we hope they are given every opportunity to change that,” he says.

“Because of the nature of red tape, they have to spend their hard-earned on professional advice or hours and hours away from running the business to comply with superannuation regulations.”