Excess Concessional Contributions: What if you exceed the caps?

Your excess concessional contributions are counted as personal assessable income and taxed at your marginal tax rate. You will receive a tax offset to reflect the 15% tax already paid on these contributions by the super fund. 

You can elect to withdraw the excess concessional contributions from your fund. If you elect not to, your excess concessional contributions will also count towards your non-concessional contribution cap.

Excess non-concessional contributions are taxed at 45% + Medicare (2%).

But before the ATO applies this tax, they will give you an opportunity to remove the excess non-concessional contributions (plus a notional amount to reflect investment earnings) from super. If you take this option, you will only pay tax on the notional earnings amount.

The notional earnings will be taxed just like normal personal income, less a 15% tax offset to reflect the fact that theoretically, the super fund has already paid 15% on its earnings.

If you decide to pay the additional tax out of your own money (and leave the excess concessional contributions in your super account), you should follow the payment directions provided in the ATO correspondence. Payment of any extra tax should be made directly from your personal bank account and no further action is required by the super fund.

Members who do nothing will effectively default to this option - ie, they will miss the opportunity to release any money from their super fund and will be required to pay the tax personally.

If you decide to have the excess concessional contributions refunded out of your super fund, you will need to make an election.

You can make this election:

• on the paper form provided by the ATO
•  via you myGov account or
• by asking your personal accountant to submit an election on your behalf.

This choice is irrevocable and must be made within 60 days.

In the meantime, the super fund should not do any of the following:

• release any money to you,
• pay the tax bill by the “due date”, or
• use the payment details provided to you on the initial notice.

In due course, the ATO will send a request (called a "release authority") to the super fund that directs the super fund to pay some of your super to the ATO. (Note that the refund is paid to the ATO first, not directly to you.)

The release authority will be sent electronically to the super fund via its ESA (Electronic Service Address). The payment must be made (and the ATO notified via the required electronic systems) within 10 days.

Once the ATO has received the money, they will deduct the tax owed on the excess contributions, as well as any other personal tax debts you have, and give you whatever is left like a tax refund.

The ATO will automatically issue a release authority to the fund 60 days after the initial notification of the excess. This directs the fund to refund certain money to the ATO.

As for excess concessional contributions, it will be sent via the fund's ESA and payment must be paid (and the ATO notified via the required electronic systems) within 10 days.

One again, the ATO will calculate and deduct additional taxes owing (this time, tax on the notional earnings amount, less a 15% offset) and return the amount leftover to you.

If you wish to:

• nominate a specific fund from which the refund should be paid;
• have the refund dealt with more quickly than 60 days after the initial notice detailing the excess; or
• leave the excess in superannuation and pay tax on the excess contributions yourself

you must make an election within 60 days of the initial notice about your excess.