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Re: ABOVE CAP CONTRIBUTIONS TO SMSF

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Hy everyone! I accidently made 47000 $ contributions including employer contributions which is way too much above cap of 25 k. I am member and trustee. Please advise what is the best of option for me to remain compliant with SMSF , gain confessional contributions benefit. Can I reserve extra amount for 2019_20 towards confessional contributions. Please advise best option. 25 k I will be claiming towards deduction in PERSONAL return this year and next year
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First things first - don't forget that contributing more than the concessional contributions cap doesn't threaten the complying status of your fund.  It just means you have some tax issues to deal with.  As long as you were allowed to put money into super (eg you're under 65 or if over 65 meet the relevant work tests), the contribution is perfectly legal it might just create an excess over your contribution cap.

 

If you have put all that money in from your own funds (rather than an employer), you could treat the excess over $25k as a non-concessional (personal, not tax deductible) contribution.  In fact that's what will happen automatically if you don't claim the full amount as a tax deduction and it's all come from your own money.  These contributions don't count for the $25k cap, they count towards their own cap ($100k pa).  You might still have an excess here if for some reason you have a lower limit than $100k (eg if your Total Super Balance was >$1.6m at the previous 30 June, your cap for these is $nil).  If it's still an excess.

 

Either way, if you do have an excess it's not a disaster any more.  The consequences differ depending on whether it's an excess concessional contribution or non-concessional contribution but the end result is generally that the ATO allows you to take the money back out with some fairly modest tax / interest charges.  (If it's an excess concessional contribution you more or less end up paying tax as if the contribution had been paid to you personally and you get charged some interest on that and if it's an excess non-concessional contribution you get hit with some interest that gets taxed)

 

Most importantly : don't take it back out again until the ATO tell you that you have an excess.

 

You could consider reserving the excess if at least this amount was made in June.  But the ATO generally considers that if you've made the whole contribution in a single payment you can't reserve just part of it. (And of course you'd have to make sure the trustee hasn't automatically allocated it to you already).

1 REPLY 1

Most helpful response

Initiate

Replies 0

First things first - don't forget that contributing more than the concessional contributions cap doesn't threaten the complying status of your fund.  It just means you have some tax issues to deal with.  As long as you were allowed to put money into super (eg you're under 65 or if over 65 meet the relevant work tests), the contribution is perfectly legal it might just create an excess over your contribution cap.

 

If you have put all that money in from your own funds (rather than an employer), you could treat the excess over $25k as a non-concessional (personal, not tax deductible) contribution.  In fact that's what will happen automatically if you don't claim the full amount as a tax deduction and it's all come from your own money.  These contributions don't count for the $25k cap, they count towards their own cap ($100k pa).  You might still have an excess here if for some reason you have a lower limit than $100k (eg if your Total Super Balance was >$1.6m at the previous 30 June, your cap for these is $nil).  If it's still an excess.

 

Either way, if you do have an excess it's not a disaster any more.  The consequences differ depending on whether it's an excess concessional contribution or non-concessional contribution but the end result is generally that the ATO allows you to take the money back out with some fairly modest tax / interest charges.  (If it's an excess concessional contribution you more or less end up paying tax as if the contribution had been paid to you personally and you get charged some interest on that and if it's an excess non-concessional contribution you get hit with some interest that gets taxed)

 

Most importantly : don't take it back out again until the ATO tell you that you have an excess.

 

You could consider reserving the excess if at least this amount was made in June.  But the ATO generally considers that if you've made the whole contribution in a single payment you can't reserve just part of it. (And of course you'd have to make sure the trustee hasn't automatically allocated it to you already).