Super Contributions Caps

Changes To Super Contributions Caps Could Cost You

You Will Pay Extra Tax If You Breach The Contributions Cap?

While super funds have taken a hammering in the last two years due to the global economic conditions, they are still one of the best vehicles for holding and managing assets that will be needed in retirement. The tax advantages of keeping assets in super funds are well documented, and a succession of federal governments have tried to provide appropriate processes and vehicles to encourage it, well aware that without some form of self-funded retirement savings, Australia simply cannot afford large numbers of unfunded retirees. However, the super rules are complex and some people who are subject to the regulations around super contribution caps are finding that they are inadvertently paying too much tax.


In order to discourage over-excessive contributions into super, there are caps in place for the contributions, but during the actual change to superannuation rules, there have been unexpected consequences. People with an SMSF Brisbane (self managed superannuation fund) need to understand the rules and limitations around the caps, so they can make the best decisions for their assets. They must realise that any super contributed over a cap amount in any financial year is subject to extra tax.

There are several ways that individuals can in all innocence, end up in hot water with regard to attracting a higher tax rate than necessary. Every persons situation is different, and the final crunch comes when the tax return is prepared which of course, takes into account a range of income sources and claimable expenses. It is difficult if not impossible, to undo a legitimate contribution further down the track, when lodging a tax return makes it clear that part of the contribution will be taxed at 46.5%.

Suppose, for example, that when the accountant prepares the tax return, the taxpayer can’t claim all of the concessional contributions as a tax deduction because there is not enough income in that year, remembering that you cannot create a tax loss when personal contributions are claimed as a tax deduction. When contributions were initially made, it was unlikely that this situation would occur, but the result now is that only partial contributions can be claimed, and this results in individual tax payers needing to pay more tax overall.

Obviously this is just one example. There are many other variations, and people engaged in DIY Super Brisbane would be wise to seek expert assistance before trying to apply any of this information to their own situation. Although the Australian Tax Office have high power to decide on contributions in different ways, they don't often do so (with a small amount of excess contribution cases being exempted from pental tax).

SMSF managers must pay close attention to contribution cap concession limits. As proponents of DIY Super, they could be disadvantaging themselves through not understanding the concession boundaries.