Exceeding the superannuation contributions cap could lead to individuals having to pay an inordinate tax liability, according to a specialist lawyer in the self-managed superannuation fund sector.
“It can give rise to essentially a situation where $1 going into a super fund could result in a liability of 93 cents to the government. So an effective rate of 93 per cent, which is a very harsh outcome,” DBA Lawyers’ Bryce Figot said.
The situation arises from the fact the government will now treat excess concessional contributions as non-concessional contributions as well.
It means that a single contribution can now be classified as two things, Figot said.
Furthermore, it means if an individual’s non-concessional contributions limit has already been breached and that person then breaches their concessional contributions, that final contribution that exceeded the limits could end up incurring tax on three levels.
“So one contribution could incur excess concessional contributions tax (46.5 per cent), excess non-concessional contributions tax (31.5 per cent) and just regular income tax (15 per cent). This totals up to 93 per cent,” Figot said.
Those people who had utilised the three-year bring forward provisions in relation to their non-concessional contributions were particularly vulnerable to being caught out in this manner, he said.
In addition, Figot said any individuals over the age of 50 who had put in place salary-sacrificing arrangements into their super fund in previous years, which meant their contributions were in excess of $50,000, needed to change that arrangement to accommodate the new limits as soon as possible if they hadn’t already done so.
