Refund of Excess Contributions for SMSFs

As announced in the 2011/2012 Federal Budget, the Government proposed to introduce a one-off reprieve for taxpayers who exceed their concessional contribution cap.This reprieve will be in the form of the taxpayer requesting a refund of up to $10,000 of an excess concessional contribution, whereby the amount refunded would be taxed at their marginal tax rate.

Applies to contributions made from 1 July 2011;
– Available where excess concessional contributions are $10,000 or less for the year;
– Available only in the first year the individual has excess concessional contributions of $10,000 or less;
–  In eligible year, taxpayer will have the option of receiving refund of excess amount or have excess contributions in the normal way;

If taxpayer elects to receive a refund:
–  Amount refunded will be included in taxpayer’s assessable income and taxed at
marginal tax rate – the ATO will amend the taxpayer’s personal tax return;
– Super fund will be required to refund 85% of the amount directly to the ATO (85%
takes into consideration the contributions tax);
– ATO will then refund to the taxpayer, after deducting the personal tax payable. The
15% contributions tax is taken into consideration with respect to the amount of tax
payable by the individual and the refund due;
– If the taxpayer does not elect to use the provision, they will be unable to use it in any future years;
– If the taxpayer has any unused $10,000, the amount does not carry forward to future years;

If the taxpayer’s excess is greater than $10,000:
– They are ineligible to utilise the refund in that year (even up to $10,000);
– They will be ineligible for the refund in any future years;
– The taxpayer is unable to elect to receive a refund of part of the excess contributions – all or nothing;
– Taxpayer must lodge their income tax return within 12 months from the end of the relevant financial year of the contribution to be eligible (or such longer period as the Commissioner allows).