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  • If you go over the non-concessional contributions cap

    Once we receive and assess your financial information, we let you know if you went over the caps by sending you a determination, which explains your options.

    If you have exceeded your non-concessional contributions cap, you must lodge an income tax return for that year. If you have not lodged your income tax return within 28 or more days of your due date, we will issue you with your determination.

    If you do not wish to receive your excess non-concessional superannuation contribution determination before you have lodged your income tax return, either you or your tax professional will need to request a deferral of your lodgment before the due date.

    If you go over the non-concessional cap, you can withdraw the excess non-concessional contributions, and any earnings. The earnings would then be included in your income tax assessment.

    If you choose not to withdraw your excess contributions, they are taxed at the top marginal tax rate.

    To work out if you have gone over the non-concessional contributions cap, we look at your date of birth and assess the information:

    • reported to us by your super fund
    • you report in your tax return.

    You can choose how your excess non-concessional contributions are taxed

    You can choose how your contributions in excess of the non-concessional cap are taxed. You can't change your decision once you make it.

    From 2017–18 onwards

    For most people it is easiest to do nothing. We will ask your super funds to release and send amounts to us. We will also amend your income tax assessment to include your associated earnings. You will pay tax on your associated earnings at your marginal tax rate.

    We will use the money released to pay any tax or Australian government debts and refund any remaining balance to you

    If you have no money in super, we will amend your income tax assessment to include your associated earnings amount. You will pay tax on your associated earnings at your marginal tax rate.

    If your only super interest is held in a defined benefit fund or a non-commutable super income stream and the fund cannot or will not voluntarily release we will send you an excess non-concessional contributions tax assessment

    Alternatively you have 60 days from the date of your determination, to choose one of the following options:

    Option 1 – Release the excess from your super funds

    You can elect to release all your excess non-concessional contributions and 85% of your associated earnings from your super funds.

    The full associated earnings amount stated in your determination will be included in your assessable income and taxed at your marginal rate of tax. A non-refundable tax offset equal to 15% of your associated earnings is applied to recognise any tax paid by your super fund.

    We will issue a release authority to the super funds you nominate and they will pay this amount directly to us.

    If you choose this option

    You must nominate one or more super funds to release the amount from.

    Details of the super funds must be provided on the election form.

    When you complete the excess non-concessional contributions election form:

    • We send a release authority to the super funds you nominate. They pay an amount to us in total equal to your excess non-concessional contributions amount and 85% of the associated earnings amount. Currently they have 21 days from the release authority being issued to make the payment. From 1 July 2018 super funds will have 10 working days to action a release authority.
    • We amend your income tax assessment by including the full amount of the associated earnings as assessable income and providing a non-refundable tax offset equal to 15% of these associated earnings. We send you a notice of amended assessment, which may require you to pay an amount to us.
    • When your fund(s) release the money they will send it us, we will use the money to offset any ATO or Commonwealth debts you may have and pay any remaining balance to you.
    Option 2 – Leave your excess non-concessional contributions in your super funds

    If you choose not to release your excess non-concessional contributions from your super funds, you receive an excess non-concessional contributions tax assessment. The excess amount is taxed at the highest marginal tax rate. You must elect a fund to release your excess non-concessional contributions tax from.

    You must select this option if your only fund is a defined benefit.

    From 2013–14 to 2016–17

    Option 1 – Release amounts from superannuation

    You can elect to release all your excess non-concessional contributions and 85% of your associated earnings from your super funds.

    We issue a release authority to the super funds you nominate and they pay this amount to you.

    You're also electing to have the full associated earnings amount stated in your determination included in your assessable income, to be taxed at your marginal rate of tax.

    A non-refundable tax offset equal to 15% of your associated earnings is applied to recognise any tax paid by your super fund.

    If you choose this option

    You must nominate one or more super funds to release the amount from.

    Details of the super funds must be provided on the election form.

    When you complete the excess non-concessional contributions election form:

    • We send a release authority to the super funds you nominate. They pay an amount to us in total equal to your excess non-concessional contributions amount and 85% of the associated earnings amount. They have 21 days from the release authority being issued to make the payment.
    • We amend your income tax assessment by including the full amount of the associated earnings as assessable income and providing a non-refundable tax offset equal to 15% of these associated earnings. We send you a notice of amended assessment, which may require you to pay an amount to us.

    Situations where your money can’t be released

    Your super fund may not release the amount of the release authority we send if your only interest in that super fund is a defined benefit interest or is a non-commutable super income stream.

    We will advise you if this happens and what you need to do.

    Option 2 – Pay excess non-concessional contributions tax on the excess amount

    If you choose not to release your excess non-concessional contributions from your super funds, you receive an excess non-concessional contributions tax assessment. The excess amount is taxed at the highest marginal tax rate (49% for 2014 to 2017 years).

    You receive a compulsory release authority with the assessment. You must give this to your super funds to pay the amount of the assessment.

    You must select this option if your only fund is a defined benefit.

    Option 3 – Advise the Commissioner you have no money in superannuation

    If you choose this option, you're electing you have no money or assets in any superannuation fund.

    You're also electing to have the full associated earnings amount stated in your determination included in your assessable income to be taxed at your marginal rate of tax. A non-refundable tax offset equal to 15% of your associated earnings is applied to recognise any tax paid by your superannuation fund.

    We review your election and if satisfied the value of all your super interests is zero, we will issue you a direction notice. This direction means you have no excess non-concessional contributions for the financial year.

    We will amend your income tax assessment by including the full amount of the associated earnings as assessable income and provide a non-refundable tax offset equal to 15% of those associated earnings.

    We will send you a notice of amended assessment, which may require you to pay an amount to us.

    However, if we consider you do have money in super, we advise what further action we will take. This may mean you make a new election, we issue a release authority to your fund or we issue an excess non-concessional contributions tax assessment for your excess contributions.

    See also:

    Associated earnings

    The associated earnings amount recognises your excess non-concessional contributions amount benefited from investment in your super fund.

    How associated earnings are calculated

    The associated earnings amount is calculated using three key elements:

    1. The excess non-concessional amount – the non-concessional contributions amount above your cap.
    2. The associated earnings rate – the rate used to calculate associated earnings is the average of the general interest charge rates for the four quarters of the relevant financial year the excess non-concessional contributions were made.
    3. The associated earnings period – the period used to calculate associated earnings is from 1 July of the financial year the excess contributions were made and ends on the date of the original excess non-concessional contributions determination letter.

    The associated earnings rate is applied on a daily compounding basis to the excess non-concessional amount for the length of the associated earnings period.

    Impact of increasing assessable income

    When the associated earnings amount is included in your assessable income, it may have flow-on consequences to other benefits and payments, such as:

    • child support
    • Centrelink benefits
    • super co-contributions
    • Medicare levy surcharge
    • Division 293 tax
    • eligibility for pay as you go instalments.

    Example: Working out how your excess non-concessional contributions are taxed

    In 2014–15, Reginald makes non-concessional contributions and exceeds his non-concessional contributions cap by $100,000.

    He already received his notice of income tax assessment for 2014–15 with taxable income of $140,000.

    We determine the associated earnings amount is $19,000 and give Reginald an excess non-concessional contributions determination stating:

    • an excess contributions amount of $100,000
    • an associated earnings amount of $19,000
    • a total release amount of $116,150 ($100,000 plus 85% of the associated earnings amount of $19,000).

    Reginald has 60 days from the determination letter issue date to make an election and give it to us.

    If Reginald chooses option 1 – release amounts from super

    Reginald decides to release $116,150 from his super and have the associated earnings included in his assessable income.

    He logs onto his myGov account and completes the excess non-concessional contributions election form, choosing option 1 and nominating the superannuation fund he wants the amount released from.

    After receiving the valid election, we add Reginald’s associated earnings amount of $19,000 to his assessable income. We send Reginald a notice of amended income tax assessment with:

    • amended taxable income of $159,000 ($140,000 plus $19,000)
    • a non-refundable tax-offset of $2,850 (15% of $19,000)
    • an amount payable of $4,180.

    We also send Reginald’s nominated super fund a release authority requiring the fund to pay him $116,150 from his super.

    The super fund pays Reginald $116,150 in compliance with the release authority. The super fund notifies us and Reginald of the payment of $116,150.

    If Reginald chooses option 2 – pay excess non-concessional contributions tax

    Reginald logs onto his myGov account and completes the excess non-concessional contributions election form, choosing option 2 to pay excess non-concessional contributions tax on $100,000.

    We issue Reginald with an excess non-concessional contribution tax assessment for $49,000 (49% of $100,000).

    He also receives a Compulsory release authority, which he must give to his super fund to release $49,000 from his super.

    Reginald pays us $49,000 and receives a payment of $49,000 from his super fund.

    If Reginald chooses option 3 – advise the Commissioner you have no money in super

    Before receiving the determination, Reginald was paid a super lump sum benefit for the entire balance of his super. He has no amounts or assets in any fund so he chooses option 3.

    Reginald logs onto his myGov account and completes the excess non-concessional contributions election form, choosing option 3 because the value of his super interest is zero.

    Once we are satisfied the total value of all Reginald’s super interest is zero, we notify him and add the associated earnings amount of $19,000 to his assessable income. We send Reginald a notice of amended income tax assessment with:

    • amended taxable income of $159,000 ($140,000 plus $19,000)
    • a non-refundable tax-offset of $2,850 (15% of $19,000)
    • an amount payable of $4,180.

    As Reginald has no money in super, we don't send any release authorities.

    If Reginald does not choose any option

    We don't receive a valid election form from Reginald within 60 days of the determination letter issue date. We issue Reginald an excess non-concessional contributions tax assessment for $49,000.

    Reginald also receives a Compulsory release authority, which he must give to his super fund to release $49,000 from his super.

    Reginald pays us $49,000 and receives a payment of $49,000 from his super fund.

    End of example
      Last modified: 08 Aug 2018QC 19749