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Avoiding penalty tax on superannaution contributions

18 Jan 2012 11:20 AM -

Making superannuation contributions seems straightforward enough, however all tax payers need to be aware that exceeding their contributions caps set by the Australia Taxation Office (ATO) does come with penalties.

What are the penalties for exceeding superannuation contributions?

You will need to pay tax on any excess contributions made in a financial year.This additional tax payable is between a minimum of 31.5% and a maximum of 46.5% of the excess contributions.

Tips to keep below the Concessional Contributions Cap

Below are some tips the ATO has provided to help taxpayers keep their superannuation contributions below the concessional contributions cap and to avoid paying extra tax.

  • If a taxpayer works out they may exceed the concessional contributions cap in the current financial year, they should consider:
    • Stopping or reducing any voluntary contributions, such as salary sacrifice (they cannot ask their employer to change compulsory superannuation guarantee amounts or amounts paid under a contract or industrial agreement); and/or
    • Delaying the making of any personal superannuation contributions they intend to claim as a deduction to the next financial year;
  • Check when their contributions are received by their superannuation fund (generally, the contribution counts towards a cap in the financial year in which the superannuation fund actually receives the money).
  • Check if the employer pays costs such as superannuation administration fees and insurance premiums on behalf of the fund, as they generally can count towards the taxpayer’s concessional contributions cap.
  • If the taxpayer has more than one job or pays money into more than one superannuation fund, they should include all these when they work out their annual contributions (remembering that compulsory superannuation guarantee amounts are concessional contributions).
  • If the taxpayer is eligible to claim a deduction for their personal superannuation contributions, only the amount allowed as a deduction will count towards their concessional contributions cap.

Tips to keep below the Non-Concessional Contributions Cap

Below are some tips to help taxpayers from exceeding the non-concessional contributions cap.

  • If the taxpayer exceeds the concessional contributions cap, the excess contributions count towards their non-concessional contributions cap.
  • Any amount that is cashed out and re-contributed into the taxpayer’s superannuation fund is a personal contribution and will be counted.
  • Contributions are counted against the caps in the financial year in which they are received and credited by the superannuation fund.
  • A taxpayer is only eligible to bring forward the next two financial years of contributions if they are age 65 on 1 July of the first financial year.
  • If the taxpayer is over 65 and over, then they must pass the work test to make contributions (i.e. they must work for at least 40 hours over a 30 day period in the financial year in which the contribution is made).
  • The taxpayer must give an election form to their fund before or when they make a contribution if they are eligible to exclude from the non-concessional cap:
    • contributions arising from personal injury payments; or
    • contributions derived from the proceeds of the disposal of certain small business assets, up to their lifetime superannuation CGT cap amount.
    • If the form is submitted to the fund after the contributions are made, the exclusion will not apply and the fund must report the amount to the ATO as a personal contribution.

It’s important you are fully aware of your concessional and non-concessional cap limits in your superannuation, in order to avoid paying any additional penalty tax.

Note: Some information from this article was sourced from the National Tax and Accountants website at:

and other information from ATO website


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