Example 2
A second example illustrates how a $2600 error can result in $70,959 excess contributions tax (ECT) assessment.
On 29 June 2009, Member A made an NCC of $150,000 to their superannuation fund and another $450,000 on 2 July 2009.
Member A forgot her employer had been contributing an additional $50 per week after tax to her superannuation fund, resulting in NCCs for the year of $152,600.
This figure xceeded her NCC cap by $2600 and triggered the ‘bring forward’ rule in the 2009 financial year. Member A’s NCCs for the year ended 30 June 2009 now total $602,600, $152,600 above the NCC cap, and taxed at 46.5 per cent.
No simple solution
Unfortunately there is no simple solution for those exceeding their CCs due to the mandatory nine per cent super guarantee. However, members can apply to the Commissioner to have excess contributions disregarded or reallocated to another period.
The Tax Office’s practice statement PS LA 2002/1 describes factors the ATO may consider in determining whether special circumstances exist warranting such a decision.
In conclusion, members can easily find themselves exceeding their contributions caps if they do not maintain regular communication with their adviser and keep appropriate records of all sources and amounts of superannuation contributions.
You should note the federal budget proposes a once off opportunity for those breaching their CC cap by less than $10,000 to have this amount refunded from their superannuation fund and taxed as income at their marginal rate.
This relief will apply in respect of contributions made in the 2011/12 financial year and beyond.
