If you exceed your concessional contributions cap
If you exceed your concessional contributions cap, you may have to pay extra tax.
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What it means to exceed your cap
Exceeding your cap means that:
- the excess concessional contributions amount is included in your assessable income
- this amount will be taxed at your marginal tax rate.
We apply a 15% tax offset to account for the contributions tax already paid by your super fund.
If you exceed your concessional contributions caps, you may elect to withdraw up to 85% of your excess concessional contributions from your super fund to help pay your income tax liability.
When your excess concessional contributions are included in your assessable income it can lead to:
If you don't withdraw your excess concessional contributions
From 1 July 2017, if you do not or cannot elect to release your excess concessional contributions, you could be taxed up to 94%. Any excess concessional contributions not released from the fund are counted towards your non-concessional contributions cap.
The following examples show when you could pay tax of 94%.
Example: excess concessional and excess non-concessional contributions and defined benefit funds
Andrew is a member of a defined benefit fund. His employer makes contributions on his behalf. These contributions are normally non-concessional but Andrew arranged for them to be salary sacrificed as concessional contributions.
In 2017–18, Andrew's concessional contributions exceed his cap by $5,000. Andrew receives an excess concessional contributions determination but does nothing. He leaves the excess concessional contributions in super.
Andrew is subject to the top marginal tax rate in 2017–18. His excess concessional contributions are taxed at 47% (including the Medicare levy). He receives an offset of 15% for the concessional contributions tax.
Because Andrew's total super balance at 30 June 2017 was greater than $1.6 million, his non-concessional contributions cap for 2017–18 is nil. This means his excess concessional contributions are also excess non-concessional contributions.
Andrew can't release the excess non-concessional contributions amount because he is a member of a defined benefit fund. He must pay excess non-concessional contributions tax of 47%. This is in addition to the 47% income tax paid on the same contributions when they were excess concessional contributions. This means 94% tax has been paid on these contributions.
Andrew's decision to enter into a salary sacrifice arrangement for his compulsory employer contributions resulted in them being taxed at 94%. If he had not made this arrangement, the same contributions would have been taxed as excess non-concessional contributions only at 47%.
This example shows why it is important to carefully consider how you make extra super contributions.
End of example
Example: excess concessional contributions and excess non-concessional contributions and no release of excess concessional contributions
Wendy makes salary sacrifice contributions in 2018–19 in addition to the super guarantee contributions made by her employer. Her income in 2018–19 is $200,000.
In 2018–19, Wendy's concessional contributions exceed her cap by $3,000. Wendy receives an excess concessional contributions determination but does nothing. She leaves the excess concessional contributions in her super.
Wendy is subject to the top marginal tax rate in 2018–19. Her excess concessional contributions are taxed at 47% (including the Medicare levy). She receives an offset of 15% for the concessional contributions tax.
Because Wendy’s total super balance at 30 June 2018 was greater than $1.6 million, her non-concessional contributions cap for 2018–19 is nil. This means her excess concessional contributions are also excess non-concessional contributions.
Wendy elects for Option 2 for her excess non-concessional contributions. She is assessed and must pay 47% tax on the entire excess non-concessional contributions. This is in addition to the 47% income tax paid on the same contributions when they were excess concessional contributions. This means she paid 94% tax on these contributions.
End of exampleExcess concessional contributions charge
Individuals who make contributions on or after 1 July 2021 that exceed their concessional contributions cap, will no longer be liable to pay the excess concessional contributions charge.
For the income years 2013–14 to 2020–21, if you exceed your concessional contributions cap, you also may have to pay the excess concessional contribution charge (ECC charge).
This charge is in addition to the extra tax you pay when your excess contributions are included in your assessable income. It is applied because the tax on the excess concessional contributions is collected later than normal income tax.
The charge is payable for the year you have excess concessional contributions.
The period for which the charge is calculated:
- starts at the beginning of the financial year in which the excess concessional contributions were made
- ends the day before the due date for your first income tax assessment for that year.
If you don't pay the ECC charge by the due date, the general interest charge (GIC) may also apply.
How we let you know you have exceeded your cap
If you have excess concessional contributions for 2013–14 or later years, we will issue you with an excess concessional contributions determination.
The determination letter advises you:
- that your excess concessional contribution amount has been included as assessable income in your tax return
- what actions you need to take.
You will also receive a notice of assessment (NOA). This includes the:
- excess concessional contributions amount in your assessable income
- non-refundable tax offset amount (15% of the ECC).
To work out if you exceeded your concessional contributions cap, we assess the information reported to us:
- by your super fund
- in your tax return.
If your excess concessional contributions are reported to us after you lodged your tax return, we will amend your tax return. We will send you an amended NOA and an excess concessional contributions determination.
Your options if you exceed the cap
When you receive a determination and NOA or amended NOA, you have 60 days to make an election (choice). You can:
- choose to leave the excess contributions in super, or
- elect to release them.
If you choose to leave the excess concessional contributions in super, you need to pay any extra tax and the ECC charge out of your own money. Individuals who make contributions on or after 1 July 2021 that exceed their cap, will no longer be liable to pay the ECC charge. If you choose to do nothing, your excess concessional contributions will be counted towards your non-concessional contributions cap.
If you elect to release, you can release up to 85% of your excess concessional contributions from your super fund to help pay any additional tax and the ECC charge. Individuals who make contributions on or after 1 July 2021 that exceed their cap, will no longer be liable to pay the ECC charge.
If you believe the determination is wrong, see If the information used for excess contributions is wrong.
If there are special circumstances why your contributions exceeded or will exceed your contributions cap, you can make an application to the Commissioner for a determination to disregard or reallocate your contributions.
If your employer has lodged super guarantee charge (SGC) statements under the SG amnesty, any concessional contributions we pay to your fund as a result will be disregarded and will not count towards your concessional cap. We will tell you when this has occurred.
However, if your employer made contributions directly to your super fund and claimed these amounts under the SG amnesty, then you still need to apply for a determination to have the contributions disregarded from counting towards your cap.
For more information, see excess contributions tax and how funds report your contributions.
Example: excess concessional contributions
Mary is 51 years old. During 2019–20, Mary salary sacrificed money to super. Her total concessional contributions were $35,000. Mary's total super balance is over $500,000 on 30 June 2019.
Mary's concessional cap is $25,000, so her excess concessional contributions total is $10,000 ($35,000 minus $25,000).
Mary lodges her tax return and her taxable income is $70,000. We include the $10,000 of excess concessional contributions, which increases Mary's taxable income to $80,000. Mary's income is assessed at her effective marginal tax rate of 34.5% (including 2% Medicare levy).
Mary now has an additional tax liability of $3,450. However, Mary is entitled to a tax offset equal to 15% of her excess concessional contributions. This decreases her tax liability by $1,500 ($10,000 × 15%) to $1,950 ($3,450 minus $1,500).
The ECC charge is also calculated and added to her liability. Individuals who make contributions on or after 1 July 2021 that exceed their cap, will no longer be liable to pay the ECC charge.
We will notify her by sending:
- an income tax NOA
- an excess concessional contributions determination.
Mary can choose to act in one of 2 ways:
- Leave the excess concession contributions in super and pay the extra tax and ECC charge out of her own money. Individuals who make contributions on or after 1 July 2021 that exceed their cap, will no longer be liable to pay the ECC charge.
- Release up to 85% of her excess concessional contributions from her super fund to help her pay the extra tax and ECC charge. Individuals who make contributions on or after 1 July 2021 that exceed their cap, will no longer be liable to pay the ECC charge.
If Mary does not release her excess concessional contributions, they will be counted as non-concessional contributions.
End of exampleReleasing excess concessional contributions from your fund
You may elect to withdraw up to 85% of your excess concessional contributions from your super fund to help pay your income tax assessment and ECC charge. Individuals who make contributions on or after 1 July 2021 that exceed their concessional contributions cap, will no longer be liable to pay the ECC charge.
You have 60 days from when you receive your determination to make an election (although further time is allowed in certain circumstances).
You can choose to withdraw the amounts from one or more funds, however the total amount withdrawn cannot be more than 85% of the excess concessional contribution amount stated in your determination.
Before making an election, you should check that you have enough money in your funds.
Members of defined benefit funds should check with the fund as they may not be able to release an amount.
Once you make an election, it cannot be withdrawn or revoked.
If you release 85% of your excess concessional contributions, none of your excess concessional contributions will:
- be treated as non-concessional contributions
- count towards your non-concessional contributions cap.
If you release less than 85% of your excess concessional contributions, some or all your excess concessional contributions will:
- be treated as non-concessional contributions
- count towards your non-concessional contributions cap.
When your election has been successfully lodged and processed, we issue a release authority to the relevant super funds. Super funds have 10 business days to release the requested amount and send it to us.
The amount sent to us is used to pay any of your:
- outstanding tax liability
- other Australian Government debts.
We will refund any remaining balance to you.
The super fund is required to release the full amount elected to us unless you:
- don't have enough funds available
- no longer have any super interests with the fund
- have funds that cannot be released because they are in a defined benefit interest.
If a fund is not able to release all or part of the elected amount, we will let you know. You will have another 60 days to make a new election to another fund.
If you don't have another fund, then you will need to pay your income tax liability out of your own money.
Example: election to release
Faye has $4,500 of excess concessional contributions in 2019–20.
Faye's total super balance was $1.7 million on 30 June 2019, so her non-concessional contributions cap for 2019–20 is nil. She did not make any non-concessional contributions in 2019–20.
After we send an excess concessional contributions determination to Faye, she uses ATO online services to lodge an election to release the full amount (85% of $4,500).
When we receive the election, we issue a release authority to her nominated fund. Faye's fund must release the maximum amount available, and they send $3,825 to us. We credit this amount to Faye's account.
As the full amount was released (85% of the excess concessional contributions) none of Faye's $4,500 excess concessional contributions count towards her non-concessional contributions cap.
This means Faye will not have excess non-concessional contributions in 2019–20.
End of exampleEffect of not releasing your excess concessional contributions
Any excess concessional contributions you do not elect to have released will count towards your non-concessional contributions cap.
From 1 July 2017, if unreleased excess concessional contributions cause you to exceed your non-concessional contributions cap you could be taxed up to 94%.
Example of situations where not releasing excess concessional contributions may mean you exceed your non-concessional cap include:
- You have a total super balance above the general transfer balance cap ($1.6 million from 2017–21; $1.7 million from 2021–22) and your non-concessional contributions cap is nil.
- You have already triggered the bring-forward arrangement for non-concessional contributions and have made non-concessional contributions up to the bring-forward cap.
- You are not entitled to the bring-forward arrangement for non-concessional contributions and you have made non-concessional contributions up to your normal cap.
- You unintentionally triggered the bring-forward arrangement for non-concessional contributions when your unreleased excess concessional contributions were included as non-concessional contributions.
Be aware that if you are a member of a defined benefit fund then you may not be able to release excess concessional contributions from that fund.
You should consider the tax consequences of releasing or not releasing excess concessional contributions from a super fund. You may want to seek financial advice.
For assistance, see seeking our advice.
Example: does not elect to release
Lucy had excess concessional contributions of $10,000 in 2019–20.
Lucy's total super balance on 30 June 2019 was less than $1.6 million.
Lucy also made non-concessional contributions of $100,000 in 2019–20. Because Lucy is 68 years old, she is not eligible for the bring-forward arrangements. Therefore, her non-concessional contributions cap for 2019–20 is $100,000.
We send Lucy an excess concessional contribution determination. She chooses not to release any of her excess concessional contributions. She has to pay the additional tax and ECC charge out of her own money. Individuals who make contributions on or after 1 July 2021 that exceed their concessional contributions cap, will no longer be liable to pay the excess concessional contributions charge. This also means her excess concessional contributions will count towards her non-concessional contributions cap.
She will have excess non-concessional contributions of $10,000 ($100,000 non-concessional contributions plus $10,000 excess concessional contributions minus the $100,000 non-concessional contributions cap) for 2019–20.
We also issue Lucy an excess non-concessional contribution determination. She elects to release from her fund:
- the excess non-concessional contribution amount
- 85% of her associated earnings released from her super fund.
Her associated earnings are included in her assessable income and she will pay tax at her marginal tax rate. She will also get a tax offset equal to 15% of the associated earnings.
The amount released from her fund is sent to us and is used to pay her income tax debt. The remainder will be refunded to her.
End of exampleHow to make an election to release funds
To release an amount of your excess concessional contributions, you can make an election using ATO online services through myGov.
There are 3 ways to make an election:
- Log in to ATO online services, select Super, then navigate to Concessional election. To make an election, select 'Lodge'. The election form will be available for 120 days after the determination issue date.
- Ask your tax agent to submit an election on your behalf through Online services for agents.
- Complete an excess concessional contributions election form and send it to us.
More information:
If the time frame to make election has expired
You have 60 days to make an election. However, the option to make an election will still be available in our online services for 120 days after the date of issue of the determination.
After 120 days you cannot lodge an election via ATO online services. However, you can still either:
You should pay any outstanding liabilities to avoid additional interest charges.
When we receive a late election form, we will determine if we will accept it.
Example: excess concessional contributions – release from fund
Mary (from the previous example) has 21 days to pay her income tax debt which was a result of the:
- excess concessional contributions being included in her income tax assessment
- ECC charge. Individuals who make contributions on or after 1 July 2021 that exceed their concessional contributions cap, will no longer be liable to pay the ECC charge.
She decides to withdraw some excess concessional contributions from one of her super funds to help pay her tax debt.
Mary completes the excess concessional contributions election form via ATO online services and decides to release the full amount of $8,500 (85% of $10,000).
We issue a release authority to Mary's nominated fund to have the money released to us.
When we receive the money, we offset the amount against any debts Mary has, before refunding her the balance.
Mary's excess concessional contributions will no longer be counted as non-concessional contributions.
End of exampleTips to avoid exceeding the concessional contributions cap
The following suggestions may help you keep your super contributions below your concessional contributions cap and prevent you having to pay additional tax.
Keep track of amounts and your contribution caps
- Be aware of your concessional contributions cap, including any unused concessional contribution cap amounts from previous years.
- Be aware of your total super balance.
- Keep track of the amount of contributions you, your employer or others make on your behalf.
- If you have more than one job or pay money into more than one super fund, include all of them when working out your annual contributions. You can track these contributions on ATO online services.
Check the timing of contributions
- Check when your employer pays the contributions and when they were received by your super fund – contributions count towards a cap in the year your super fund receives them.
- Check with your employer if you have an instruction in your salary sacrifice agreement about the timing of when contributions will be paid to your super fund.
Understand what is and isn't a concessional contribution
- Compulsory employer contributions are included as part of your concessional contributions.
- If your employer has lodged super guarantee charge (SGC) statements under the SG amnesty, any concessional contributions we then pay to your fund will not be included in your concessional cap. We will tell you when this occurs. However, if your employer made contributions directly to your super fund and claimed these amounts under the SG amnesty, you need to apply for a determination to have the contributions excluded from your cap amount.
- If you are a member of a constitutionally protected fund or an unfunded defined benefit fund be aware of how concessional contributions to these funds are treated. Keep track of how contributions are calculated by these types of funds and contributions made to any other funds that may put you over your cap.
- Check if your employer pays costs on your behalf to your fund, for example super administration fees and insurance premiums. These amounts are included in your concessional contributions cap.
- If you are eligible to claim a tax deduction for your personal super contributions, the amount we allow as a deduction is included in your concessional contributions cap.
Take action
- If you think you may go over your concessional contributions cap in the current financial year
- stop or reduce any before-tax voluntary contributions to your super
- delay making any personal super contributions you intend to claim as a deduction in your tax return.
- If you have 2 or more employers and you think your employers' compulsory super contributions will exceed your concessional contributions cap for a financial year, you can apply for a Shortfall exemption certificate. This means you can opt-out of receiving super guarantee (SG) from one or more of your employers. Before you apply
- talk to your employer about the effect a Shortfall exemption certificate may have on your pay or other entitlements
- be aware that your employer can disregard a Shortfall exemption certificate and continue paying SG.
For information on high income earners see super guarantee opt-out for high income earners with multiple employers' form.
Special circumstances
If your contributions for a financial year exceed or will exceed your contributions cap due to special circumstances, you can apply to the Commissioner to make a determination so that some or all your contributions are disregarded or allocated to another year, see request to disregard or reallocate your contributions.