As you may already be aware, eligible individuals can currently
contribute up to $180,000 per annum to their super fund using
after-tax monies (known as nonconcessional contributions). Eligible
individuals under age 65 can also bring forward an additional two
years' worth of contributions as long as they don't exceed
a maximum of $540,000 worth of contributions over a three year
Under current rules, where contributions exceed these caps,
individuals can be subject to a non-concessional contributions tax
on the excess amount, which is subject to tax at the top individual
marginal rate of tax. Given that this type of super contribution is
sourced from after-tax monies, the tax on excess contributions was
effectively a double taxation arrangement which was not deemed
As a result, it is being proposed that individuals who make
after-tax (known as non-concessional) super contributions in excess
of the above caps can elect to have these contributions refunded as
well as the 'associated' earnings on those contributions
(15% of the earnings will be withheld to reflect earnings tax).
The excess contributions will no longer be subject to tax at the
top marginal rate, however the earnings on the contributions will
be included in the individuals assessable income with a 15% tax
offset to reflect the amount withheld inside super. The amount
refunded from the super fund must come from the tax-free component
of the member's super interest, before reducing any taxable
The amount of the associated earnings included in assessable
income is calculated from the first day of the financial year in
which the contribution was made until the date of issue of the
ATO's excess non-concessional contributions determination. The
actual amount of earnings generated by the fund on the excess
amount is not used, rather the calculation will use an average of
the General Interest Charge (GIC) rate for each of the quarters of
the financial year in which the excess contributions were made and
is compounded daily.
James (Marginal Tax Rate of 47% includes Medicare levy) exceeded
his Non-Concessional Contribution Cap by $200,000 on 1 July 2014.
He is given an excess NCC determination on 1 July 2015.
James chooses to refund the whole amount of excess to him. If he
didn't, the full amount would be subject to a tax of 49%
($98,000). As he is withdrawing the amount, he must withdraw 85% of
the associated earnings as well. Associated earnings can be
calculated via the following:
(The weighted average of GIC over the period) 0.000263219%
× $200,000 x 365 days (1 July 2014 to 1 July 2015) =
James' total available release amount is $216,332.74
($200,000 plus 85% of $19,214.99)
James' tax return will include extra assessable income of
$19,214.99. James will pay $6,148.79 ($9,031.04 less $2,882.24
non-refundable tax off-set).
Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Treasurer Scott Morrison recently announced changes to a number of 2016 Budget superannuation contribution measures.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).