What happens if you go over the contribution caps depends on whether your contributions are before-tax or after-tax.
If you go over the concessional (before-tax) contribution cap
Any contributions you make over your before-tax limit are included in your taxable income and taxed at your marginal tax rate, with a 15% tax offset.
The Australian Taxation Office (ATO) will let you know you've exceeded the cap, and explain your options:
- Withdraw the extra: You can withdraw up to 85% of your excess contributions from your account.
- Leave the extra: If you leave excess concessional contributions in your super, they will count towards your non-concessional contributions.
If you go over the non-concessional (after-tax) contribution cap
If you go over your after-tax contributions limit, the ATO will send you details and explain your options:
- Withdraw the extra: You can withdraw all excess after-tax contributions and up to 85% of the associated earnings calculated by the ATO.
If you do this, you won't be taxed on the contributions, but the ATO-calculated earnings are included in your income tax assessment. You're entitled to a 15% tax offset on the ATO-calculated earnings.
- Leave the extra: If you choose to leave the excess contributions in your account, you will be taxed at the highest marginal tax rate of 47%.
If you decide to leave the excess in your super, the ATO will send a release authority to us, instructing us to pay the additional tax from your account on your behalf.