On 27 April 2021, the ATO posted an article on it’s website headed: ‘If you exceed your non-concessional contributions cap. This refers to the $110,000 cap on non-concessional contributions to a complying superannuation fund. It sets out the two options available to you – the first being to take your non-concessional (post tax) money out of the fund (untaxed) and the other is to leave it in the fund, be assessed on it yourself, at 47%, which can be paid by release of the money from the fund. The post goes through the process for doing this and some relevant scenarios.

See below for further details.

[Tax Month – April 2021]

 


 

The ATO’s post states as follows.

For most people the non-concessional contribution cap (limit) is $110,000 per financial year (from 1 July 2021).

To work out if you have exceeded the non-concessional contributions cap, we assess the information reported to us by your super fund and in your return (if you lodged it) and consider your age (date of birth).

You must not apply to your super fund to release an amount relating to exceeding your cap. You must wait until we have sent you your determination letter and you have selected your option for paying the tax. We will then send your fund a release authority.

If you exceed your non-concessional contributions cap:

  • we will send you a determination which explains your options
  • you must lodge a tax return for that year. If you can’t lodge your tax return by the due date, and you do not want us to issue a determination before you lodge, you will need to request a lodgment deferral
  • we will manage the release of money from your super
  • you may need to pay extra tax.

Find out about:

Your options if you exceed the cap

You have 60 days to elect one of the two options for paying your tax when you receive our determination letter.

You cannot change your election decision once you make it.

If you believe the ENCC determination is wrong, see If the information used for excess contributions is wrong.

You have two election options when you receive your determination letter
Option Tax Taxable income
Option 1

With Option 1 you release both:

  • the entire excess contributions amount from your super
  • 85% of the associated earnings (this is an amount calculated by us to approximate the amount earned from the excess contributions while in the fund.

We will add the full amount of associated earnings to your assessable income and give you a 15% tax offset.

We will issue you with an amended notice of assessment.

A change in your assessable income may impact government benefits or payments you receive or make (e.g. childcare subsidy).

You need to make an election choosing Option 1 to release.

May pay tax on your associated earning at your marginal tax rate, including Medicare levy. Increases
Option 2

With Option 2 you:

  • do not release an amount in relation to the excess
  • are assessed for excess non-concessional contributions tax.

You choose to leave the excess contributions and associated earnings in your super.

We will send you a Notice of Assessment taxing you on your entire excess non-concessional contributions at the 47% tax rate.

This tax will need to be paid from your super. We will send a release authority to your fund to release your tax amount and pay it to us.

You need to make an election choosing Option 2 if you want the tax to be paid from your super.

If you are with a Defined Benefit Fund, making an election and choosing Option 2 is the only option available to you. Your tax will need to be paid from your own pocket.

Pay 47% tax on the entire excess non concessional contributions. No change

 

[29.4.21]

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