On the website of the Inspector General of Taxation (IGT), a review in regards to the compliance required for excess contributions tax is being posted. Agreed that the concessional contributions corner a big pie of discussions but no one can deny that the exorbitant tax on non-concessional contribution is also a point of debate.
Top marginal tax rate levied
We know that in case of breach of upper cap on non-concessional contributions, we are levied tax at top marginal tax rate. This can hurt! The government proposed in the Federal budget that any excess contribution made will be returned from the 1st July 2013 onwards. Earnings made via the contributions shall also be returned and construed as assessable income (taxable at highest marginal tax rate).
Recommendations from IGT
In the event of failure to return the excess contribution, taxation at marginal tax rate will apply. Policy recommendation made in the IGT discusses ATO’s approach to non-concessional contributions. Altogether the 10 recommendations made aim to streamline excess contributions tax. The plan is to impart the right kind of information to the SMSF members so that they are more diligent about the contributions cap.
You can go through the review here.
Let us understand it this way. The upper ceiling for after-tax contribution is $150,000. Going overboard can attract a penalty of $46.5%. What does the statement imply? Simple! Non-compliance can hurt whether it is about ‘concessional’ or ‘non-concessional’.
What I liked reading most is that policy recommendations, among other things, aim at increasing knowledge about compliance so that lessor breaches are made. While on it, a word is due on ATO’s initiative of a free webinar. It is another welcome step in the direction of knowledge-imparting.
Feel free to get in touch with us at SMSF Hub if you are in dark about anything associated with your Super.