Super fund members saving for retirement should remain vigilant about the risk of excess contributions tax.
The amount of contributions an individual makes into their super each financial year is subject to contributions caps. If the contributions exceed the caps, the level of contributions above the cap is known as ‘excess contributions.’
The amount of the contributions cap and how much extra tax an individual needs to pay depends on their age and whether the contributions are concessional or non-concessional.
The law has recently changed to allow super fund members to withdraw the excess concessional contributions made from July 2013, rather than pay the excess tax. Withdrawn concessional contributions are taxed at a member’s marginal tax rate.
However, super fund members should keep in mind that the law regarding excess non-concessional contributions has not changed. These contributions are taxed at the highest marginal rate and cannot be withdrawn to avoid the excess contributions tax.