Draft legislation allowing individuals the option of withdrawing superannuation contributions in excess of the non-concessional contribution cap has been released.

You can access this withdrawal offer if your excess contributions were made after 1 July 2013. Under the proposed legislation you can also elect to release an ‘associated earnings amount’. This is the amount made on those excess contributions invested into the super fund.

You can read the draft legislation here.

The reforms propose to deliver the Government’s commitment to create a system that covers unintentional breaches of the contribution caps, and their associated penalties.

What will this mean for me?

The Australian Taxation Office (ATO) explains how individuals can “choose to release up to 85% of their excess contributions from their fund by completing an election form”. The ATO will then issue the nominated super fund with an excess concessional contributions release authority. Each super fund that is nominated will be required to pay the elected amount and return the release authority statement to the ATO within 7 days to avoid administration penalties.

The released amount will defined as a non-assessable and non-exempt benefit payment to the member.

The ATO has said it is likely that they will begin issuing tax notice of assessments containing excess concessional contribution amounts to those it applies to, in October and November.

Example

Anne exceeded her non-concessional contribution cap by $50,000 in 2013/14, and her associated earnings amount from it sitting in her super fund equalled $7,000.

Anne can request the release of the entire amount from her super ($57,000) by completing the appropriate election form and will receive this non-assessable, non-exempt amount. But, it is important to note that the associated earnings ($7,000) will be counted towards Anne’s assessable income.