Excess nonconcessional contributions – what are they?

pink piggy bank standing on some coins with australian twenty dollar note sticking out from slot indicating that excess nonconcessional contributions refundableExcess nonconcessional contributions are undeducted amounts contributed to a superannuation account. (Undeducted simply means that these contributions are being made from either tax paid, or from tax-free funds.) Superannuation nonconcessional contribution ‘caps’ have been in place for some time now and for the 2015 financial year, were increased applying the indexation measure from an earlier change to legislation in the superannuation environment.

Update alert: 
In its 2016 Federal Budget, the government introduced a revision to the contributions ‘cap’ applicable each to concessional and nonconcessional superannuation contributions. The matter was left in limbo, until the outcome of the double dissolution election to be held on July 2, 2016 was known. Considering the several changes that have been made to superannuation contribution provisions since this matter was first announced we will publish a new article on the topic and provide a link to that as soon as it is prepared.   Continuum Financial Planners Pty Ltd

Refund or be taxed – how will it work?

In its 2014 Federal Budget, the Government announced that superannuation members who exceed their nonconcessional contribution cap will be able to withdraw the excess contribution, plus any associated earnings, without having excess contributions tax levied on the amount.

On withdrawal, the related earnings will be taxed at the member’s personal marginal tax rate. Alternatively, if the member in this situation chooses to retain the excess nonconcessional contribution within the fund, the excess will continue to be taxed at the scheduled top marginal tax rate payable by individuals.

Excess nonconcessional contribution – or an alternative strategy?

The experienced advisers at Continuum Financial Planners Pty Ltd have wealth management strategies available to accumulate wealth in a structure that will provide substantial asset protection and whilst not taxed as beneficially as superannuation accounts, are tax effective in most cases. Some advantages of such an investment include:

  • only incidental age-limit access (more liberal than the superannuation ‘condition of release’);
  • can be excluded from estate assets; and
  • isolates investment funds from being taxed at an individual’s high marginal tax rate.

If you would like to know more about making nonconcessional contributions, or about the alternative strategies that we can offer, please call our office (on 07-34213456) or complete the online Contact Us form and we will make prompt contact to help satisfy your enquiry.