There are limits on the amount you can contribute into super each financial year. If you contribute over these caps, you may have to pay extra tax. The cap amount and how much extra tax you have to pay may depend on your age, which financial year your contributions relate to, and if:
- the contributions are concessional (before tax ie you are going to claim a tax deduction for the contribution)
- the contributions are non-concessional (after tax ie you aren’t going to claim a tax deduction for the contribution)
Excess Non-Concessional Contributions
From 1 July 2017, your non-concessional contributions cap will be nil if you have a total super balance greater than or equal to $1.6 million at the end of 30 June of the previous financial year. If your non-concessional cap is nil, any non-concessional contributions you make plus any excess concessional contributions you elect or are unable to have released will be excess non-concessional contributions. You will pay excess contributions tax of 47% on these contributions.
To find out how much you contributed into your super fund to ensure you don’t go over the caps, contact your super fund or look at your myGov account.
If you exceed your non-concessional contributions cap in a financial year, you must lodge a tax return for that year and you may have to pay extra tax.
If you go over the non-concessional cap you have 2 options. Option 1 is where you can withdraw the excess non-concessional contributions, and any earnings associated with the excess contribution. The earnings would then be included in your personal income tax assessment.
Option 2 will apply If you choose not to withdraw your excess contributions, they are then taxed at the top marginal tax rate within super.
Excess Concessional Contributions
If you have made excess concessional contributions during a financial year, the ATO will issue you with an excess concessional contributions determination. The determination advises you that your excess concessional contribution amount has been included as assessable income in your personal tax return.
With your determination, you will also receive a tax return Notice of assessment or Notice of amended assessment for your personal tax return for the year in question.
When you receive the determination from the ATO you can choose to:
- do nothing and leave the excess concessional contributions in super
- elect to release your excess concessional contributions from your super fund.
Any excess concessional contributions you do not elect to have released will count towards your non- concessional contributions cap.