{"id":3751,"date":"2021-05-04T15:10:10","date_gmt":"2021-05-04T05:40:10","guid":{"rendered":"https:\/\/www.oreon.com.au\/?p=3751"},"modified":"2021-05-04T15:10:10","modified_gmt":"2021-05-04T05:40:10","slug":"dealing-with-excess-before-tax-super-contributions","status":"publish","type":"post","link":"https:\/\/www.oreon.com.au\/superannuation\/dealing-with-excess-before-tax-super-contributions\/","title":{"rendered":"Dealing with excess before-tax super contributions"},"content":{"rendered":"
Making extra before-tax contributions into super (called concessional contributions) can help boost a person\u2019s retirement savings. But fund members need to be aware of the implications for when they exceed the concessional contributions cap.<\/p>\n
Since 2013-14, when the excess concessional contributions refunding scheme came into effect, individuals exceeding their concessional contribution cap will accrue a tax liability.<\/p>\n
The excess concessional contribution (CC) amount will be added to the individual\u2019s assessable income for the relevant year and taxed at their marginal tax rates plus an excess CCs charge (as explained below). The individual will, however, be entitled to a 15% non-refundable tax offset to compensate for the tax already paid by their fund(s) on the same excess amount.<\/p>\n
The ATO will determine whether there are any excess CCs once the individual\u2019s fund has finalised its reporting requirements and the individual has lodged their personal tax return for the relevant income year.<\/p>\n
Upon exceeding their CCs cap, the individual will receive an excess CC determination from the ATO advising them that their excess CCs amount has been included as assessable income in their tax return. Together with the determination, the ATO will issue the individual with an income tax return notice of assessment or notice of an amended assessment.<\/p>\n
First, the CCs (totalling $30,000) would be included in the SMSF\u2019s assessable income for 2019-20 and taxed at 15% (that is $4,500).<\/p>\n
Secondly, the ATO would add the excess CCs of $5,000 to Greg\u2019s assessable income for 2019-20 and recalculate his income tax for that year allowing for a 15% tax offset to reflect the tax already paid by the SMSF. This gives Greg the following tax liability: $5,000 taxed at a marginal tax rate of 34.5% ($5,000 x 34.5% = $1,725). Less 15% tax offset ($5,000 x 15% = $750). Total $975.<\/p>\n
When an individual has their tax payable increased due to having their excess CCs included in their assessable income, they will also have to pay an excess CC charge (essentially an interest charge) that applies to the extra tax liability.<\/p>\n
The excess CC charge:<\/p>\n
Following on from Greg\u2019s scenario earlier, the excess CC charge will apply to his extra tax liability amount of $975 (not the full $5,000 excess CCs) from 1 July 2019 to 20 September 2020 (being the day before tax is due to be paid under his first notice of assessment).<\/p>\n
An individual\u2019s tax liability may also increase by the shortfall interest charge (SIC) that applies to the shortfall between the amount of tax the individual paid originally, and the amount of extra tax identified in their amended tax return (which includes the excess CCs and applicable 15% tax offset).<\/p>\n
The SIC rates are the same as the excess CC charge. Similar to the excess CC charge, the SIC is calculated and compounded daily by the ATO.<\/p>\n
The SIC is applied to the shortfall amount from the time the original tax liability was payable until the day before the extra tax liability related to the amended assessment for the excess CCs is due. The SIC is charged on the total of the extra tax payable due to excess CCs, plus the amount of the excess CC charge.<\/p>\n
In Greg\u2019s case, Greg may need to pay the SIC on the extra income tax liability of $975 plus the excess CC charge amount. Greg\u2019s SIC is applicable from 21 September 2020 (the payment due date under his original notice of assessment) to 20 December 2020 (the day before the payment due date on his amended assessment). Many taxpayers seem to be unaware of the SIC until they receive an amended assessment from the ATO.<\/p>\n
This information has been prepared without taking into account your objectives, financial situation, or needs.\u00a0 Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.\u00a0Content in partnership with Taxpayers Australia<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" Making extra before-tax contributions into super (called concessional contributions) can help boost a person\u2019s retirement savings. But fund members need to be aware of the implications for when they exceed the concessional contributions cap. Since 2013-14, when the excess concessional contributions refunding scheme came into effect, individuals exceeding their concessional contribution cap will accrue a […]<\/p>\n","protected":false},"author":3,"featured_media":3740,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","footnotes":""},"categories":[28],"tags":[],"acf":[],"yoast_head":"\n