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PCG 2020/6 & recap on timing of contributions

PCG 2020/6 & recap on timing of contributionsThe ATO recently released Practical Compliance Guideline PCG 2020/6. The guideline considers the timing of income tax deductions for superannuation contributions made through the Small Business Superannuation Clearing House (‘SBSCH’) and the ATO’s compliance approach. However, it is also a timely reminder on when to make contributions more generally.

Background to PCG 2020/6

The ATO’s position is that a contribution of money is made when the amount is received by the superannuation provider or credited to the relevant account (TR 2010/1 [183]).

This position was confirmed by the Federal Court in Liwszyc v Commissioner of Taxation [2014] FCA 112. In this case, Mr Liwszyc was the director of Southern Fluids Technologies Pty Ltd (‘SFT’). On 30 June 2009 the bookkeeper of SFT made two superannuation contributions in respect of Mr Liwszyc. The payments were made via BPay. However, the superannuation fund (AMP Superannuation Trust) did not show the contributions as having been received until 1 July 2009.

Naturally, this meant the contributions were recognised in the 2010 financial year instead of the 2009 financial year. This was despite Mr Liwszyc’s evidence that the payments were clearly marked that as being for the 2009 financial year.

This meant that Mr Liwszyc had excess concessional contributions and thus excess concessional contributions tax!

Mr Liwszyc took this matter to the Federal Court. The Court confirmed that the contribution was indeed made when the amount was received by the superannuation provider (ie, the 2010 financial year), not when the amount left the contributor’s bank account (ie, the 2009 financial year).

Naturally this approach can cause all sorts of practical issues for employers!

The guideline

The ATO state in PCG 2020/6 that they will not apply compliance resources to consider whether the contribution an employer made was received by the superannuation fund in the same income year in which the employer made the payment to the SBSCH, provided the employer made the payment to the SBSCH before close of business on the last business day of the financial year on or before 30 June.

The guideline applies both before and after its date of issue.

The guideline is very practical and the ATO should be commended for it.

Best practice

Taxpayers must remember that the guideline only applies to employers making superannuation contributions by way of payment to the SBSCH.

The guideline offers no protection for taxpayers who make:

  • personal contributions (non-concessional contributions or concessional contributions)
  • employer contributions directly (eg, SFT in Liwszyc).

For such taxpayers, I have always advised to make contributions with a generous time buffer before the end of the financial year. This buffer is designed to allow for processing delays. Previously I have said that — practically — such taxpayers should view the final day in a financial year for making superannuation contributions as being 20 June.

I feel this is still the case.

By Bryce Figot, Special Counsel ([email protected])


30 September 2020

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