The Government recently passed legislation to change the treatment of excess non-concessional superannuation contributions. The new measures effectively remove the double taxation on after tax contributions made into superannuation in excess of the cap (currently $180,000 per year). This applies to any excess non-concessional contributions made from 1 July 2013.
Under the old system, if an individual made non-concessional contributions over their limit, the excess was taxed at the top marginal tax rate. This led to minor, inadvertent breaches resulting in disproportionally high tax assessments and people effectively being taxed again on monies they had already paid tax on.
The new system sees members that breach the limits receive an offer to elect to have the excess non-concessional contribution and an associated earnings amount (calculated by the ATO) released from their superannuation fund and paid back to them. The associated earnings will be included in the individual’s personal assessable income and general interest charges will also apply. If the election to withdraw the excess is not made, then the amount will be taxed at the highest marginal tax rate.
While there will still be some cost if contribution limits are exceeded, these changes mean that members now have a choice. They will no longer be automatically severely penalised for minor infringements. This gives more peace of mind to people utilising contribution strategies to maximise their retirement benefits.
Leading up to the end of financial year it is timely to forecast your superannuation contributions for financial year ending 30 June 2015. Having an accurate understanding of forecast contributions will ensure you can make a top up to contribution limits should you decide on that strategy when doing your year end planning. If you require any assistance in determining your year to date contributions, please speak with your usual Hanrick Curran adviser or call Clive Todd on 07 3218 3900.