Tax treatment of excess super contributions

Trustees of SMSFs have many duties and responsibilities. In most cases when regulations are breached the ramifications are not too onerous. One exception to this is when the limits are exceeded for both concessional and non-concessional contributions.

Changes were made to the excess contributions penalty tax system on June 28, 2013. These changes mean excess concessional contributions will be included in a person's income and taxed at their applicable marginal tax rate.

When there has been an excess contribution the Australian Tax Office will issue a new assessment detailing the increase in tax payable. On this amended assessment the amount of extra income tax payable on the excess contribution will be shown, and a credit or offset for the contributions tax paid by the super fund on the excess contribution.

In addition to the net increase in tax shown on the assessment there will also be an Excess Concessional Contributions Charge (ECCC). This will be applied at the Shortfall Interest Charge rate. The SIC is based on the 90-day bank accepted bill rate plus a 3 per cent uplift factor. The ECCC will apply from the first day of the financial year the excess contribution was made up to the due date of the person's first notice of assessment for that year.

There will also be an extra amount to pay on the assessment advising of the excess super contribution. This will be an SIC on the extra tax payable on the amended assessment and will be applied from the date of the original assessment up to the due date for payment on the amended assessment.