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 taxed at your marginal tax rate, with a 15% tax offset.
After you lodge your tax return, 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. That amount is added to your assessable income and taxed at your marginal tax rate. You're entitled to a 15% tax offset for the contributions tax you've already paid.
- Leave the extra: If you leave excess concessional contributions in your super, they are added to your assessable income and taxed at your marginal tax rate, and they count towards your non-concessional contributions. You're entitled to a 15% tax offset for the contributions tax you've already paid.
If you decide to leave the excess funds in your super account, you can elect to pay the additional tax yourself or you can send the ATO a release authority and they'll tell us to pay the excess from your account on your behalf. Any amounts we release for tax no longer count towards your non-concessional contribution cap.
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 after you lodge your tax return, 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.