Excess Concessional Contributions

The process

Example:

Taxpayer: age 57 on 1 July 2013 – Adjusted Taxable Income $245,000 – Taxable Income $200,000

*SIC Rate changes quarterly – refer to the link below for relevant rates

Subsequently

ATO offers refund of up to 85% of the excess contribution.

If Taxpayer takes up the offer, the ATO notifies the Superfund Trustee of amount to be released.

The Superfund Trustee releases the amount to the ATO.

ATO remits to the Taxpayer.

Treatment in Superfund

If refund not taken Superfund classifies excess as Non-Concessional

If refund taken Superfund reduces the Non-Concessional amount accordingly.

From 1 July 2011 – Limited Refund
Eligible individuals have the option to have excess concessional contributions taken out of their super fund and assessed as income at their marginal tax rate, rather than incurring excess contributions tax at 46.5%.  This measure applies to excess concessional contributions up to $10,000 (unindexed) made after 1 July 2011 and only for the first year in which an excess contribution occurs.

From 1 July 2007
Superannuation funds report to the ATO all concessional contributions (including notional taxable contributions, but not untaxed contributions) made for the benefit of an individual.

If your concessional contributions exceed your concessional cap in a financial year you will be notified by the ATO.  The excess contributions will be effectively taxed at the top marginal tax rate plus the Medicare levy (an additional 31.5% on top of the original 15% paid by the fund).

This tax will be applied to the individual, not the fund.  You may pay the ATO directly or provided that you do it within 90 days of the date of the release authority received from the ATO, you will be able to instruct your fund to release monies and pay the tax liability on excess contributions that do not exceed the non-concessional cap. 

If a person inadvertently breaches the cap, the ATO may be able to reduce the amount of excess contributions subject to tax.  Refer to the link below for more details. 

Contributions above the concessional cap will count towards the non-concessional contributions cap even if they have been taxed at the top marginal rate.  This will ensure that people cannot circumvent the non- concessional cap by making excessive concessional contributions. 

NB! The tax on excess contributions that exceed the non-concessional cap cannot be paid by the individual.  It must be paid by the superfund.  Refer to the topic ‘Non-Concessional Contributions’, elsewhere on this website for more information. 

Employers will be able to claim a full deduction for all contributions to superannuation funds made on behalf of their eligible employees under age 75 (even contributions which exceed the contributions cap). 

If a superfund receives a contribution for a member who does not meet the relevant age and work test it must reject it or return it to the payer within 30 days of becoming aware of the breach. 

In a SMSF, where all members are also trustees, the ‘ATO view’ is that the 30 day period for returning the contributions, runs from the date the excess contribution is made and not when the trustee first becomes aware of it.

Refer to the links below for more details.