Super alert: Have you counted your super contributions lately?

Note: This article outlines the super contribution rules, and also provides a list of helpful articles that explain how the two types of contributions caps work, and the general contribution rules.

You can make two types of super contributions: concessional (before-tax) contributions and non-concessional contributions. Each type of super contribution is subject to an annual cap. If you exceed one or both of these caps, you can expect administrative and financial consequences. Super contributions that excess a contributions cap are known as excess contributions.

Concessional contributions: Your excess concessional contributions count towards your assessable income in the year that you made the excess concessional contributions. Note that the super fund earnings connected to the excess contributions then form part of your assessable income and are subject to your marginal tax rate. This treatment applies from 1 July 2013. For the treatment of excess concessional contributions before July 2013, see SuperGuide article Excess contributions: Happy ending to a super horror story.

Non-concessional contributions: Excess non-concessional contributions can now be withdrawn from a super fund without financial penalty, although the super fund earnings associated with those excess contributions count towards your assessable income and are subject to your marginal income tax rate. If you choose to leave your excess non-concessional contributions in your super fund however, then your excess super contributions will be subject to the top marginal tax rate. This treatment applies from 1 July 2013. For the treatment of excess non-concessional contributions before July 2013, see SuperGuide article Excess contributions: Happy ending to a super horror story.

Tips to help you avoid the hassle of excess contributions

Here’s a few suggestions to help you avoid exceeding your concessional contributions cap:

  • Check with your employer about the level of super contributions that they have made on your behalf, so far, for the financial year (a financial year runs from 1 July through to 30 June of the following year).
  • You also need to track any voluntary concessional (before-tax) super contributions you may be making to your super fund.
  • If you don’t want to exceed your concessional contributions cap, you need to ensure that your current concessional super contributions, and any further concessional contributions (from your employer or you) going into your super account for the remaining months of the current financial year keep you within your concessional contributions cap.
  • Also check with your super fund to confirm whether all of those super contributions have reached your super account, and if not, when the super fund intends to process them, and when your employer plans to process future contribution payments for the current financial year.

You can then properly monitor your contributions for the year, and decide if you will, or have exceeded your concessional contributions cap.

If you have a superannuation salary sacrifice arrangement with your employer, then you also need to check the timing, size of these contribution payments, and the recording of these contributions with your employer and your super

Continue reading to access SuperGuide articles explain the rules applying to:

Seeking information on concessional (before-tax) contributions

For information on concessional (before-tax) contributions, including the concessional contributions caps, see the following SuperGuide articles:

Seeking information on non-concessional (after-tax) contributions

For information on non-concessional (after-tax) contributions, including the concessional contributions caps, see the following SuperGuide articles:

Seeking information on excess contributions rules

For information specifically on the excess contributions rules, see the following SuperGuide articles

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Comments

  1. Hi Trish, I have recently come across your website and like many of your other readers I am finding it very informative.
    I am one of the many who has recently received a bill for Excess Contributions and like others it is because of the timing of when my employer made the actual payments into my super fund.
    I am attempting to dispute this claim, however it is very time consuming and stressful.
    I have been aware of the various caps on contribution and the changes from $50,000 to $25,000 and must say unless you really dig around on the ATO website, knowing what to look for, the ATO continues to refer to “Income year” referring to financial years. They should just be upfront about this and state it is “the date which these contributions are received by a super fund” !
    Funnily enough neither the financial planner nor the tax agent who does our SMSF tax return have ever mentioned this “date by which contributions are received by super fund”.
    Perhaps it would have been nice for the ATO to mention this in the letter they sent out in 2011 when they were reminding everyone about the reduction from $50k to $25!!!
    Deb

    • Hi Deb
      Thanks for your comment. I agree that the communication (and inaction) by the federal government on this issue in the past has been a disgrace. I also agree that this timing issue should have been better communicated to Australians. I wish you all the best with your appeal.
      Regards

      Trish

  2. Margaret Di Giovinazzo says:

    I recently looked at my husband’s salary sacrificing amount to see if we could raise it a little this year to ameliorate a capital gain. I was horrified to note that the cap had been reduced by half and that if he continued with the current amount, he would go over the $25000 cap. He is 68 years old and still working, trying to boost his super account which is pitiful. I don’t know where this government gets its “expert” information from, certainly not from hard-working families like ours.

    Thanks and thanks again for alerting me to the reduction so we can adjust downwards to prevent a penalty being imposed.

  3. I also received a Letter saying I had exceeded the $50,000 by $17400. Even though I was very careful for the Salary Sacrifice and SG to be under the limit, my employee did not submit the money deducted from my salary in 2010/2011 year until 28th July 2011, and this pushed me over the limit for 2011/2112 year.
    This is quite legal for the company to do this, and unfortunately the ATO only looks at when the money enters the account, not when it is withdrawn from salary. This seems incredibly unfair to me and I will be submitting a ‘Excess Contributions Tax Determination’ form and hope that the Commissioner will allow the money be put in the correct year of deduction.

  4. I suppose we have to accept that some government decisions are taken for short-term & self-interested reasons, not necessarily what makes sense for taxpayers & retirees in the long term. Specifically the reduction in the concessional contribution caps saves the government money … one cynical view would be that these savings will be spent on other things which buy more votes. This is a price we pay for democracy, where the incumbents are voted in or out every few years.

  5. Ann MacCann says:

    Like your other readers, I find this site illuminating and informative! Thanks so much for this article – we were in Europe when the reduction in concessional superannuation was decided on and – needless to say – it didn’t receive any coverage there. It wasn’t till the superannuation fund sent us a letter in September that we realised what had happened, and in many cases this would be far too late to rejig the contributions.

    When we consulted our financial adviser (who, needless to say, had not bothered to let us know what was happening), she was quite sanguine about the timing of the advice from the super fund, and not at all bothered by our situation! We were both less than impressed. Only time will tell whether we have a penalty or not – it was very confusing, and typical of the irrational way in which superannuation is organised in Australia.

    • Hi Ann
      I hope your situation is resolved without any tax penalty.
      Many thanks for your kind feedback. We’re very proud of SuperGuide and we love to hear from readers who have found the information on the site useful, or have suggestions for future articles.
      Regards
      Trish

  6. Hi Andrew
    Many thanks for your support of our website, and it’s great to get some insight from the perspective of the employer. I agree with you that the halving of the contribution limits is short-sighted and fails to appreciate that Australians do not lead planned, linear lives. For most Australians, the opportunity to contribute substantial money to a super account during their working lives may last only 5 to 10 years, rather than the 30 years the Government has used as justification for this ill-advised change in policy.
    Regards
    Trish

  7. Hi Trish, enjoy your work and have your various dummies guides as well. Whilst I don’t work in the super industry I work in a HR profession and hence have responsibility for implementing and complying with SG legislation. I have always thought the Age Base Limits were draconian due to the impost of the employer to manage the limits and lose deductibility status for going over these limits. The implementation of Concessional Contribution Caps were a better way forward and easier to understand for most employer and employees however the reduction in these limits at the last budget is extremely short sighted by a government that wants us to save for our retirement. It has also adversely affected some of our employees who have made investment decisions based on legislation i.e. opting out of a DB environment to pursue an AC fund only to be told that they can’t make the full contributions due to the change in limits. What happens when the transitional Concenssional Contribution Caps cease and everyone’s limits because $25k? Surely bearcats should listen to the experts when designing policy not making it up on the run. Is super for the long term not the short term? Great job.

  8. Thankyou for your positive feedback on our website. We’re pleased that you find this article helpful.
    Regards
    Trish

  9. Jill Stuart says:

    Thanks Trish for bringing this very important issue to our notice.
    It is unfortunate that the Government and media did not tell us the full story when they presented “this window of importunity”.
    We enjoy your Newsletter and find it most informative.
    Many thanks again.
    Cheers
    Jill

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