The problem of Excess Contributions - now finally solved!

It has taken about 7 years but the Government has finally solved the problem of excess superannuation contributions - both concessional and non-concessional.  Well, at least, for excess contributions made on or after 1 July 2013.

The problem of excess contributions arose because taxes at 31.5% and 46.5% respectively were imposed on excess concessional and excess non-concessional superannuation contributions. Further, excess concessional contributions were treated as non-concessional contributions which, in extreme cases, could have resulted in excess concessional contributions being taxed at an effective rate of 93%.

These taxes were required in order to “enforce” the contributions caps - which is the keystone of the current superannuation system.

However, excess contributions could arise from simple miscalculation of previous contributions, inadvertent triggering of 'the bring forward' of 3 years’ worth of non-concessional contributions, over-estimating assessable income and failing one of the many requirements for the small business capital gains concessions.