Changes to how excess super concessional contributions are taxed

Excess contributions tax (ECT) is a tax you pay when your super contributions go over either your concessional (before tax) contributions cap for the 2012-2013 and prior financial years or the non-concessional (after tax) contributions cap.

The cap amount and the amount of tax you pay will depend on whether the contributions are concessional or non-concessional contributions.

The ATO works out if you have excess contributions based on information they receive from your super fund and on your income tax return.

For the 2013-2014 financial year and onwards, excess super concessional contributions will no longer incur excess contributions tax (ECT) but will instead be included in your assessable income for the corresponding year and taxed at your marginal tax rate.

As part of the ATO assessment process you will receive a non-refundable tax offset of 15% of your excess concessional contributions along with an additional excess concessional contribution charge you will be liable for.

To assist payment of the additional tax and charge, individuals can request up to 85% of their excess concessional contributions to be released from their super fund. When released from the fund, it is not counted as non-concessional contributions.

For the 2011-2012 and 2012-2013 financial years only, individuals with excess concessional contributions of $10,000 or less may receive a once only offer to refund their excess concessional contributions. If refunded, the amount is still assessed at your marginal tax rate rather than pay excess contributions tax (ECT).

For the 2012-2013 and prior financial years, if the ATO calculates that you've gone over your cap and have excess contributions, they will contact you in writing.

CHANGES TO SUPER CAPS

The concessional super contributions cap has increased to $35,000 for:

• the 2013-2014 financial year - for individuals turning 60 years or older and
• the 2014-2015 financial year - for individuals turning 50 years or older.

The general concessional cap for everyone else remains at $25,000 in 2013-2014.

The higher cap of $35,000 replaces the previously announced cap that was to apply from 1 July 2014 for individuals aged 50 years and over with superannuation balances below $500,000.