The refund option for excess superannuation concessional contributions up to $10,000 has now been passed as law.

As a result, eligible individuals will have a once-only option to have 85% of their excess concessional contributions up to $10,000 released from their superannuation fund to the ATO and assessed as income for the financial year in which the contribution was made.  The individual will effectively pay tax on refunded excess concessional contributions at their marginal tax rate (less a 15% refundable tax offset for the tax already paid in the fund on the contributions).

The following eligibility criteria applies:

  • only available for excess concessional contributions in respect of 2011-12 or later years;
  • only available for breaches of $10,000 or less;
  • only available once – in the first year;
  • the individual must lodge an income tax return for the relevant year, within 12 months of year end.

The ATO Commissioner will provide eligible individuals with a notice of offer and, if accepted by the taxpayer, the Commissioner then provides the Fund with a compulsory release authority.  If a Fund pays an amount to the Commissioner in accordance with a release authority, the taxpayer is entitled to a tax credit equal to that amount.

There are certain criteria in which a superannuation fund will not be required to comply with such a compulsory release, such as if the interest is supporting a superannuation income stream (pension).  In these cases, the taxpayer will be denied access to a tax credit, however the excess contributions will remain in the taxpayer’s assessable income.

Careful consideration must therefore be made prior to commencing any new pension.  To discuss this further, please contact The SMSF Accountant.