Australia To Curb Excess Pension Contribution Tax

by Mary Swire, Tax-News.com, Hong Kong

18 August 2011

People who make excess concessional contributions to their superannuation funds may benefit from changes contained in a consultation paper released on August 17 by the Australian Assistant Treasurer and Minister for Financial Services and Superannuation.

Under the proposals, individuals who breach their concessional contributions caps by up to AUD10,000 (USD10,540) for the first time will be given the option to have the excess concessional contributions refunded to them.

"The Gillard government believes these changes will make the superannuation system fairer by giving individuals the option to take excess concessional contributions out of their superannuation fund and have them assessed at their marginal rate of tax, rather than incurring a potentially higher rate of excess contributions tax," Shorten said.

The excess contributions tax is designed to ensure that individuals adhere to the superannuation contributions caps, and is part of ensuring the substantial tax concessions for superannuation are sustainable and fair.

"While the Gillard government believes the high rate of excess contribution tax is important to encourage compliance with the contribution caps, individuals who breach their concessional contribution caps for the first time should be given a second chance," he said.

"We are mindful of the need to minimize the compliance cost on superannuation funds as well as the individual. The majority of the administrative processes will be handled by the Australian Taxation Office," Shorten said.

Excess concessional contributions are taxed at 31.5%, in addition to 15% when contributions are made to the fund. Concessional contributions include compulsory superannuation guarantee payments, salary sacrifice contributions, and other deductible contributions.

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