Individuals are allowed to make concessional contributions to their superannuation fund, which are taxed at a lower rate than their regular income. However, there are limits to how much can be contributed each financial year. If an individual exceeds this limit, they may be subject to an excess concessional contributions charge (ECCC).
The concessional contributions cap for the 2022-2023 financial year is $27,500. If an individual exceeds this cap, they will be required to pay additional tax on the excess amount at their marginal tax rate, in addition to the regular tax on concessional contributions.
The ECCC is designed to discourage individuals from using superannuation as a tax avoidance scheme, and to ensure that everyone is contributing to their superannuation fund in a fair and consistent manner.
If an individual exceeds the concessional contributions cap, they will receive a notice of assessment from the ATO outlining the amount of the excess contribution and the amount of the ECCC. The excess contribution can be withdrawn from the superannuation fund, although this may also be subject to additional tax.
It’s important to note that there are some circumstances where an individual may be able to avoid or reduce the ECCC, such as if they have unused concessional contributions from previous years or if they meet certain criteria for releasing excess contributions.
In summary, excess concessional contributions into super can have significant tax implications for individuals. It’s important to carefully monitor contributions to ensure that they remain within the concessional contributions cap.
If you require more assistance on this matter, please contact our office at 03 9973 5905.