Thursday, July 25, 2013

Excess Superannuation Contributions

I just saw this on the Colonial First State website:

"More generous rules for excess contributions:
In the past, if you went over your concessional contribution cap accidentally or otherwise, you’d be penalised effectively by having to pay the highest tax rate on the excess amount. But from
1 July 2013, you pay tax at your normal marginal tax rate on any excess concessional contributions, plus an interest charge. You'll also have the ability to withdraw up to 85% of any excess concessional contribution made. Note that this does not apply to contributions you have made in excess of the concessional cap before 1 July 2013."

I had heard there would be some change to the excess contributions regime but didn't know the details. But this is pretty unclear. Looking at the ATO website they don't have any clear information available yet on exactly how it would work. It looks like you can pay the extra tax at your own marginal rate and leave the money in the fund. The longer you wait to pay the excess tax, the more interest you will pay. But the ATO also says that "you will be liable for the excess concessional contributions charge." It doesn't say how much that will be - or perhaps that is the interest that the other articles I found mention.

I am stuck making excess contributions (more than $25k currently) because the universities' superannuation scheme has employers contributing 17% of your salary to the fund. And, no, you can't get them to reduce it or pay part of it as a "non-concessional contribution". At least the excess for me is less than $1000.  In Snork Maiden's case I just realised that after the latest round of pay increases she will now be over the cap. We have been contributing $400 every two weeks as a "salary sacrifice" contribution on top of the employer contribution of 15.4%. We'll reduce this to $350.

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