What happens if I exceed the $27,500 p.a. concessional contributions limit to superannuation in Australia?

In Australia, if you exceed the contributions cap of $27,500 per year for concessional (before-tax) contributions, you will be subject to an excess concessional contributions (ECC) charge. The charge is calculated as the excess amount, multiplied by your marginal tax rate plus an interest charge. Any amount over the cap will be included in your assessable income and taxed at your marginal tax rate. You may also be liable to pay an interest charge on the excess amount. If the excess is not withdrawn or released from the superannuation fund, the ATO may issue an assessment for the ECC charge.

How is the Excess Concessional contributions (ECC) charge calculated?

In Australia, if you exceed the contributions cap of $27,500 per year for concessional (before-tax) contributions, you will be subject to an excess concessional contributions (ECC) charge. The charge is calculated as follows:

1. Your excess concessional contributions (the amount over the cap) will be included in your assessable income for the financial year in which they were made.
2. You will be liable to pay tax on the excess amount at your marginal tax rate.
3. An interest charge will be applied to the amount of the ECC charge
4. If the excess is not withdrawn or released from the superannuation fund, the Australian Taxation Office (ATO) may issue an assessment for the ECC charge.
5. The assessment will be sent to the superannuation fund and they will deduct the charge from your superannuation account balance and pay it to the ATO.
6. You will receive a notice of assessment from the ATO outlining the amount of the ECC charge, the tax and interest that apply, and the date it must be paid by.

It is important to note that if your contributions exceed the non-concessional contributions cap of $100,000 per year, you will be subject to a different set of penalties and tax rules.

To discuss how to minimise your tax, call your Sunshine Coast Financial Planner, Mike Beal, on 0409 799 279.