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Refund of excess non-concessional contributions

Posted on Jul 7, 2015 by editor

The Government recently made changes to excess non-concessional contributions, bringing the treatment of excess non-concessional contributions into line with the treatment of excess concessional contributions.

The changes eliminate double taxation, where individuals were being taxed at the top marginal tax rate even though they paid income tax on contributions prior to making contributions to their fund.

Members aged under 65 are allowed to contribute up to $180,000 each year to their super fund using after-tax funds known as non-concessional contributions. In addition, they can bring forward two years’ worth of contributions. However, they must not exceed a maximum of $540,000 worth of contributions over a three-year period.

Under the old rules, non-concessional contributions that exceeded those caps were taxed at the top marginal rate.

The new rules provide members, who exceed the non-concessional caps on or after 1 July 2013, with the option to release the excess plus 85 per cent of the associated earnings amount. This is the amount the super fund includes on the investments made with the excess contributions.

By making the election, members can avoid paying excess non-concessional contributions tax. The individual’s assessable income will include the associated earnings amount with a 15 per cent non-refundable tax offset. Members that choose to keep the excess contributions in their fund are taxed at the top marginal rate.

Where a member’s fund modifies their contribution information, or a member changes their deduction for personal super contributions, the ATO may amend their excess non-concessional contributions tax assessment and refund their excess contributions.

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