ATO ID 2005/279: Superannuation Contributions Surcharge - unfunded defined benefit schemes and interest on overpayment
Date of decision: 11 February 2004
Year of income: Year ended 30 June 2002
Business line: Superannuation

Issue
Is the taxpayer, a member of an unfunded defined benefits superannuation scheme (UDB Scheme), entitled to interest on overpayment under Part IIC of the Taxation (Interest on Overpayments and Early Payments) Act 1983 (IOP Act) in relation to a payment made in respect of a superannuation contributions tax (surcharge) assessment which was later amended, resulting in a lower surcharge liability?

Decision
No. No interest is payable under Part IIC of the IOP Act in this case.

Facts
In accordance with section 15 of the Superannuation Contributions Tax (Assessment and Collection) Act 1997 (SCT Act), in February 2003 the Commissioner of Taxation issued a surcharge assessment for the 2001-02 income year in respect of the surchargeable contributions of the UDB Scheme member. The resulting surcharge liability was debited to a surcharge debt account for the member under subsection 16(3) of the SCT Act. Under subsection 16(7) of the SCT Act, the member made a payment to the UDB Scheme in order to reduce the debit balance of the surcharge debt account. In November 2003, the Commissioner amended the surcharge assessment for the 2001-02 income year, reducing the surcharge liability for that year. As a result, the member became entitled to a refund of the difference between the amount already paid and the amended (lower) surcharge liability. No 'splittable payments' were payable and no benefits had been payable to the member by the UDB Scheme before the amended assessment was issued.

Reasons for decision
Summary: Part IIC of the IOP Act provides for the payment of interest by the Commissioner on an overpayment of surcharge where an assessment made under the SCT Act is amended to reduce the surcharge liability. In particular, section 8M of the IOP Act states: If: (a) an assessment is made under the Superannuation Contributions Tax (Assessment and Collection) Act 1997 in respect of a person's liability to pay superannuation contributions surcharge or an advance instalment; and (b) the person has paid the assessed amount of the surcharge or instalment; and (c) the assessment is amended (otherwise than under section 18 of that Act) reducing the liability of the person to pay surcharge or the instalment; interest is payable by the Commissioner to the person in accordance with this Part on the amount by which the surcharge or instalment payable by the person under the amended assessment is less than the surcharge or instalment that was paid by the person under the assessment that was amended. The period in which interest is payable is determined by section 8N of the IOP Act which states: The interest is payable for the period that: (a) started on the later of the following days: (i) the day on which the amount of the surcharge or advance instalment was paid; (ii) the day by which the amount of the surcharge or advance instalment was required to be paid; and Section 16 of the SCT Act prescribes the timing in which the surcharge liability becomes payable in respect of the surchargeable contributions of a member of a UDB Scheme. This section is significant for interpreting the phrase 'the day by which the amount of the surcharge ... was required to be paid' as used in subparagraph 8N(a)(ii) of the IOP Act. Importantly, section 16 of the SCT Act makes provision for the deferral of surcharge liability. In summary, the liability is not required to be paid until one month after: For the purposes of subparagraph 8N(a)(ii) of the IOP Act, this is also the day on which the surcharge was required to be paid. Neither of the above scenarios had occurred before the amended surcharge assessment issued in November 2003. Due the operation of section 8N of the IOP Act, as the required payment date did not occur before the day on which the assessment was amended, there is no period for which interest is payable.

Legislative references: Superannuation Contribution Tax (Assessment and Collection) Act 1997 section 15 section 16 subsection 16(3) subsection 16(6) subsection 16(6A) subsection 16(7)
Subject references: Interest on overpayment Superannuation contributions surcharge Superannuation contributions tax