Introduction: Concessional Contributions (CC) refer to the pre-tax contributions made by an individual to their superannuation account, including employer contributions and salary sacrifice contributions. The Australian Taxation Office (ATO) has set limits on how much an individual can contribute to their superannuation account each year. When an individual exceeds these limits, they may be subject to excess CC tax. In this blog post, we will take a closer look at the CC Maximum Cap, including what it is, how it works, and why it is important. We’ll also explore the options available to members once they have exceeded their CC Cap.
Understanding the Excess Concessional Contributions Tax Regime: The CC Cap for the 2022-23 financial year is $27,500. If an individual contributes more than this amount to their superannuation account, they may be subject to excess CC tax. The tax rate for excess concessional contributions is 15%, in addition to the individual’s marginal tax rate. The ATO will notify the individual if they have exceeded their cap and provide them with a notice of assessment for the excess contributions tax.
Broadly, any such increase to an individual’s CC Cap is limited to the sum of any previously unused CC Cap amounts that have been accrued and carried forward on a rolling five-year basis.
To access unused CC Cap amounts from previous years, an individual must have: –
- A Total Superannuation Balance (TSB) of less than $500,000 (unindexed) on 30 June of the previous financial year, and
- Unused CC Cap amounts from one or more of the previous five financial years (commencing in the 2018-19 year). Where an individual exceeds their standard CC Cap, the ATO will automatically assess whether they are eligible to access any unused CC Cap amounts carried forward from the previous five years.
Example:
During the 2022-23 financial year, Alistair will receive $35,000 of CC. At first glance, it appears that he will exceed the $27,500 CC Cap by $7,500. However, upon further investigation, it appears that Alistair has not always fully utilised his CC Cap in recent years. His contribution history is outlined in the table below:
| Financial Year |
Concessional contributions made |
CC Cap |
Unused CC Cap |
| 2018-19 | $22,500 | $25,000 | $2500 |
| 2019-20 | $25,000 | $25,000 | N/A |
| 2020-21 | $22,500 | $25,000 | $2500 |
| 2021-22 | $22,500 | $27,500 | $5000 |
Alistair’s contribution history highlights that he has $10,000 of unused CC Cap amounts that have accrued since 1 July 2018. Fortunately for Alistair, his Total Superannuation Balance (TSB) at 30 June 2022 was $450,000. As his TSB was less than $500,000 on 30 June of the previous financial year, he will be eligible to access this accrued unused CC Cap amount.
Exceeding the cap
Individuals who exceed their CC Cap will receive an Excess Concessional Contribution (ECC) determination from the ATO. This determination will state the amount of excess contributions that have been included in their assessable income and outline the actions that must be taken.
- Leave the excess concessional contribution(s) in super. (Treat as NCC or additional tax liability must be paid personally)
- Elect for the excess concessional contributions to be released from super.( up to 85% of the excess CCs released)
Conclusion: The excess contributions tax regime for excess concessional contributions has undergone several changes over time. Eligible individuals are now able to increase their personal CC by accessing unused CC Cap amounts from previous years, and members have the freedom to choose how they handle any excess concessional contributions. As a result, the current regime is much less stringent than the ones we had to deal with in the past.
Credits:
Sundar
SMSF Team
