Did you know that any money you put into your superannuation
fund that exceeds your annual contributions cap could attract a
penalty tax rate of 93 percent?
Each year you can put up to $25,000 into super as a concessional
contribution, such as an employer contribution, which will be taxed
at a rate of 15 percent (in the superannuation fund). You can put
in more than this amount, but tax of 46.5 percent is payable on
extra contributions over the nonconcessional contributions cap, a
separate and additional cap of $150,000 per year.
What you might not know is that if you exceed your concessional
contributions cap and your nonconcessional contributions cap, you
could end up paying $93,000 of tax for every $100,000
In our experience, huge bills for excess contributions tax are
rarely the fault of the individual intentionally trying to put too
much into super. Instead, the problem usually arises inadvertently,
from simple things like bad timing or delays in electronically
transferring funds. As contributions caps are looked at on a
year-by-year basis, if these issues occur around year end (30
June), you could face the 93 percent tax rate.
The ATO has cracked down on excess super contributions, and is
targeting over 30,000 taxpayers for excess contributions during the
2008 and 2009 years.
If you receive notice from the ATO that you have a problem with
excess super contributions, you will need to take action as soon as
One way - and often the only way - of fixing an excess
contributions problem is to ask the Commissioner of Taxation to
exercise his discretion to reallocate your super contributions to a
Given the amount of tax revenue at stake, it is difficult to
convince the Commissioner to exercise this discretion. According to
an article in yesterday's AFR, Taxman agrees super
penalties draconian (24 February 2011), the Commissioner
exercises this discretion in less than two percent of cases.
The Commissioner is reluctant to alleviate the unfair outcomes
caused by the excess contributions tax. Even so, in one successful
application, HopgoodGanim saved a client nearly $300,000 in
While every case is different, our experience tells us that it
is wise to check your exposure to excess contributions tax sooner
rather than later, and to obtain appropriate advice about managing
excess contributions tax exposure before you're on the
Exemptions or concessions on stamp duty could apply when contemplating the purchase or transfer of NSW real estate.
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