Have you exceeded the Concessional Contributions Cap?
From 1 July 2013, if you go over the concessional cap, the ATO will include your excess contributions in your assessable income and you will be taxed at your marginal tax rate. You will also have to pay the excess concessional contributions charge (ECC) on the increase in your tax liability. The ATO will send you an ECC determination that shows the amount of ECC and the ECC charge.
You can choose to release up to 85% of your ECC from your super fund by completing an Excess concessional contributions election form and sending it to the ATO within 21 days of your ECC determination issue date. You can only release up to 85% because 15% tax has already been paid by your super fund. You will receive a 15% non-refundable tax offset in your tax return to allow for this. Released contributions will not be counted as non-concessional contributions.
If you go over the non-concessional contributions cap
From 1 July 2013, if you go over your non-concessional contributions cap, you will receive an excess non-concessional contributions determination. You can then choose how your excess contributions are taxed by completing an Excess non-concessional contributions Election form and sending it to the ATO within 60 days of your excess non-concessional contributions determination issue date. You can choose from one of the following options:
Option 1 – release amounts from superannuation
- You choose to release all of your excess contributions and 85% of your associated earnings from your super fund. You can only release up to 85% as 15% tax has already been paid on the earnings by your super fund
- The total amount of your associated earnings are included in your assessable income and taxed at your marginal tax rate. You receive a 15% non-refundable tax offset to allow for the 15% tax paid by your fund
- The ATO issue a release authority to funds you nominate and they pay this amount to you.
Option 2 – pay excess non-concessional contributions tax
- You choose not to release your excess non- concessional contributions from your super fund
- You will receive an excess non-concessional contributions tax assessment where the excess amount will be taxed at the highest marginal tax rate – 49% in 2016-17
- You receive a compulsory release authority with your assessment, which must be given to your super fund to pay the amount of the assessment.
Option 3 – advise you have no money or assets in any super fund
- If you advise the ATO that the value of your super interests is zero and the ATO are satisfied, you will receive a direction notice
- The full amount of your associated earnings will be included in your assessable income and taxed at your marginal tax rate
- A non-refundable tax offset equal to 15% of your associated earnings is applied to allow for the 15% tax already paid by your fund.
If you don’t choose an option
If the ATO don’t receive a valid election form within 60 days of the determination letter issue date, they will issue you with an excess non-concessional contributions tax assessment. It will be as though you chose option 2.
Bring forward provision
If you are under age 65 in the relevant financial year you can bring forward the next two years of non-concessional contributions using the “bring forward” provision. The cap amount that applies is three times the non-concessional contributions cap for the financial year when you make the contribution.
Avoiding extra tax
Check your contributions regularly to make sure you aren’t going to exceed the caps. When you work out how much you’re contributing in any financial year, remember that contributions count when they are received by your fund – not when the payment was sent.
If you salary sacrifice to super and you think you’re at risk of exceeding the cap, consider reducing your salary sacrifice amounts.
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