Excess contributions tax and how funds report your contributions
Excess contributions tax and how funds report your contributions
Funds must report to us the contributions and reportable allocations from reserves that are made to all your super accounts in a financial year.
If you close your first home saver account (FHSA) and choose to contribute the balance to a super fund, or your spouse or ex-spouse contributes an amount to your super from their FHSA because of a family law obligation, your FHSA provider must report the transfer to us.
We use these reports, information from your income tax return and our data about any FHSA government contribution we have paid you to work out if you have exceeded a super contributions cap.
If we find that you have exceeded a super contributions cap, we will issue you an excess contributions tax (ECT) assessment.
The cap amount, and how much extra tax you pay once you exceed it, depends on whether the contributions are:
- concessional
- non-concessional.
Super funds
When a fund must report contributions information to us depends on what sort of fund they are.
APRA regulated funds
Australian Prudential Regulation Authority (APRA) regulated funds must report contributions and allocations by 31 October but only if they received contributions for you in the financial year.
APRA regulated funds complete a Member contributions statement (MCS) (NAT 71334) to report to us.
Tax Office regulated funds (self-managed super funds)
A self-managed super fund (SMSF) must make a report for all your accounts each financial year, even if it has not received any contributions or made any allocations for you in that year.
SMSFs report contributions and allocations in the Self managed superannuation fund annual return (SAR). The SAR includes the fund's regulatory return and income tax return and must be lodged when the fund's income tax return is due. This may be any time from 31 October to 5 June of the financial year after the contributions are received.
FHSA providers
FHSA providers must report FHSA balances they transfer to a super fund by 31 October of the next financial year.
As we calculate your contributions on the basis of these reports, we may not be aware that you have exceeded a super contributions cap until all the funds you belong to have reported. This may not be until the end of the next financial year.
Alternatively, we may issue you with an ECT assessment on the basis of information reported by a fund that reports early - for example, an APRA regulated fund. We may then raise an amended assessment when another of your funds, such as your SMSF, reports later in the year.
Example 1
Rosalita is a member of an APRA regulated fund and a member of an SMSF with her husband. During the financial year, the only contributions for Rosalita were employer contributions into the APRA regulated fund.
The APRA regulated fund must report the contributions by 31 October. Even though Rosalita's SMSF account did not receive any contributions for the financial year, her SMSF must report nil contributions for her in the SAR when its income tax return is due. In Rosalita's SMSF's case, this is 15 May.
Rollovers
If you rollover an amount from one super fund to another, the paying fund must report in a Rollover benefits statement any contributions it has received so far in the financial year which are included in the rollover. It must give the Rollover benefits statement to the payee fund. Both APRA regulated funds and SMSFs use this form.
The paying fund must also send a copy of this statement to you.
The payee fund will report in its MCS or SAR the contributions and allocations rolled over to it. The paying fund must only report contributions it received which were not rolled over.
Example 2
Janey's employer contributions are being made to her employer's default super fund, ABC. Janey's employer has contributed $1,400 for her up to 31 January. On this day, Janey retires and rolls over her account balance with ABC to the ZYX fund.
When the requested amount is rolled over, the ABC fund will give a Rollover benefits statement to the ZYX fund and a copy to Janey. In this example, the ABC fund would report on the Rollover benefits statement that the amount rolled over included $1,400 of employer contributions.
After the end of the financial year, the ZYX fund will report $1,400 as Janey's employer contributions for the year, even though the ZYX fund did not receive this amount directly from the employer.
Table of reported amounts
Use the following table, which shows the types of contributions and allocations that funds must report, to help you determine how they're treated for ECT purposes.
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If you have any excess concessional contributions, they will also count towards your non-concessional contributions cap.
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Why are contributions classified as concessional or non-concessional?
In general, a contribution is:
- concessional - because it is included in your fund's assessable income. The contributor generally can claim an income tax deduction for these sorts of contributions
- non-concessional - because it is not included in your fund's assessable income. Non-concessional contributions are generally made from amounts you have already paid tax on.
Employer contributions
Employer contributions count towards your concessional contributions cap.
Employer contributions include:
- super guarantee and award contributions
- salary sacrificed amounts
- additional amounts your employer pays as part of an agreement with you.
They may also include amounts transferred from us to you which we received from your employer, such as super guarantee amounts your employer paid late.
If you belong to a defined benefit fund, your employer contributions may include a notional taxed contributions amount.
Personal contributions
Personal contributions count towards your non-concessional contributions cap except to the extent you are allowed a personal superannuation deduction in your income tax return for that year.
Personal contributions are generally contributions you have made directly to your super fund. They sometimes include contributions another entity has paid on your behalf - for example, amounts your employer pays to your super fund from your after-tax pay rather than paying the amount to you.
Personal contributions also include capital gains or capital proceeds and personal injury payments for which you do not validly claim an exclusion from your non-concessional contributions - for example, you did not submit an election in the approved form.
If you have an SMSF, any payments you make on behalf of the fund will also be included in your personal contributions.
Example 3
Barbara has an SMSF with three other family members. Barbara made a personal contribution of $150,000 and also personally paid the super fund's accounting fees of $7,500. This is treated as a personal contribution and therefore Barbara's fund must include this amount in the personal contributions it reports for her for that financial year (a total of $157,500).
Personal superannuation deductions
If you are allowed a personal superannuation deduction in your income tax return, the amount allowed will be counted towards your concessional contributions cap rather than your non-concessional contributions cap.
Example 4
Julia contributed $100,000 as a personal contribution. She claims and is allowed a personal superannuation deduction in her income tax return of $100,000. If Julia has no other contributions for the year, her concessional contributions will be $100,000 and her non-concessional contributions will be $0.
Example 5
Candy is 50. She is self-employed and is eligible to claim a personal superannuation deduction against her assessable income in her income tax return. She contributes $550,000 to her fund on 25 June as a personal contribution. At the same time, she gives a notice to her fund that she intends to claim $100,000 of her personal contributions as a personal superannuation deduction. The fund acknowledges this notice, and Candy lodges her income tax return claiming this amount.
Candy's fund
Candy's fund will report $550,000 as her personal contributions for the financial year. Even though Candy advised the fund that she intends to claim a personal superannuation deduction for part of her personal contributions, the fund must still report them as personal contributions.
Determining Candy's concessional and non-concessional contributions
- If Candy is allowed the full amount of her personal superannuation deduction claim
When we determine Candy's concessional and non-concessional contributions, we will count $100,000 towards her concessional contributions cap and the remaining $450,000 towards her non-concessional contributions cap.
- If Candy is not allowed the full amount of her personal superannuation deduction claim
If Candy is not allowed the full amount of her personal superannuation deduction claim, only the amount she was allowed as a deduction will be counted towards her concessional contributions cap. For example, if Candy was only allowed a personal superannuation deduction of $80,000, only $80,000 will be counted towards her concessional contributions cap, and the remaining $470,000 of her personal contributions will be counted towards her non-concessional contributions cap.
Super capital gains tax cap election amounts
People who are eligible can exclude some of their personal contributions from counting towards their non-concessional contributions cap by electing for the amounts to count instead towards their super capital gains tax (CGT) cap.
To make this election, the amount you contributed must have arisen from a capital gains event and must have met the requirements of either the:
You must also have made the election to your fund before or at the same time as you made the contribution.
Your super CGT cap is a lifetime cap - it is the maximum amount of your eligible personal contributions you can choose to exclude from counting towards your non-concessional contributions cap. The super CGT cap is indexed every year.
If you elect to use this exclusion for an amount, your super CGT cap is reduced by the amount your fund reports to us at this label.
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You must have advised your fund that you were claiming the exclusion before or when you made the contribution. Otherwise, your fund must report the amounts as Personal contributions.
The election could have been made in the approved form which is the Capital gains tax cap election. However, you did not have to use this form, as long as you provided your fund with all the information required by this form.
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If the exclusion does not apply to you, the amount will be treated as a normal personal contribution and count towards your non-concessional contributions cap.
Example 6
Barry owned a small business for 33 years. When he was 72, he started selling his business assets in preparation for retirement. He is eligible to use the small business 15-year exemption.
In the 2007-08 financial year, he contributed to his super fund $550,000 of the capital proceeds he received from selling some of his eligible assets. At the same time, he notified his fund that he was electing to use $550,000 of his super CGT cap, under the small business 15-year exemption, to exclude the contribution from counting towards his non-concessional contributions for the year. Therefore, his super CGT cap of $1 million was reduced to $450,000.
In 2008-09, the super CGT cap was indexed to $1.045 million. However, Barry has already claimed $550,000 of the cap. Therefore, the super CGT cap available to him in 2008-09 is $1,045,000 - $550,000 = $495,000.
Personal injury election amounts
People who are eligible can exclude some of their personal contributions from counting towards their non-concessional contributions cap by electing for the amounts to be excluded as a personal injury payment.
Personal injury election amounts are personal contributions that you make that arise from a personal injury and for which you validly claim the exclusion. There is no limit on the amount you can claim as a personal injury election amount, but there are strict conditions on the contributions you can claim the exclusion for.
You can only use the exclusion for that part of the payment that is compensation or damages for your personal injury.
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You must have advised your fund that you were claiming the exclusion before or when you made the contribution. Otherwise, your fund must report the amounts as Personal contributions.
The election could have been made in the approved form which is the Contributions for personal injury. However, you did not have to use this form, as long as you provided your fund with all the information required by this form.
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If the exclusion does not apply to you, then the amount will be treated as a normal personal contribution and count towards your non-concessional contributions cap.
Example 7
Bruce was injured in a car accident. As a result of his injury, he is not expected to ever work again in a role for which he is suited because of education, training or experience. Two qualified medical practitioners have certified this.
As a result of a structured settlement of Bruce's claim, Bruce receives an amount of $2 million from the insurers, three years after the injury. $1.5 million of the payment was compensation for the personal injury and the remaining $500,000 was compensation for medical costs.
Bruce contributes $1.75 million to his super within 90 days of receiving the payment and uses the remaining $250,000 to pay the debts he accrued for hospital stays and physiotherapy as a result of his injury.
Bruce can only claim the exclusion for $1.5 million of the contribution (this is the part of the payment which was compensation for the personal injury).
Spouse and child contributions count towards your non-concessional contributions cap.
Spouse contributions
If your spouse makes a contribution for you, the contribution counts towards your non-concessional contributions cap and not your spouse's contributions caps.
You must not be separated or permanently living apart from your spouse. If you are, the contribution will be reported as other family and friend contributions.
Spouse contributions do not include contributions your spouse made as your employer. These contributions are reported as employer contributions.
Spouse contributions are treated differently to contributions your spouse splits with you. For more information on super splitting, refer to Superannuation contributions splitting - superannuation funds.
Spouse contributions also include amounts transferred from your spouse's or ex-spouse's FHSA under a family law obligation.
Child contributions
If you are under 18 and a person makes a contribution for you, the contributions count towards your non-concessional contributions cap. The contribution does not count towards your parents' (or any other person's) contributions caps.
Child contributions do not include contributions a person makes as your employer. These contributions are reported as employer contributions.
Example 8
Bill runs a small business. He employs his wife Elizabeth as the administrator of the business. Bill pays Elizabeth a salary and contributes 9% of her salary to her super fund as required under the super guarantee. He also contributes $1,000 a year to super accounts for his three children who are all under 18. The children occasionally help out around the business and get paid extra pocket money when they do, but they are not employees.
Each child's super fund will report $1,000 in Spouse and child contributions for each of the children. However, the money Bill pays to super for Elizabeth will be reported by her fund as employer contributions.
Other family and friend contributions
Other family and friends contributions count towards your concessional contributions cap.
Other family and friend contributions are contributions made for you by anyone other than you, your spouse or your employer.
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If you were under 18, contributions made by other family and friends will be reported as child contributions at the spouse and child contributions label.
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Your fund would report at this label contributions made by:
- a spouse living separately and apart from you on a permanent basis
- a parent, child, relative or friend if you are 18 years old or older
- any other third party other than an employer or your spouse.
Taxable component of directed termination payments
The taxable component of a directed termination payment can, in certain circumstances, be treated as a concessional contribution.
Transitional arrangements may apply to employment termination payments received between 1 July 2007 and 30 June 2012.
To be eligible for the transitional concessions, you must have had an entitlement to the employment termination payment as at 9 May 2006 under:
- a written contract
- an Australian or foreign law (or an instrument under such a law)
- a workplace agreement under the Workplace Relations Act 1996.
If you receive a transitional termination payment (TTP) between 1 July 2007 and 30 June 2012, you are given concessional tax treatment for up to $1 million (not indexed) of the taxable component of the payment.
Your TTP may have a tax-free component and taxable component. Your employer will determine the tax-free component and the taxable component.
You can:
- receive all or part of the TTP as income
- direct your employer to pay all or part of the TTP to your super fund as a contribution or to buy a superannuation annuity.
The portion of your TTP that you have told your employer to roll over to your super fund is called a directed termination payment (DTP).
The taxable component of a DTP, in excess of your $1 million TTP cap, counts towards your concessional contributions cap.
Any tax-free component of an employment termination payment paid to your super fund will be reported at Any other contributions for an SMSF, and in your Total contributions.
Example 9
Mark received a $1.1 million employment termination payment on 1 July 2010 which consisted wholly of a taxable component. The employment termination payment qualified as a TTP because Mark had a contract in place at 9 May 2006 which stated that he would receive a termination payment if he resigned after five or more years of service.
In line with Mark's instructions, his employer paid Mark $400,000 of the payment in cash and then paid the other $700,000 on his behalf to his super fund. Mark must include the $400,000 in his personal income tax return and his super fund will report $700,000 at the Taxable component of a directed termination payment label.
Only $1 million of the taxable component of a TTP is treated concessionally. As the cash payment to Mark was made first, the $400,000 will be taxed concessionally. Mark's TTP cap is reduced to $600,000. Therefore, of the DTP, $600,000 will not be counted towards his concessional contributions cap. However, the $100,000 of the DTP which exceeded Mark's TTP cap will count towards his concessional contributions cap.
Foreign fund transfer amounts
Assessable foreign fund amount
The assessable foreign fund amount counts towards your concessional contributions cap.
Non-assessable foreign fund amount
The non-assessable foreign fund amount counts towards your non-concessional contributions cap.
'Non-assessable' here means that the contribution is not included in the assessable income of your Australian super fund. It does not mean that the amount cannot be assessed for excess contributions tax.
Applicable fund earnings
Your non-assessable foreign fund amount will include any applicable fund earnings component of the foreign fund transfer. However, if you made an election to include all or part of the applicable fund earnings in your super fund's assessable income, your fund will not include the amount elected at either the Assessable foreign fund amount or the Non-assessable foreign fund amount labels. Therefore, the applicable fund earnings amount elected will not count towards either your concessional or non-concessional contributions caps. The applicable fund earnings amount you elected will be reported at Any other contributions for an SMSF, and in your Total contributions for all funds.
Transfers from reserves
Transfers from reserves are not contributions. However, if your fund allocates an amount from its reserves which meets certain conditions, it must be reported by your super fund and will count towards a contributions cap.
Transfers from reserves can be assessable or non-assessable.
Assessable transfers from reserves
Assessable transfers from reserves count towards your concessional contributions cap.
The assessable amount is the amount that is taken to be a concessional contribution because your fund allocated the amount to your account from a reserve and it meets the specified conditions. In some circumstances, the amount reported may be greater than the amount actually allocated to you, to take into account the contributions tax your fund would normally have had to pay.
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For more information about assessable allocations from reserves, refer to regulation 292-25.01 of the Income Tax Assessment Regulations 1997.
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Non-assessable transfers from reserves
Non-assessable transfers from reserves count towards your non-concessional contributions cap.
The non-assessable amount is the amount that is taken to be a non-concessional contribution because your fund allocated an amount to your account from a reserve which was not included as assessable income of the fund.
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For more information about the amount, refer to regulation 292-90.01 of the Income Tax Assessment Regulations 1997.
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Contributions made to a previously non-complying fund
If a fund became a complying super fund in the financial year, it must report all contributions made on or after 10 May 2006 to a non-complying fund at this label. This amount is counted towards your non-concessional contributions cap.
Any other contributions
Only SMSFs report at this label. None of this amount counts towards either of your contributions caps.
An SMSF must report all other contributions - that is, amounts that are not reported at any other label - as any other contributions.
This label will include amounts such as:
- super co-contributions received for you
- the tax-free component of a DTP
- the amount of applicable fund earnings transferred from a foreign super fund or scheme that you elected to have included in the SMSF's assessable income
- the amount transferred from your FHSA account and any FHSA government contributions paid to your fund after the transfer.
Total contributions
Total contributions are all the amounts contributed to, received by, credited or otherwise attributed to your account for the financial year, before any tax or expenses were debited from your account. None of this amount counts towards either of your contributions caps unless it includes a FHSA related payment.
If this amount includes the amount transferred from your FHSA or FHSA government contributions paid to your super fund, that part of your total contributions counts towards your non-concessional contributions cap.
The amount of the FHSA balance transferred to your super fund is reported by your FHSA provider. We also use our data about any FHSA government contributions paid to your super fund.
The amount at Total contributions must be:
- equal to the sum of all the labels for an SMSF (as their return includes the balancing item Any other contributions)
- equal to or greater than the sum of all the other labels for an APRA regulated fund.
For an APRA regulated fund, this label will include amounts not reported at other labels, such as:
- other contributions received for you - for example, employer contributions made to a constitutionally protected fund
- super co-contributions received for you
- the tax-free component of a DTP
- the amount of applicable fund earnings transferred from a foreign super fund or scheme that you elected to have included in the fund's assessable income
- the amount transferred from your FHSA and any FHSA government contribution paid to your fund after the transfer
- last-minute employer contributions that the trustee of a public sector super scheme has chosen not to include in assessable income.
Last Modified: Thursday, 14 June 2012
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