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Superannuation - Excess Contributions Tax & Special Circumstances - APR11
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SUPERANNUATION
Excess Contributions Tax & Special Circumstances
Following the introduction of the more limited superannuation contribution caps from 1 July 2009 (concessional contribution cap for members under 50 years – $25,000; and for members over 50 years – $50,000, reducing to $25,000 as from 1 July 2012), members of superannuation funds may have a liability to pay an additional tax (“excess contributions tax”) on contributions exceeding the contribution caps.
Excess non-concessional contributions are taxed at 46.5%, while excess concessional contributions are taxed at 31.5% (on top of the usual 15% tax). Sometimes, this problem is exacerbated because excess concessional contributions automatically count as non‑concessional contributions and can push a member into excess concessional and excess non-concessional territory. In this event, a marginal tax rate of 93% effectively applies.
In practice, excess non-concessional contributions can cause more problems than excess concessional contributions. The Superannuation Industry (Supervision) Regulations 1994 (“Regulations”) impose some obligations on trustees to return excess non-concessional contributions to members. However, the Australian Taxation Office (“ATO”) has interpreted these Regulations narrowly and this has severely limited a trustee’s ability to return excess contributions.
Specifically, Regulation 7.04(4) broadly requires a trustee to return contributions that are received above a person’s non-concessional contributions cap. However, the ATO has stated their view in ID 2007/225 that members must make a contribution that in itself exceeds their non‑concessional contributions cap in order for Regulation 7.04(4) to apply.
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