A reform is to be undertaken of the taxation of excess superannuation contributions. Some taxpayers are paying contributions at a rate that is considered excessive by many people in Australia. Currently non-concessional contributions exceeding the relevant cap are subject to tax at the highest rate. As these contributions are made from income that has already been taxed the effective rate is very high.
Following last year’s election the new government has drafted changes to this system as part of the Budget proposals. This will align the treatment of concessional and non-concessional contributions and if the non-concessional contributions cap is breached the penalty will not be out of proportion.
With effect from 1 July 2013 contributions that are in excess of the non-concessional cap can be withdrawn, with any associated income. Under this option tax will be payable and related earnings are taxed at the normal marginal tax rate for that taxpayer. If the excess contributions remain in the fund they will still be taxed at the top marginal rate.
