Did you realise that some unfortunate super fund members face a 93 percent tax rate on certain super contributions?
This breathtaking rate is triggered when fund members exceed the annual caps on both concessional and non-concessional contributions.
Super Contributions that exceed the cap on concessional contributions count towards the cap on non-concessional contributions – and could push a member’s non-concessional contributions over the limit.
Here’s how that hefty tax figure is calculated:
- Super Contributions that overshoot the concessional cap are taxed at 31.5 percent, in addition to the 15 percent standard contributions tax – bringing the tax take, so far, to 46.5 percent.
- Super Contributions that overshoot the non-concessional cap are taxed at 46.5 percent, bringing the possible tax total to 93 percent.
Excess contributions are, of course, highly topical at this time with many taxpayers now completing their 2009-10 tax returns, the Government’s halving of the cap on concessional contributions from 2009-10, and with the tax office’s recent updating of its online information regarding excess contributions. 1
The tax office can, in “special circumstances”, disregard excess contributions or reallocate them to another financial year. But the ATO warns: “It isn’t enough that your circumstances were unusual for you.”
And the ATO explains that unintentionally exceeding the caps, misunderstanding the law or facts, or being given incorrect information does not “amount to special circumstances on their own”.
Particularly as the amounts involved in excess contributions tax are potentially so large, any members who have overshot their caps might well consider gaining specialist professional advice.
Come and talk with Leenane Templeton Chartered Accountants & Financial planners call 02 4926 230
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Source: Robin Bowerman, Head of Retail, Vanguard Investments Australia (September 2010)