Excess Contributions – Part 1

10 Feb 2020

Written by

David Busoli, Principal

Members need to be aware that the concessional contributions they believe they have made via their pay slips will often not match what has been contributed to their superannuation fund. This is because the fund will not receive the last quarter’s contribution until July. This timing factor can easily result in an inadvertent breach of the concessional cap.

Assuming that any salary sacrifice was before tax, any amount over the cap will be excessive. Contribution splitting with a spouse will not help.

SMSF members may treat contributions received in June, even employer contributions, as contributions to a contribution reserve. Such contributions will not be allocated until the next financial year so may enable the member to avoid breaching the cap in the year of contribution – but they must remember they will have used some of their cap for the next year.

Another solution in the 19/20 year could be the accessing of any unused 18/19 concessional contributions – but only for members with a total super balance of less than $500,000 at the end of 30 June 2019.

The calculation of the ATO’s excess concessional contributions determination is not straight forward. The determination advises that the calculated excess has been included as assessable income in the member’s personal tax return for the year of contribution and an assessment notice will be attached.

If the contribution information is correct the member can either do nothing and leave the concessional contribution in super – they will still have to pay personal tax and the excess will be counted against their non-concessional cap – or elect to release it from the fund.

Under the release option the excess will be paid to the ATO where it will be reduced by any tax liability and refunded to the member.

This subject will be expanded in part 2.

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