Excess contributions tax
The object of the excess contributions tax (ECT) rules is to make sure the amount of concessionally-taxed superannuation benefits that a person receives is from super contributions made over the course of their life.
From 1 July 2007, employers have been entitled to a full deduction for all contributions to super on behalf of their employees when certain conditions are met. In addition, the self-employed (and other eligible people) have also been entitled to a full deduction for any amount they claim as a personal super deduction to the extent that it does not create or increase a loss.
The removal of age-based deduction limits, reasonable benefit limits (RBLs) and tax on super benefits from taxed funds for people 60 and over has increased the concessions provided to super.
These changes, together with the continuing tax exemption provided for income from super assets supporting a pension and the concessional rate of tax on income of complying super funds, have made super an attractive way to retain assets and minimise tax.
There is an incentive for people to transfer income producing assets currently held outside super to the concessionally taxed super system.
To ensure super tax concessions are targeted appropriately, limits have been placed on the amount of super contributions a person can make that receive concessional treatment.