Excess contributions tax: refund option for contributions up to $10,000

The Government will provide eligible individuals who breach the concessional contributions cap by up to $10,000 with a one-off option to request that these excess contributions be refunded to them. This new refund option will only apply to first time breaches from 1 July 2011.

The changes will give individuals the option to take excess concessional contributions out of their superannuation fund and have them assessed as income at their marginal rate of tax, rather than the excess concessional contributions tax rate of 31.5% (in addition to the 15% contributions tax for the fund).

The Government expects that this reform will help to reduce the number of occasions where the concessional contributions are exceeded resulting in an excess contributions tax (ECT) assessment.

The Government said it will consult with the superannuation industry on the implementation of this measure.

Concessional contributions

Concessional contributions generally include employer contributions (those made under salary sacrifice arrangements and super guarantee contributions) and personal contributions for which the taxpayer intends to claim a deduction. Since 2009-10, the "concessional contributions cap" has been set at $25,000 (or $50,000 for those aged 50-74 until 30 June 2012). Note that the Government has proposed to allow individuals aged 50 and over with less than $500,000 in super to contribute $25,000 more per year than other individuals from 1 July 2012.

Date of effect

This measure will apply from 1 July 2011 in respect of 2011-12 or later years, and only for the first year, commencing from 2011-12, in which a breach occurs.