In the 2016–17 Budget, the Government announced a package of reforms designed to improve the sustainability, flexibility and integrity of the superannuation system. It set out a clear objective for superannuation: ‘to provide income in retirement to substitute or supplement the Age Pension’, which guided the superannuation changes.

Following extensive consultation, the Government decided to amend the package to provide greater support for Australians investing in their superannuation with the primary objective of providing an income in their retirement. The three changes announced by the Government on 15 September 2016 are to replace the lifetime non–concessional contributions cap with lower annual caps for non–concessional contributions, only available to people with balances less than $1.6 million; defer commencement of carry–forward arrangements for concessional contributions; and not proceed with measures to increase the flexibility for contributions for people aged 65–74.

Once legislated, most measures will take effect from 1 July 2017.

Introducing the transfer balance cap

What is it?

• From 1 July 2017, there will be a $1.6 million transfer balance cap on the total amount of accumulated superannuation an individual can transfer into the tax–free retirement phase. Subsequent earnings on balances in the retirement phase will not be capped or restricted.
• Savings beyond this can remain in an accumulation account (where earnings are taxed at 15 per cent) or outside the superannuation system.
• People already retired will have to bring their retirement phase balances under $1.6 million before 1 July 2017.
• The transfer balance cap will be indexed and will grow in line with CPI, meaning the cap will be around $1.7 million in 2020–21.

How does it work?

• Agnes, 62, retires on 1 November 2017. Her accumulated superannuation balance is $2 million. Agnes can transfer $1.6 million into a retirement phase account. The remaining $400,000 can remain in an accumulation account where earnings will be taxed at 15 per cent.
• Alternatively, Agnes may choose to remove all or part of the extra $400,000 from superannuation.
• Subsequent earnings on balances in the retirement phase will not be capped or restricted. The minimum drawdown will apply.

Who is affected?

• Less than one per cent of Australia’s superannuation account holders will be affected by the transfer balance cap.
• A balance of $1.6 million can support an income stream in retirement of around four times the level of the single Age Pension.
• The average balance for a 60–year old is expected to be $240,000 in 2017–

Reforming the taxation of concessional superannuation contributions

What is it?

• From 1 July 2017, the threshold at which high income earners pay additional contributions tax (Division 293) will be lowered from $300,000 to $250,000.
• The Government will also reduce the annual cap on concessional (before–tax) superannuation contributions to $25,000 (currently $30,000 under age 50; $35,000 for ages 50 and over).

How does it work?

• In 2017–18, Madeline earns $260,000 in salary and wages. In the same year she has concessional superannuation contributions of $30,000. Madeline’s fund will pay 15 per cent tax on these contributions. Madeline will pay an additional 15 per cent tax on $25,000 of the concessional contributions, resulting in these amounts effectively being taxed at 30 per cent.
• The $5,000 of contributions in excess of the cap will be treated as income taxed at her marginal rate. Madeline pays $1,600 income tax on her excess contribution. Madeline can choose to leave this excess in her superannuation (as a non–concessional contribution) or remove it from super.

Who is affected?

• Around 1 per cent of Australia’s superannuation account holders will be affected by the reduced Division 293 threshold.
• Around 3.5 per cent of Australia’s superannuation account holders will be affected by the lower annual concessional contributions cap.

Lowering the annual non–concessional contributions cap

What is it?

• From 1 July 2017, the Government will lower the annual non–concessional contributions cap to $100,000 and will introduce a new constraint such that individuals with a balance of more than $1.6 million will no longer be eligible to make non–concessional contributions. As is currently the case, individuals under age 65 will be eligible to bring forward 3 years of non–concessional contributions.
• This is in place of the $500,000 lifetime non–concessional contributions cap announced in the 2016–17 Budget.

How does it work?

• The $1.6 million eligibility threshold will be based on an individual’s balance as at 30 June the previous year. This means if the individual’s balance at the start of the financial year (the contribution year) is more than $1.6 million they will not be able to make any further non–concessional contributions. Individuals with balances close to $1.6 million will only be able to access the number of years of bring forward to take their balance up to $1.6 million.
• Transitional arrangements will apply. If an individual has not fully used their non–concessional bring forward before 1 July 2017, the remaining bring forward amount will be reassessed on 1 July 2017 to reflect the new annual caps.
• Individuals aged between 65 and 74will be eligible to make annual non–concessional contributions of $100,000 if they meet the work test (that is they work 40 hours within a 30 day period each income year). As per current arrangements, they will not be able to access the three year bring forward of contributions.

Who is affected?

• This measure is expected to affect less than 1 per cent of fund me

Introducing the Low Income Superannuation Tax Offset (LISTO)

What is it?

• From 1 July 2017, the Government will replace the Low Income Superannuation Contribution (LISC) with the Low Income Superannuation Tax Offset (LISTO).

How does it work?

• The LISTO effectively refunds the tax paid on concessional contributions by individuals with a taxable income of up to $37,000 – up to a cap of $500.
• This avoids the situation where low income earners pay more tax on contributions to superannuation than on their take home pay. 
• The amount of the LISTO that an individual is eligible for will be paid into the individual’s superannuation account.

Who is affected?

• It is estimated that around 3.1 million low income earners will benefit from the LISTO, including around 1.9 million women.

Improving access to concessional contributions

A factsheet is available on this topic.

What is it?

• From 1 July 2017, the Government will allow all individuals under the age of 65, and those aged 65 to 74 who meet the work test, to claim a tax deduction for personal contributions to eligible superannuation funds up to the concessional contributions cap.

How does it work?

• Currently, an income tax deduction for personal superannuation contributions is only available to people who earn less than 10 per cent of their income from salary or wages. This limits the ability for people in certain work arrangements to benefit from concessional contributions to their superannuation. Under the new arrangements, more individuals will be able to make concessional personal contributions up to the annual cap.
• Chris has started his own online merchandise business but continue to work part-time at an accounting firm earning $10,000 as his business is growing. His business earns $80,000 in his first year and he would like to contribute $15,000 of his $90,000 income to his superannuation. He currently could not claim a tax deduction for any personal contributions. Under the changes, Chris could claim a tax deduction for his $15,000 of superannuation contributions.

Who is affected?

• This reform will benefit individuals who are partially self–employed and partially wage and salary earners – such as self–employed contractors, individuals employed by small businesses or freelancers – and individuals whose employers do not offer salary sacrifice arrangements.
• Around 800,000 working Australians are expected to benefit from this measure

Allowing catch–up concessional contributions

What is it?

• From 1 July 2018, the Government will help people ‘catch–up’ their superannuation contributions by allowing individuals with account balances of $500,000 or less to rollover their unused concessional caps (for up to 5 years) to use if they have the capacity and choose to do so.

How does it work?

• Cassandra has a superannuation balance of $200,000 but did not make any concessional superannuation contributions in 2018–19 as she took time off work to care for her child. In 2019–20 she has the ability to contribute $50,000 into superannuation ($25,000 under the annual concessional cap and $25,000 from her un–used 2018–19 cap which has been rolled–over).

Who is affected?

• In 2019–20, this will help around 230,000 Australians who take time out of work, whose income varies considerably from one year to the next, or who find their circumstances have changed (e.g. mortgage payments or school fees have ceased) and are in a position to increase their contributions to superannuation.
• Individuals aged 65 to 74 who meet the work test will be eligible to access these new arrangements.

Extending the spouse tax offset

What is it?

• The Government will make the current spouse tax offset available to more couples so they can support each other in saving for retirement.

How does it work?

• Currently, a tax offset of up to $540 is available for individuals who make superannuation contributions to their spouses with incomes up to $10,800. The Government will allow more people to access the offset by extending eligibility to those whose recipient spouses earn up to $40,000.
• There are no changes to the current aged based contribution rules. The spouse receiving the contribution must be under age 70 and meet a work test if they are aged between 65 to 69.

Who is affected?

• Around 5,000 Australian families are expected to make use of this opportunity which will mostly benefit women who are more likely to be the lower income earner in families and have lower superannuation balances

Removing barriers to innovation in retirement income stream products

What is it?

• From 1 July 2017, the Government will extend the tax exemption on earnings in the retirement phase to products such as deferred lifetime annuities and group self–annuitisation products.

How does it work?

• Extending the tax exemption to deferred or pooled income stream products will encourage providers to offer a wider range of products. This will provide more flexibility and choice for retirees and help them to manage consumption and risk in retirement better – particularly longevity risk, to avoid people outliving their savings.

Who is affected?

• Retirees wanting more flexibility and choice in retirement products will benefit from this change.

Improving the integrity of transition to retirement income streams

What is it?

• The Government will remove the tax exempt status of income from assets supporting TRIS. These earnings will now be taxed concessionally at 15 per cent. Individuals will also no longer be allowed to treat certain superannuation income stream payments as a lump sum for tax purposes.
• This will help ensure that TRIS are fit for purpose and not used as a tax minimisation strategy.

How does it work?

• Sebastian is 57 years old and has reduced his working hours. As a result, his earnings fall from $80,000 to $60,000. Sebastian commences a TRIS that pays him $20,000 per year. Currently, Sebastian pays tax on his income ($60,000) but his superannuation fund pays no tax on the earnings on assets supporting his TRIS. Under the Government’s changes, the earnings on Sebastian’s superannuation assets supporting TRIS will be taxed at 15 per cent.
• The tax treatment of income streams in the hands of the individual will not be changed. For most individuals this will mean they are tax free, or taxed at the individual’s marginal tax rate less a 15 per cent offset.

Who is affected?

Around 110,000 people will be affected by these changes

There are multiple sharing economy websites and apps operating in Australia. The people who provide goods or services through any of them need to consider how GST and income tax apply to their earnings.

What is the sharing economy?

The sharing economy connects buyers (users) and sellers (providers) through a facilitator who usually operates an app or a website.

Popular sharing economy services include:

• renting out a room or a whole house or unit for a short-time basis eg Airbnb
• providing taxi travel services (called ‘ride-sourcing’) for a fare (eg Uber)
• providing personal services, such as creative or professional services like graphic design, creating websites, or odd jobs like deliveries and furniture assembly
• renting out a car parking space.
• Renting out a room is rental income
• Money your clients earn from renting out a room in their house is rental income. This applies to rooms rented by traditional means or through a sharing economy website or app.
• Your client can only claim expenses related to the part of the house they rent out and you need to apportion the expenses accordingly. However, they can claim 100% of any fees or commissions charged by the rental facilitator or administrator.
• Capital gains tax may also apply if they sell property used to generate rental income.

For GST purposes, the word taxi means a car (vehicle) made available for public hire that is used to transport passengers for fares.

State and territory laws regulating transportation of passengers contain specific definitions of the term taxi. It is possible for a vehicle to be a taxi for GST purposes, but not for state and territory regulatory purposes.

This information clarifies how the tax laws we administer apply to ride-sourcing.

We express no view about whether ride-sourcing vehicles are taxis within the state and territory specific definitions, or on the legality of ride-sourcing arrangements.

What is ride-sourcing?

Ride-sourcing is an ongoing arrangement where:

• you (a driver) make a car available for public hire
• a passenger uses, for example, a website or smart phone app provided by a third party (facilitator) to request a ride
• you use the car to transport the passenger for payment (a fare) with a view to profit.

Ride-sourcing arrangements can be enabled by a technology platform maintained by a third-party facilitator. Typically, a website or mobile device application is used to facilitate a transaction between a driver and a passenger.

Ride-sourcing is one example of collaborative consumption in the sharing economy.

Withholding payments

New rules will apply to sales of taxable Australian real property with a market value of $2 million or more from I July 2016.

A 10% non-final withholding tax will be incurred for all contracts entered into on or after 1 July 2016, unless a clearance certificate or variation certificate is obtained.

If you are selling real property with a market value of $2 million or more and are:

• an Australian resident vendor, you can avoid the 10% withholding by providing a clearance certificate to the purchaser prior to settlement
• a foreign resident vendor, you may apply for a variation of the withholding.

You may claim a credit for the withholding amount paid to the ATO against the final tax assessed in the vendor’s income tax return.

Purchasers must pay the amount withheld at settlement to the ATO.

Foreign resident capital gains withholding payments

A new withholding regime will apply to contracts entered into on or after 1 July 2016.

Broadly, where a foreign resident disposes of certain taxable Australian property, the purchaser will be required to withhold 10% of the purchase price*and pay that amount to the Australian Taxation Office (ATO).

* Note: the legislation specifies that the 10% withholding is actually on the “first element of the cost base”. However, as purchase price is understood by vendors and purchasers, and in many instances will equate with the “first element of the cost base”, we have used the term purchase price for simplicity.

While the withholding regime will protect the integrity of the foreign resident CGT regime, it also applies where the disposal of such taxable Australian property by a foreign resident generates gains on revenue account and, as a result, is taxable as ordinary income, rather than as a capital gain.

Division 7A – as any client with a private company would know – is a key compliance area of the tax law. Complex rules and concepts overshadow the simple policy objective behind the operation of this Division – which, broadly, is to prevent the indefinite use of company profits by shareholders without incurring marginal tax rates.

Even the Government recognises that the complexity of Division 7A extends well beyond the mischief sought to be addressed; three years ago, the Board of Taxation was commissioned with the task of reviewing the rules and recommending simpler concepts that could achieve the policy objective.

Changes to simplify the rules, however, still seem to be some way off – despite the release in June 2015 by the Government of the Board’s report of November 2014, we appear to be no closer to a final decision as to how the provisions should be shaped. So, we must continue to monitor and apply them as they stand.

You may ask yourself, why are we so careful to ensure that your private company is compliant with Division 7A particularly when it comes to making written loan agreements and ensuring loan repayments are made back to the company. Our answer comes partly from recent experiences with comprehensive risk reviews conducted by the Taxation Office into taxpayers’ affairs – whenever the Taxation Office approaches a taxpayer for such a review, Division 7A questions and documentation requests are invariably included.

One of the Division 7A questions that we sometimes face is whether a loan by a private company to a partnership, even where one of the partners may be another private company, can be subject to the rules. Such an arrangement is a common structure used, for example, in relation to property developments carried out in the name of the partnership. Our comment has always been that Division 7A could very well apply and care should be taken to comply with its requirements.

Two recent Administrative Appeals Tribunal (“AAT”) decisions would appear to support our position, and they represent a timely reminder of just how complex, and perhaps unjust, Division 7A can be. Each case involved a loan by a private company to a “tax law” partnership – that is, a partnership that was not carrying on a business but nevertheless was an arrangement where the partners were in receipt of income jointly – and the AAT held that Division 7A did apply. Consequently, the partners (which in one case included a private company) were to be assessed on a share of the loan provided by the private company as though it were a deemed unfranked dividend.

So, the lesson from these decisions is that if a private company makes a loan to a partnership but does not execute a written loan agreement with the partnership or the partnership does not make minimum annual repayments of the loan, the provisions of Division 7A are likely to apply – with adverse tax consequences.

Until such time as the Government, as promised, redesigns the Division 7A rules to accord more practical business sense, any loans or payments made by private companies to shareholders or to non-corporate borrowers should be carefully reviewed.

Tax Audit Insurance provides cost effective protection and peace of mind against professional fees incurred should the ATO or other Australian government agency conduct a random review, investigation or tax audit.
 
The cover is provided through Accountancy Insurance, who are partners with over 2,000 accounting firms nationwide, and are acknowledged as continually setting the benchmark in Tax Audit Insurance. The cover is underwritten by Vero Insurance. With 180 years’ heritage and the size, strength and scale of the Suncorp Group behind it, Vero is the preferred name in Australian general insurance.

The following official enquiries, reviews, investigations and audits are covered by Audit Shield:

• Income, Land and Payroll Tax
• BAS/GST Compliance
• Workers Compensation / WorkCover
• Superannuation Guarantee and Compliance
• Self -Managed Superannuation Funds
• FBT
• Record Keeping
• Research and Development Grants (ATO Only)
• Stamp Duty

The cover extends to professional fees in responding to, or representing you, in a review, audit or investigation. These include not only our fees, but also legal fees, bookkeeping fees and specialist professional advisor fees (e.g. quantity surveyors, valuers, actuaries, etc).

As a guide, individuals and businesses with a turnover of less than $1m would enjoy cover of $10,000. Businesses turning over between $1m and $10m would enjoy cover of $20,000.

The cost varies depending on whether you are an individual , self-managed super fund or a business.

As a guide, the premium is $95 per year for an individual, and $405 per year for a business with a turnover of between $500,000 and $1 million.
  
The premium is fully tax deductible.

In the case of business cover, associated individuals and family entities can be covered by the same policy – for no extra cost.  

The main exclusions from the policy are:

• The review or audit was underway before coverage began.
• The return that is the subject of scrutiny was prepared fraudulently;
• The ATO impose a final culpability penalty of 75% or more (typically, this is in cases of recklessness or deliberate evasion);
• There are fees associated with a criminal prosecution; 
• Costs are incurred for work which should have been done prior to the audit or review taking place;
• Matters in relation to the application, assessment or review of government benefits or entitlements.

Contact Jenny Geelan of our office on (02) 9477 3334 for a no obligation quote that has been tailored to your specific circumstances.

The SuperStream standard is part of the government’s Super Reform package. It will provide a consistent, reliable electronic method of transacting linked data and payments for superannuation. The goal is to improve the efficiency of the superannuation system, to improve the timeliness of processing of rollovers and contributions, and reduce the number of lost accounts and unclaimed monies.

What is SuperStream?

SuperStream is a government reform aimed at improving the efficiency of the superannuation system.

Under SuperStream, employers must make super contributions on behalf of their employees by submitting data and payments electronically in a consistent and simplified manner.

How will SuperStream benefit employers?

These changes have a range of potential benefits for employers, including:

• the opportunity to use a single channel when dealing with super funds, regardless of how many funds your employees contribute to
• less time spent dealing with employee data issues and fund queries
• greater automation and reduced cost of processing contributions and payments
• more timely flow of information and money in meeting your superannuation obligations.

Who does SuperStream apply to?

SuperStream is mandatory for all employers making super contributions, APRA-regulated super funds, and self-managed superannuation funds (SMSFs) receiving contributions.

Why is SuperStream being introduced?

The main purpose of SuperStream is to ensure employer contributions are paid in a consistent, timely and efficient manner to a member’s account. The change also removes many of the complexities employers currently face as a result of funds being able to set up different arrangements for accepting contributions (due to the lack of common standard).

When do I have to start using SuperStream?

20 or more employees: If you have 20 or more employees (medium to large employer) SuperStream started from 1 July 2014. From that date, employers needed to start implementing SuperStream and have until 30 June 2015 to meet the SuperStream requirements when sending superannuation contributions on behalf of employees.1

We are facilitating the implementation of SuperStream for employer contributions by coordinating the introduction of compliant SuperStream solutions. You will need to work with your service provider to decide when best suits to make the change.

19 or fewer employees: If you have 19 or fewer employees (small employer), SuperStream starts from 1 July 2015. You have until 30 June 2016 to meet the SuperStream requirements when sending superannuation contributions on behalf of your employees.2

Note: You can voluntarily adopt the SuperStream from 1 July 2014 if you are ready, and many solution providers may offer to assist you to do this from this date.

What are my options for meeting SuperStream?

Every business is different, so there’s no ‘one size fits all’ approach to adopting SuperStream.

Employers have options for meeting SuperStream – either using software that conforms to SuperStream; or using a service provider who can meet SuperStream on your behalf. We recommend that you start investigating your options now.

Your options may include:

• upgrading your payroll software
• using an outsourced payroll function or other service provider
• using a commercial clearing house or the free Small Business Superannuation Clearing House (19 or fewer employees).

Your default fund may also have its own electronic channel that can be used during the transitional period up to 30 June 2016. This fund can provide you with details about how to comply with the SuperStream using their preferred facilities.

Do I need to collect additional information to make contributions using SuperStream?

Yes. To support contributions being made using the SuperStream standard employers will need to collect some new data that will be included in their payroll file to facilitate electronic processing.

Employers will need to collect the following information:

• unique superannuation identifier (USI) for APRA-regulated funds
• ABN for SMSF funds
• bank account details
• electronic service address.

For existing employees, simple processes will be implemented to enable employers to obtain this information. This may include receiving information:

• direct from your
• through the Fund Validation Service
• via employees who have elected a choice fund (such as a self-managed super fund)
• through a clearing house.

For new employees, the choice of super fund form will be updated to include this information.

Your HR or payroll provider will provide you with options to support the capture of this information whether this is updating your existing payroll file or storing this information until an update is made available.

To support your readiness for SuperStream you should contact your HR/payroll solution provider to understand their plans.

What information do I need to collect from SMSFs?

If you have an employee who is a member of a SMSF, they must provide you with details about their fund which enables you to deal with them electronically, so supporting your implementation of SuperStream.

This information includes the ABN of the SMSF, their bank account details, and an electronic service address. This information will enable you to send contributions and payments electronically in the same way for all employees.

Typically, this information should be updated into your payroll records (or provided to an agent who may assist you with contributions). You will generally only need to do this once. As new employees join your business, they will provide this information as a matter of course when they complete a choice of fund form.

To simplify this process on your first time through, it is suggested that you notify employees of your intended date for implementing SuperStream and request this information to be forwarded by the employee within a reasonable time – for example, within 28 days of a reminder. We have already written to SMSF trustees associated with large and medium employers informing them of their obligation to provide this information to their employer, and a similar letter will be issued to remaining SMSF trustees shortly.

Your employee can communicate this information in a variety of ways (paper, email, or direct update to your payroll/HR system), provided the minimum data is provided and is valid or complete.

What if I haven’t got all the SMSF details I need?

If you do not receive the SMSF’s details by the date you have nominated for responding – and provided a reasonable response period has been given – you may ask your employee to complete a standard choice form and return this form to you within 28 days.

The current standard choice form has been updated to contain fields which include the required mandatory information to support SuperStream (including the ABN of the SMSF, their bank account details, and an electronic service address). An existing employee may have previously completed such a form, their selection of choice must now be updated with the new information.

If this information is not provided, your employee will be deemed as not having provided sufficient details for the choice fund to be accepted, and you may redirect their contributions to the default fund of the employer.

An employer in this situation may, nevertheless, decide to give an employee more time to respond and continue paying by cheque or some other non-conforming method. This should only be considered as a temporary measure because it is likely to erode the benefits employers should gain from the overall shift to a consistent, electronic method for all contributions.

Remember that large and medium employers need to be SuperStream compliant by no later than 30 June 2015, so the lead time for notifying your employees with SMSFs is shortening.

The net medical expenses tax offset is being phased out. Changes this year mean you need to check your eligibility before claiming the offset in your tax return.

Net medical expenses are total medical expenses less refunds from Medicare or a private health insurer which you, or someone else, received or are entitled to receive.

“If you received the offset in your 2013-14 income tax assessment, there is no change to the types of net medical expenses you can claim.

f you did not receive the offset in your 2013-14 income tax assessment, you can only claim net medical expenses relating to disability aids, attendant care or aged care”.

If you are eligible, an income test still applies based on your family status and adjusted taxable income.

For the 2013–14 financial year onwards, excess concessional contributions are no longer subject to excess contributions tax. If your contributions exceed the cap, the amount will now be included in your assessable income and taxed at your marginal tax rate, rather than the excess concessional contributions tax rate of 31.5%.

You will also have to pay the excess concessional contributions (ECC) charge on the increase in your tax liability. This charge is applied to recognise that the tax on excess concessional contributions is collected later than normal income tax.

To reduce your tax liability, the tax office will apply a 15% tax offset to account for the contributions tax that has already been paid by your super fund provider.

You may elect to withdraw up to 85% of your excess concessional contributions from your superannuation fund to help pay your income tax assessment when you have excess concessional contributions. Any excess concessional contributions withdrawn from your fund will also no longer count towards your non-concessional contributions cap.

Example: Excess concessional contributions

During the 2013–14 financial year, Mary (aged 51), salary sacrificed money to super, and her total contributions were $35,000. Because Mary’s concessional cap was $25,000, Mary’s excess concessional contributions total $10,000.

Mary lodges her income tax return, and has taxable income of $70,000. The ATO then includes the $10,000 of excess concessional contributions, which increases Mary’s taxable income to $80,000. Mary will be assessed at her effective marginal tax rate of 34% (including 1.5% Medicare levy).

The additional tax payable as a result of the excess concessional contributions is $3,400.

Mary is now entitled to a tax offset equal to 15% of her excess concessional contributions, decreasing her tax liability by $1,500.

With the inclusion of the excess concessional contributions (ECC), Mary’s tax liability has increased by $1,900 ($3,400 – $1,500), and the ECC charge will be applied to this amount.

Mary doesn’t have to do anything; we will notify her by sending the following:

• an income tax notice of assessment
• an excess concessional contributions determination
• an excess concessional contributions fact sheet
• an excess concessional contributions election form.

Mary has 21 days to pay her account. She decides to take up the option to withdraw some of her excess concessional contributions from one of her super funds to help pay her tax debt.

Mary completes the excess concessional contributions election form and decides to release the full amount of $8,500. She sends the election form to the ATO, which then issues a release authority to Mary’s nominated fund to have the money released to the ATO. Upon receipt of the money, the ATO offsets the amount against any debts Mary has, before refunding her the balance.

(End of example)

Including ECC in your assessable income may impact your pay as you go instalments. For more information, refer to PAYG instalments.

If you have excess concessional contributions reported to us after you have lodged your income tax return, we will amend your income tax return to include the ECC. We will send you an income tax notice of amended assessment, excess concessional contributions determination and fact sheet, and excess concessional contributions election form.

For the years before 1 July 2013, if we identify you have ECC, we will write to you so you can check that the information used in our calculation is correct. If this information is correct, you will be assessed to pay excess contributions tax.

• For the 2011–12 and 2012–13 financial years only, if you have exceeded your concessional (before tax) contributions cap by $10,000 or less, you may receive a once-only offer to have the ECC refunded to you and assessed at your marginal tax rate, rather than pay excess contributions tax. See Offer to have excess concessional contributions refunded for the 2011-12 and 2012-13 years only.

Excess concessional (before-tax) contributions charge

From 1 July 2013, the excess concessional contributions (ECC) charge is applied to the additional income tax liability arising as a result of having ECC included in your income tax return. The intent of the ECC charge is to acknowledge that the tax is collected later than normal income tax. The charge is payable for the year a person makes ECC. If you don’t pay the ECC charge by the due date, general interest charge (GIC) may apply.

The salary sacrificing or “concessional” cap for superannuation is to be increased to $30,000 for the 2014-15 year, up from the current amount of $25,000.

The cap is the limit on how much can be salary sacrificed into super in a financial year and includes the compulsory super paid by employers.

The non-concessional (after tax) cap will increase to $180,000 from July 1, up from the current amount of $150,000. The non-concessional cap is maintained at six times the concessional cap.

For those who meet certain age qualifications the cap has already been raised. Those aged 60 and over in the current financial year have a salary sacrifice cap of $35,000 and this higher cap will be expanded from the 2014-15 financial year to cover everyone over 50.

Salary sacrifice caps include the 9.25 per cent compulsory superannuation guarantee, which the government intends to increase, after a two-year pause at 9.25 per cent (for 2014-15 and 2015-16) after which it progressively increases to 12 per cent by 2021.

Excess contributions tax is levied on contributions in excess of the caps. Excess concessional contributions are automatically included by the Tax Office in an individual’s assessable income. Those who make excess concessional contributions are taxed on the contributions at their marginal income tax rate.