• Refund of excess concessional contributions

    Amendments to the ITAA 1997 enable the refund of excess concessional contributions (RECC), which provides a once-only option for an eligible person to either:

    • pay ECT under the current processes
    • have excess concessional contributions of $10,000 or less refunded to them and taxed as assessable income at their marginal tax rate.

    Concessional super contributions are generally contributions that are included in the assessable income of a complying super fund, approved deposit fund (ADF) or RSA provider.

    Concessional contributions include:

    • compulsory SG contributions
    • salary sacrifice contributions
    • voluntary super contributions made by an employer on an employee's behalf, such as administration fees and insurance premiums
    • any personal contributions for which an income tax deduction claim is allowed.

    The concessional contributions cap is the limit on the amount of concessional contributions a person can make each year before they become liable to pay ECT. Excess concessional contributions are contributions above the concessional contributions cap and are subject to the ECT.

    ECT on excess contributions is levied at 31.5%. This is in addition to the 15% tax paid by the super entity as the contribution is included as part of a complying super entity's assessable income.

    Refund of excess concessional contributions

    We may issue a person with a notice of offer for a refund under subsection 292-467(1)External Link of their excess concessional contributions if all the following apply - the:

    • person has excess concessional contributions for an income year
    • amount of excess concessional contributions is $10,000 or less
    • person does not have excess concessional contributions for an earlier income year starting on or after 1 July 2011
    • person has lodged a tax return for the relevant income year within 12 months of the end of that year, or within a longer time if the ATO allows.

    The $10,000 refund of excess concessional contributions threshold is not indexed.

    To determine if a person has excess concessional contributions for an income year, the Commissioner will use:

    • MCS data
    • the person's tax return
    • information held on ATO systems
    • the person's date of birth.

    The conditions for a person to be made an offer for a refund mean:

    • once an individual has excess concessional contributions for the 2011-12 and later income years, they are not eligible for a refund offer in any subsequent income year
    • if the person exceeds their concessional contributions cap in more than one income year before receiving notification from the Commissioner then only the first year will be eligible for the refund offer
    • existing ECT processes apply for non-eligible people and for the those who do not accept the refund offer.

    The exception to a person receiving a refund offer in a subsequent income year is if there is an amendment to a person's ECT assessments for an earlier income year that removes the person from having excess concessional contributions, for example, as a result of exercising the Commissioner discretion in accordance with section 292-465External Link.

    Therefore, as the person no longer has excess concessional contributions in that income year, they would be eligible for a refund offer for a future income year.

    The refund option does not apply retrospectively. That is, a refund offer cannot be made for excess concessional contributions made before the 2011-12 income year.

    Example: refund offers

    Eamon has excess concessional contributions of $5,000 for the 2010-11 income year. An ECT notice of assessment is issued for the $5,000 excess concessional contributions.

    Eamon has excess concessional contributions of $6,000 for the 2011-12 income year. Assuming the eligibility criteria are met, Eamon is eligible for a refund offer as the amount of excess concessional contributions is $10,000 or less.

    As the $5,000 excess concessional contributions were for the 2010-11 income year and made before 1 July 2011 (the start date of the refund measure), they are not taken into consideration when determining Eamon's eligibility to receive a refund offer for a later income year.

    In this case, a refund offer would be issued to Eamon for the $6,000 excess concessional contributions made during the 2011-12 income year.

    Example: No eligibility in later years

    Emily has excess concessional contributions of $5,000 for the 2011-12 income year and the Commissioner determines that she is eligible for a refund offer.

    Emily chooses not to accept the offer and an ECT notice of assessment is issued.

    Emily has excess concessional contributions of $6,000 for the 2012-13 income year. Because she received a refund offer for the 2011-12 income year (which she chose not to accept), Emily is not eligible for a refund offer for excess concessional contributions in any later income years.

    End of example

    Refund offer

    The ATO must provide eligible people with a choice, via a notice of refund offer, when it has been determined they have excess concessional contributions for an income year. This choice will be to either:

    • accept the offer and have the excess concessional contributions released from their super fund and assessed as income at their marginal tax rate,
    • not accept the offer and leave their excess concessional contributions in their super fund and pay ECT.

    If a person chooses to not accept a refund offer they do not need to do anything. Their offer will lapse after a specified timeframe and they will be assessed for ECT. They will then no longer be eligible for a refund offer for any later income years.

    If a person accepts the refund offer, we may make a determination under subsection 292-467(1)External Link that the excess concessional contributions for that income year are to be disregarded for the purposes of the ECT provisions contained in Division 292.

    The contributions that resulted in the refund determination are still contributions, and continue to count towards:

    • satisfying an employer's SG obligations
    • the fund's assessable income.

    A refund determination merely changes the tax treatment of the person in relation to the excess concessional contributions.

    The ATO will issue the Choice to include excess concessional contributions in assessable income form (NAT 71886) to eligible people. This form will:

    • outline the nominated super fund that will be requested to release 85% of the excess concessional contributions
    • provide an option to nominate a different super fund to release 85% of the excess concessional contributions
    • provide an option if the person no longer holds an accumulation interest in any super fund.

    The refund offer is only available once for the first income year in which the concessional contributions cap is breached.

    Example: eligible for refund in earlier income year due to additional information

    Jill is deemed eligible for a refund offer for the 2012-13 income year. The Commissioner issues a notice of offer and election form.

    Before receiving the election form, the ATO receives additional information that results in Jill being eligible for a refund offer for the 2011-12 income year.

    As a refund offer can only be made once for the first income year in which a person has excess concessional contributions of $10,000 or less, Jill is no longer eligible for the refund offer for the 2012-13 income year.

    As a result of this additional information, Jill is issued with a new notice of offer and election form for the 2011-12 income year and a withdrawal of the refund offer for the 2012-13 income year.

    End of example

    Issuing the refund offer

    If an individual is eligible for the refund offer, we will issue them with a letter detailing the amount of the excess concessional (before-tax) contributions and outline their options.

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

    A person cannot object to the offer, however they are able to:

    • advise that the contribution amount is incorrect and discuss with their super provider the need to have the amount of concessional contributions re-reported under section 390-115External Link of Schedule 1 of the TAA
    • apply for Commissioner's discretion to disregard or reallocate to another income year the excess concessional contributions under section 292-465External Link.

    In these situations, the person may be granted an extension of time to accept the offer from the ATO under subsection 292-467(3)External Link.

    A person's refund offer only applies to the total amount of their excess concessional contributions. Refunding part of a person's excess concessional contributions is not an option.

    Accepting the refund offer

    If a determination is made that a person has excess concessional contributions for an income year and they accept the refund offer, in accordance with subsection 292-467(2):

    • an amount equal to the excess concessional contributions is included in their assessable income for the income year
    • they are entitled to a tax offset for that income year of 15% of the excess concessional contributions.

    When a written notice of offer is issued to an eligible person, in accordance with subsection 292-467(3), they may accept the offer within 28 days after the issue date or within longer times if the ATO allows.

    An offer can only be accepted using the approved form. If the person does not wish to accept the offer they can allow the offer to lapse or contact the ATO, however they are not required to formally reject the offer.

    The choice made by a person (to either accept or not accept the offer) is irrevocable. If the offer is not accepted on time, the person will be assessed for ECT.

    If the offer is accepted, we must issue a notice of the determination in accordance with subsection 292-467(4), which can be in the form of an amended tax return. We may also send a refund release authority to the relevant super provider seeking the release of an amount of the excess concessional contributions.

    An accepted refund offer will increase the person's assessable income, as well as their taxable income and adjusted taxable income.

    This may have flow-on effects to other government benefits and payments such as child support, super co-contributions, low income tax rebates and other means-tested benefits.

    Amending a tax return

    When a person accepts a refund offer, we will include the amount of excess concessional contributions in their assessable income for the income year that corresponds with the income year for the excess contributions. Therefore, in accordance with subsection 292-467(2)External Link, the person's tax return will be amended and a notice of amended assessment will be issued.

    Under subsection 292-467(5), the determination for the excess concessional contributions to be disregarded for the purposes of Division 292 for the income year may be included in the notice of amended assessment.

    When amending the person's tax return we will allow the individual a tax offset equal to 15% of the excess concessional contributions. The offset accounts for the excess contributions being assessable to the super fund (effectively reducing the excess contributions by 15% to provide for the fund's income tax liability).

    The tax offset is a refundable tax offset in accordance with sections 13-1External Link and 67-23External Link.

    The ATO will also allow the person a credit for any amount paid to Commissioner by a super provider in accordance with a refund release authority. This means that most people will have no tax debt to pay as their income tax account will be in credit.

    If an account is in credit, the ATO owes money to the person and that amount must be refunded. This is a credit the person is entitled to under a tax law for the purposes of paragraph 8AAZL(1)(b)External Link of the TAA, but does not form part of the notice of amended assessment.

    However, a reduced refund may be received, or no refund at all, if the person has an outstanding debt:

    • for another type of tax, for example, an income tax debt
    • to another Australian Government agency that has required the ATO to pay any refund to them to cover other debts, for example, the Child Support Agency or Centrelink.

    The refund will not be used to reassess whether a person is entitled to claim a deduction for personal super contributions. Nor will the refund be used to reassess whether a person has satisfied the 10% eligible income test in paragraph 6(1)(b)External Link of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003.

    No super provider or insufficient funds available

    If there is no super provider available or there are insufficient funds available to comply with a refund release authority, the amount of excess concessional contributions will be included in the person's assessable income and the tax offset allowed. However, the person is not entitled to a credit as no amount has been paid by a super provider to the ATO. Therefore, the person will have a tax bill to pay unless either:

    • their amended marginal tax rate is less than 15%
    • they have unused tax offsets in their original tax return.

    Revocation and variation

    In accordance with section 292-468External Link, the ATO has the power to revoke or vary a determination made under section 292-467External Link if satisfied that the amount of excess concessional contributions previously determined is incorrect.

    The ATO will issue a written notice of a revocation or variation.

    If a request is made to vary or revoke a determination, the Commissioner will also issue a written notice to the person advising them of a decision not to vary or revoke the determination. This notification will ensure they can exercise their right to object to the decisions.

    Revocation of a determination

    We may revoke a determination under subsection 292-468(2) at any time before receiving a payment from a super provider if we are satisfied that either the person:

    • to which the determination relates has excess concessional contributions greater than $10,000 for the income year
    • has no excess concessional contributions for the income year.

    If the correct amount of excess concessional contributions is greater than $10,000, the revocation of the determination will mean that the Commissioner can make an ECT assessment for the correct amount. Also, the person will not be eligible for a refund offer for a subsequent income year.

    Under subsection 292-420(7)External Link, if the person has no excess concessional contributions, the revocation of the determination will mean the ATO will also revoke any refund release authority issued to a super provider. In addition, the person will be eligible for a refund offer for excess concessional contributions in a subsequent income year.

    If a payment under a refund release authority has been received, the Commissioner cannot revoke the determination.

    Example: excess contributions after a refund offer is accepted

    Louise makes $27,500 concessional contributions to the L&J Super Fund during the 2011-12 income year.

    The ATO determines that she has excess concessional contributions of $2,500 and issues a refund offer, which Louise accepts.

    A refund release authority is issued to the L&J Super Fund however, before the $2,125 is received by the ATO, MCS data from the E&M Super Fund shows that Louise made $12,000 excess concessional contributions during the 2011-12 income year.

    The ATO determines that she is no longer eligible for a refund offer as Louise now has $12,000 excess concessional contributions for the 2011-12 income year.

    The refund offer is revoked and an ECT notice of assessment is issued for the $12,000 excess concessional contributions.

    Furthermore, Louise will not be eligible for a refund offer for any future income years.

    End of example

    Variation of a determination

    In accordance with subsection 292-468(3)External Link, the ATO may vary a determination at any time before receiving payment from a super provider if it is determined that the person has excess concessional contributions for the income year of $10,000 or less.

    A determination can also be varied under subsection 292-468(4) at any time after receiving a payment from a super provider if we are satisfied that the person has excess concessional contributions for the income year both:

    • greater than the amount of excess concessional contributions mentioned in the determination
    • not greater than $10,000.

    If a determination is varied in accordance with section 292-468, the varied determination has effect as if it were a determination under section 292-467External Link.

    If a payment under a refund release authority has been received, we:

    • cannot revoke the determination in accordance with subsection 292-468(2)
    • may vary the determination if satisfied the amount of excess concessional contributions is increased, but is $10,000 or less in accordance with subsection 292-468(4).

    If a determination is varied because a person's excess concessional contributions have increased, but are still $10,000 or less, they are not entitled to make a new choice about the increased excess concessional contributions.

    Example: determination variation due to increased concessional contributions

    The PS Super Fund reported it received concessional contributions of $32,500 for its member, Jemima, for the 2011-12 income year. The Commissioner determines Jemima has excess concessional contributions of $7,500 and issues a refund offer, which Jemima accepts.

    Jemima's tax return is amended to:

    • include $7,500 in assessable income
    • allow a $1,125 tax offset.

    Jemima's income tax account was credited with the $6,375 received from the PS Super Fund.

    The Big Ted Super Fund lodged its MCS late at which time it reported it had received concessional contributions of $2,000 on behalf of Jemima.

    Following receipt of the additional MCS information, the Commissioner is satisfied that Jemima had $9,500 excess concessional contributions for the 2011-12 income year and varied the original determination.

    The original determination is varied to represent the correct excess concessional contributions amount of $9,500.

    As Jemima chose to accept the original refund offer, she is unable to make a different choice for the varied determination for concessional contributions reported by the Big Ted Super Fund.

    An additional refund release authority will be issued requesting a further $1,700 from Jemima's nominated super fund. Jemima's tax return is amended again to include the additional $2,000 excess concessional contributions in her assessable income and apply the tax offset and credit from the refund release authority.

    End of example


    The ATO cannot revoke or vary a determination under any other circumstances other than those mentioned above.

    We cannot revoke or vary the determination if both the following apply:

    • An amount is received by the ATO as the result of issuing a refund release authority pursuant to a refund determination.
    • We satisfied the person was not eligible for the determination because they had excess concessional contributions greater than $10,000.

    Instead, the ATO is required to assess the person for ECT. However, in accordance with subsection 292-468(9)External Link, the ECT assessment will be made by disregarding the amount of excess concessional contributions already included in the person's assessable income.

    Example continued: original determination cannot be revoked or varied

    Using the same facts as the example above, assume the Big Ted Super Fund reports $5,000 concessional contributions were received on behalf of Jemima for the 2011-12 income year.

    As a result of the new information, the ATO is satisfied that Jemima had $12,500 ($7,500 + $5,000) excess concessional contributions for the income year.

    As the Commissioner has received an amount from the PS Super Fund pursuant to the refund release authority, the original determination cannot be revoked or varied.

    Instead Jemima must be assessed for ECT on the $5,000 excess concessional contributions reported by the Big Ted Super Fund.

    End of example

    Refund release authority

    Subsection 292-420(1)External Link states the ATO may issue a release authority to a super provider if the Commissioner makes a determination for a person's excess concessional contributions under section 292-467External Link.

    The refund release authority must:

    • state the amount to be released
    • be dated
    • contain any other information we consider relevant.

    Only 85% of the excess concessional contributions will usually be stated on the refund release authority because the contribution will be assessable income to the super provider who would have reduced the contributions by 15% to provide for its income tax liability.

    A refund release authority issued under subsection 292-420(1) will be for an amount less than 85% of the excess concessional contributions if any ECT has already been released pursuant to a voluntary release authority given under section 292-415External Link for excess concessional contributions. In these circumstances, the ATO may issue a refund release authority for any difference.

    We will not issue a refund release authority if the amount to be released is reduced to zero.

    Super providers

    In accordance with subsection 292-420(4)External Link, a super provider that has been issued with a refund release authority must:

    • pay the amount stated in the release authority within 30 days of the date of issue of the release authority
    • provide a statement, in the approved form, to advise of the payment within the earlier of  
      • 30 days of the date of issue of the release authority
      • seven days after the payment is made.

    Subsection 292-420(5) states that a super provider is not required to comply with a refund release authority if either the:

    • value of the super interests held for the person is less than the amount stated in the release authority
    • super provider holds only one or more of the following types of super interests for the person  
      • a defined benefit interest
      • an interest in a non-complying super fund
      • an interest supporting a super income stream.

    If a super provider is not required to comply with a refund release authority they must advise, in the approved form, within 30 days of the issue date of the release authority, in accordance with subsection 292-420(6).

    The ATO may choose to penalise a super fund if they do not pay an amount on a refund release authority with a reason not listed above.

    Example: what happens after acceptance of a refund offer

    Mel has assessable income of $45,000 and excess concessional contributions of $5,000 for the 2011-12 income year.

    Mel receives a refund offer from the ATO, however she has a defined benefit super interest and is aware that her super fund will be unable to release her excess contributions.

    Mel accepts the refund offer and, on the election form, completes the 'I declare that I no longer hold an accumulation interest in any super fund' section and returns it to the ATO within 28 days.

    Following receipt of her election form, the ATO issues a notice of amended assessment and statement of account showing that:

    • Mel's assessable income has been increased by $5,000
    • an amount of tax payable of $5,000 x 31.5% (30% plus Medicare levy) = $1,575
    • a tax offset of $750
    • an amount of $825 is payable.
    End of example

    Payments from refund release authorities

    The payment made by a super provider in accordance with a refund release authority is a super benefit as defined in section 307-5External Link.

    However, as the refunded amount is to be included in assessable income for the income year that corresponds to the year in which the person has excess concessional contributions, the super benefit is non-assessable, non-exempt income in accordance with subsection 303-15(1)External Link.

    The proportioning rule does not apply to the released amount, therefore the taxable component of the super interest from which the refund is paid will effectively be reduced without reducing the tax-free component as well.

    Failure to comply with a refund release authority

    Tax-related liability

    The amount a super provider is required to pay in accordance with a refund release authority will be treated as a tax-related liability of the provider under subsection 250-10(2)External Link of Schedule 1 of the TAA.

    This enables the ATO to take legal action against the super provider for the amount if it has not paid as required.

    Penalties

    As there is no provision enabling its application, GIC will not be payable by the super provider if the amount payable under a refund release authority is not paid by the due date.

    However, a super provider may be liable for an administrative penalty for failure to pay the amount on time and this penalty is subject to GIC.

    An administrative penalty also applies if the super provider does not provide the accompanying payment statement in time under existing subsection 286-75(1)External Link of Schedule 1 of the TAA.

    Example: administrative penalty for failure to release

    A refund release authority was issued to XYZ Super Fund on 1 November 2012 requiring the release of $8,500. The money was not received from the fund within the 30 day timeframe.

    The issue was referred for action. After contacting the XYZ Super Fund it was determined that the fund had misplaced the refund release authority. The fund eventually remitted the $8,500 on 31 January 2013.

    After considering the circumstances surrounding the failure to remit, the case officer determined that the fund had made a moderate attempt to comply with the refund release authority and remitted the penalty in accordance with PS LA 2011/24External Link to 50% of the 20 penalty units.

    That is, a fine of 10 penalty units..

    Example: basic refund and amended tax return

    Paul has assessable income of $80,000 and makes $32,500 concessional contributions to his super fund during the 2011-12 income year.

    The ATO determines Paul has excess concessional contributions of $7,500 and issues a refund offer, which Paul accepts.

    A refund release authority is issued to Paul's super fund for $6,375 (that is, $7,500 x 85%), which pays the amount within 30 days.

    Following receipt of the released funds, Paul's 2011-12 tax return is amended to increase his assessable income to

    $80,000 + $7,500 = $87,500

    Also included is a refundable tax offset of

    $7,500 x 15% = $1,125

    A notice of amended assessment and statement of account is issued to Paul showing an amount payable

    = excess concessional contributions x marginal tax rate (plus Medicare levy) - tax offset

    = $7,500 x 38.5% - $1,125

    = $1,762.50

    The credit of $6,375 is applied to Paul's account and the remaining credit of $4,612.50 (that is, $6,375 - $1,762.50) is refunded to him.

    Example: effect of accepting a refund offer

    For the 2011-12 income year, John has assessable income of $50,000 and contributes $40,000 of concessional contributions to the ABC Super Fund.

    John is 45 years old and deemed ineligible for a refund offer. He receives an ECT pre-assessment letter advising that he has excess concessional contributions of $15,000.

    John believes the excess concessional contributions are incorrect and he contacts his super fund. An error was discovered and the fund re-reports John's concessional contributions for the 2011-12 income year and John's excess contributions are reduced to $6,000.

    As John is now eligible for a refund offer, which he accepts.

    A refund release authority is issued to the ABC Super Fund for $5,100 (that is, $6,000 x 85%).

    Following receipt of the release funds, John's tax return is amended to:

    • increase his assessable income to $56,000
    • apply a tax offset of $900.

    The credit of $5,100 is applied to the debit liability and, as John does not have any other Australian Government debts, the balance of any credit is refunded to him.

    Example: refunds

    Mark is deemed ineligible for a refund offer in the 2011-12 income year as his excess concessional contributions are greater than $10,000. He receives an ECT pre-assessment letter, followed by an ECT notice of assessment that he pays by the due date.

    Additional information is received that indicates Mark's excess concessional contributions for the 2011-12 income year were $8,000. A refund offer is issued to Mark, which he accepts.

    The ECT notice of assessment is amended to nil and the amount of ECT paid by Mark is refunded to him.

    A refund release authority is issued to Mark's super fund for $6,800 (that is, $8,000 x 85%).

    On receipt of the $6,800, Mark's tax return is amended to:

    • increase his assessable income by $8,000
    • apply a $1,200 tax offset.

    The amendment results in a $3,000 tax liability for Mark.

    The $6,800 credit (that is, the refund release authority amount received from the super fund) is applied to Mark's account and reduces the liability to nil and results in a $3,800 credit on Mark's account.

    However, Mark has an outstanding child support debt. Therefore the $3,800 credit is forwarded to the Child Support Agency.

    End of example

    Interest payable

    Section 292-425External Link states that the ATO is required to refund all or part of a credit as a result of an amount paid by a super provider in accordance with a refund release authority. If this is not done within 60 days of receiving that amount, interest will accrue on the amount that has not been refunded.

    The amount on which interest is payable includes any portion of the refundable tax offset required to be refunded.

    The interest is payable:

    • on a daily basis
    • at the base interest rate for the period  
      • beginning 60 days after the day the ATO receives the payment
      • ending on the day of the refund.

    Objection

    Once a determination is made under section 292-467External Link, a person may object to the determination in the manner set out in Part IVC of the TAA.

    Under section 292-469External Link a person can lodge an objection if they are dissatisfied with a:

    Paragraph 14ZW(1)(aac)External Link of the TAA states that an objection under section 292-469External Link must be lodged within 60 days of:

    • issuing the determination or varied determination
    • making the decision to revoke the determination
    • making the decision not to vary or revoke the determination.

    Part IVC of the TAA enables a person to appeal a decision to the AAT.

    Other amendments

    A number of provisions contained within legislation contain income tests that consider both:

    • assessable income, or an amount derived from it such as taxable income, adjusted taxable income or total income
    • either reportable  
      • employer super contributions
      • super contributions.

    If a refund determination is made for an income year, an individual's assessable income for that year will be increased by the amount of their excess concessional contributions for that year.

    Further, if an individual has reportable employer super contributions or personal deducted contributions, some or all of their excess concessional contributions may be attributable to the reportable contributions.

    To avoid counting an amount twice (that is, as both income and super contributions), reportable employer super contributions are reduced by the amount of the refunded excess concessional contributions. However, the amount cannot be reduced below zero.

    Amendments to give effect to these changes will be made to the ITAA 1997 and the Superannuation (Government Co-contributions for Low Income Earners) Act 2003

    Example: adjusted taxable income

    Alex has a salary of $165,000 in the 2011-12 income year. Assume the following:

    • SG contributions = $165,000 x 9% = $14,850
    • additional salary sacrifice contributions = $15,000
    • reportable employer super contributions = $15,000
    • excess concessional contributions amount = $14,850 + $15,000 - $25,000 = $4,850
    • adjusted taxable income = $180,000 ($165,000 + $15,000).

    Alex accepts the refund offer, therefore her:

    • assessable income increases by $4,850 due to the excess concessional contributions
    • adjusted taxable income increases by $4,850 (due to assessable income increase)
    • reportable employer super contributions decrease by $4,850 (to reflect the adjustment to reportable employer super contributions).

    Therefore, there is no overall change to adjusted taxable income.

    End of example
      Last modified: 06 Sep 2017QC 34181