A proposed law would allow a member of a superannuation fund (including a Self-Managed Superannuation Fund) who has breached the concessional contributions cap by up to $10,000 to ask the trustees of their fund to refund the excess for their first breach.
The law is part of the federal government's ongoing Stronger Super reforms.
The ATO's recent Excess Contributions Tax Learner Guide may provide a useful refresher on understanding contribution caps.Alastair Keith
The proposed law is in the Superannuation Legislation Amendment (Stronger Super and Other Measures) Bill (the Bill).
The Bill seeks to vary superannuation and income tax legislation to:
The Bill proposes to amend superannuation law so that a member of a superannuation fund who beaches the concessional contributions cap by up to $10,000 can, for their first breach, ask the trustees of their superannuation fund to refund the excess.
Currently, if a member breaches the concessional contributions cap, then:
A member's contributions to their super funds are subject to caps. If the amount the member contributes exceeds the relevant cap during a given financial year, then the extra amount is subject to extra tax. Caps apply to both 'concessional contributions' and 'non-concessional contributions'. 'Concessional contributions' include compulsory superannuation payments, salary sacrificed amounts and voluntary contributions by employers.
A summary of current contribution caps is available on the ATO website here.
Treasury has not yet published any draft provisions about how the refund payments will work.
Parliament's objective in proposing these amendments is to:
If the Bill becomes law, then members will be able to require their fund trustees to refund excess contributions of less than $10,000. How requests must be made – and what obligations trustees will face in complying with such requests – will become clear when the Bill is finalised (we hope).
Given these potential changes, trustees and their advisers will need to be aware of the following:
Maddocks will monitor the Bill and update you through ClearLaw.
The ATO has published an Excess Contributions Tax Learner Guide to help financial planners understand contribution cap issues. However, the ATO states that the Guide must not be used as a legislative support tool in the workplace, but is a useful reminder of relevant issues.
More information on Stronger Super is available here.
For questions or more information about the above article, please call Maddocks in Melbourne (03 9288 0555) and ask for a member of the Superannuation Team.
You can read other articles concerning superannuation and SMSFs here.
Download a checklist of the information you need to order a document package.
 Superannuation Legislation Amendment (Stronger Super and Other Measures) Bill.
Julian Smith is a partner in the Maddocks Commercial team.
Julian advises extensively in the following areas:
Julian advises clients ranging from public companies servicing the wholesale financial services market to high net worth individuals and their advisers.
Julian has been with Maddocks since undertaking articles in 2001.
The legal information and commentary on this site is general only. Documents ordered through Cleardocs affect the user's legal rights and liabilities. To assess their suitability for the user, legal accounting and financial advice must be obtained.
For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of their team.