Super contributions - too much super can mean extra tax

Offer to have excess concessional contributions refunded

From 1 July 2012, you may receive an offer to have the excess concessional (before-tax) contributions refunded and assessed at your marginal tax rate, rather than pay excess contributions tax. This may occur if:

you have exceeded your concessional (before-tax) contributions cap for the first time since the 2011-12 financial year
the amount above the concessional cap is $10,000 or less
you have lodged a tax return for the relevant income year within 12 months of the end of that year (or within a longer period if the Commissioner allows it).

This is a once-only offer - when you have made your choice it can not be reversed and, having received an offer, you will not receive a further offer in later years.

If you have exceeded your concessional (before-tax) contributions cap by more than $10,000, you will not be eligible for the refund offer and will be subject to excess contributions tax.

If you are eligible for the refund offer, we will send you a letter detailing the amount of your excess concessional (before-tax) contributions and your options.

You can choose to either accept the refund offer or pay your excess contributions tax liability.

Before accepting the offer

In deciding whether or not to take up the offer it is important for you to consider the following:

the income tax implications of accepting an offer
the refund that you may be entitled to on accepting an offer could be used to pay any outstanding ATO or other Commonwealth agency debts (such as Child Support Agency or Centrelink)
the flow-on impacts of accepting an offer on a range of government income tests used for offsets, surcharges, benefits and payments.

For information on what may be affected refer to:

Income tests: an overview

What has changed?

Super co-contribution.

Accepting an offer - taxation consequences

If you decide to accept the offer, you need to complete a Choice to include excess concessional (before-tax) contributions in assessable income form. You will need to ensure the completed form is returned to us within 28 days of the date on the offer.

When we receive the form confirming that you accept the refund offer:

we will send your super fund a refund release authority for 85% of your total excess concessional (before-tax) contributions (recognising the 15% tax already paid by your super fund)
your fund will take the money from your account and send the money to us
the total amount of excess concessional (before-tax) contributions will be added to your assessable income in the same year the contributions were made and taxed at your marginal tax rate
we will reduce any tax you may have to pay by a refundable tax offset equal to 15% of your excess concessional contributions - this recognises the 15% tax already paid by your super fund
the remaining credit will be refunded to you, minus any other ATO or Commonwealth agency debts you may owe
the excess concessional (before-tax) contributions refunded will not count towards your non-concessional (after-tax) contributions cap
you will receive a notice of amended assessment and statement of account, together with any refund.

This is a once-only offer.

Also, increasing your income may have flow-on effects to a range of government income tests for offsets, surcharges, benefits and payments - see Before accepting the offer.

If you do not respond to us within 28 days from the issue date on your letter of offer, the offer will lapse and we will presume that you have chosen not to accept the offer - see Choosing not to accept the offer.

Example: Amended assessment and statement of account

Deb receives a notice of offer letter from the ATO advising her that she had excess concessional (before-tax) contributions of $5,000 for the 2011-12 financial year. As she meets the eligibility requirements, the letter advises her that she can choose to take the excess concessional (before-tax) contributions amount out of her super fund and have them assessed at her marginal rate of tax, rather than incurring a potentially higher rate of excess contributions tax.

She reads the letter and the fact sheet which sets out the consequences of accepting each option. She understands that the refund offer is a once-only offer available to her in this financial year, regardless of whether she accepts it or pays the excess contributions tax.

Deb decides to accept the refund offer and completes the election form that came with the letter and fact sheet. She returns it to the ATO within the required 28-day period.

After processing her form and obtaining a release of her excess contributions from her fund, the ATO sends Deb a notice of amended assessment and statement of account and advice that a payment has been credited to her bank account.

The notice of amended assessment shows that:

Deb's taxable income has been increased by $5,000 as a result of choosing to have her excess concessional (before-tax) contributions refunded
an amount of tax payable of $1,250 is calculated (based on marginal tax rate of 25% of $5,000)
a refundable tax offset of $750 credit (which is equal to the 15% tax already paid by the fund on the excess contributions), resulting in an amount payable of $500.

To find out the total amount payable, she is referred to the statement of account. The statement of account shows:

a credit for the contributions paid by the super fund of $4,250
a debit of $500 owing from her amended income tax assessment
advice that a refund $3,750 has been paid into her nominated financial institution ($4,250 minus $500).

Choosing not to accept the offer

If you choose not to accept the offer, you do not need to do anything. After 28 days from the date on the letter, the offer will lapse and you will receive an excess contributions tax assessment with a letter detailing your options.

If your only super account is a defined benefit account or if you are receiving a pension, you may still accept the offer. However as no credit will be received from your fund it may result in a tax debt.

Example: Defined benefit account holder

Mel receives a notice of offer letter from the ATO advising her that she has exceeded the concessional (before-tax) cap by $5,000 for the 2011-12 financial year. As she meets the eligibility requirements, the letter advises her that she can choose to take the excess concessional (before-tax) contributions amount out of her super fund and have them assessed at her marginal rate of tax, rather than incurring a potentially higher rate of excess contributions tax.

Mel only has a defined benefit account and is aware that her fund will not be able to release her excess contributions. Mel decides to accept the refund offer anyway. She completes the election form and, within it, selects the option 'I declare that I no longer hold an accumulation interest in any super fund'. She returns it to the ATO within the required 28-day period.

Mel's fund is unable to release her excess contributions as Mel only has one defined benefit account. After processing her election form, and being advised that her fund is unable to release her excess contributions, the ATO sends Mel a notice of amended assessment and statement of account and advice that an amount is payable to the ATO.

The notice of amended assessment shows that:

Mel's taxable income has been increased by $5,000 as a result of choosing to have her excess concessional (before-tax) contributions refunded
an amount of tax payable of $1,250 is calculated (based on marginal tax rate of 25% of $5,000)
a refundable tax offset of $750 credit (which is equal to the 15% tax already paid by the fund on the excess contributions), resulting in an amount payable of $500.

To find out the total amount payable, Mel is referred to the statement of account. The statement of account shows there is a debit of $500 owing from her amended income tax assessment.

Calculating the full impact can be complex. We recommend you seek professional independent financial advice.

Sections within If you go over the concessional contributions cap

Last Modified: Tuesday, 3 July 2012