Administration of excess contributions
Administration of excess non-concessional contributions
The ATO will notify the member that they have non-concessional contributions exceeding their cap via an excess non-concessional contributions determination,
which must specify the following amounts:
- the amount of excess non-concessional contributions,
- the deemed earnings amount calculated for the relevant period, and
- the total amount that can be refunded (ie the total release amount).
Electing to release contributions above non-concessional cap
Once the determination has been issued, the member then has 60 days from the date of the determination to give the ATO a notice (on an approved form) electing for the
release amount to be paid. In the notice, the member will also be required to nominate from which fund (or funds) they would like the amount paid.
Once the election has been made it cannot be revoked. Only a full election can be made, so for example, a member cannot elect to withdraw only part of the contributions made above their non-concessional cap.
Where a member has elected to release their excess non-concessional contributions, the ATO must issue a release authority to the member's nominated fund (or funds) or
any other fund the ATO considers is holding a superannuation interest for the individual (or both). Where a trustee receives a release authority, it must then pay the member the amount specified within 21 days (or a further period allowed by the Commissioner).
Where a trustee receives a release authority under these rules, it cannot refuse to pay the amount unless the member only holds a defined benefit interest in the fund. In this case, the payment of the release amount will be at the discretion of the trustee.
Elections where a member has already withdrawn all of their benefits from the super system
Where a member has withdrawn all their benefits and they no longer have any benefits left anywhere in the super system (ie across all funds including defined benefit
interests), the member can give the ATO a notice electing not to release the amount specified in the determination on the basis that the value of their benefits in super
is nil. In this situation, the excess contributions would be exempt from excess non-concessional contributions tax, however, the deemed earnings amount would still be
calculated and included in the member's assessable income for the year.
Excess non-concessional contributions tax applies where no valid election made
Where a member has non-concessional contributions that exceed their non-concessional cap, and they have not made a valid election to either withdraw the amount of excess or that the value of their benefits in super is nil, the contributions above their cap generally become excess non-concessional contributions and are subject to excess non-concessional contributions tax of 49%.
It is therefore critical to ensure that clients make a valid election within 60 days of the date of their excess non-concessional contributions determination where possible.
Members will be notified of their liability to excess non-concessional contributions tax via an excess non-concessional contributions tax assessment, which is due
within 21 days from when the assessment is issued. Amounts of unpaid excess non-concessional contributions tax after that time are subject to a general interest charge.
Compulsory release authority for excess non-concessional contributions tax amount
At the same time as the excess non-concessional contributions tax assessment is issued, the member will receive a compulsory release authority. The release authority will state the date and the amount of excess contributions tax the person is liable to pay.
The person must give the release authority for an amount of excess non-concessional contributions tax to their super provider within 21 days after the date of the release
authority. If the person does not have a super interest, they must pay the contributions tax out of their own pocket. If the person has a super interest, they do not have the
option of paying excess non-concessional contributions tax out of their own pocket.
The Commissioner of Taxation may give the release authority directly to one or more super providers that hold a super interest (other than a defined benefit interest) for the person if any of the following occur:
- The person does not give the release authority to a super provider within 90 days after the date of the release authority.
- The total of the amounts (if any) paid by super providers in relation to the release authority falls short of the amount of the excess non-concessional contributions tax.
- The total of the values of every super interest (other than a defined benefit interest) held for the person by a super provider to which the release authority is given falls short of the amount of the excess non-concessional contributions tax stated in the release authority.
A super provider that has been given a release authority must pay to the person or the Commissioner of Taxation within 30 days after receiving the release authority
the lesser of the following amounts:
- The amount of excess tax stated in the release authority.
- An amount specified by the taxpayer.
- The person's account balance.
The proportioning rule does not apply to a payment made under a release authority. Amounts from super or pensions may be released for the payment of amounts under
a release authority.
Last modified: Friday, January 12, 2018