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Date of article: 29 June 2012
Last updated: 6 July 2012

Refund of excess concessional contributions

From 1 July 2011, a once in a life time option will be available to an individual to have the excess concessional contributions taken out of their superannuation fund and assessed in the individual’s income tax at their marginal rate rather than be assessed for Excess Contributions Tax. This measure only applies where an individual has made excess concessional contributions of $10,000 (not indexed) or less.

New law Current law
Eligible individuals will be given the option to have refunded excess concessional contributions of $10,000 or less made in 2011-12 financial year or a later year only if they do not have excess concessional contributions for an earlier financial year commencing on or after 1 July 2011.

Where the refund is chosen, excess contributions will effectively be assessable at the individual’s marginal tax rate.
Excess concessional contributions are subject to ECT at the rate of 31.5 per cent. This in addition to the 15 per cent withheld by the superannuation or RSA provider to provide for its income tax liabilities.
Source: Treasury paper: Refunded excess concessional contributions - explanatory material

How it will work

If the Commissioner of Taxation is satisfied the conditions are met to refund the excess concessional contributions, a notice of offer for a refund may issue to the individual prior to the making of an Excess Contributions Tax Assessment. The individual does not need to accept the offer and could allow the offer to lapse.

Where the individual accept the offer, a release authority is issued to the superannuation fund to release the amount of the excess concessional contributions (up to a maximum of 85% as the superannuation fund has a concessional contributions tax liability of 15%).

The Commissioner will include the amount of excess concessional contributions in the individual’s assessable income for the income year that corresponds with the financial year for the excess contributions. A refundable tax offset equal to 15 per cent of the excess concessional contribution will be allowed.

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