The superannuation concessional contribution limit for all adult Australians is now $25,000 per annum. This includes the minimum 9% employer superannuation guarantee (SG) contributions and any salary sacrifice arrangements you may have in place.

Of those people aged 50 and above, it concerns me that you may not have adjusted your salary sacrifice arrangements to comply with your now lower contribution threshold which could see you exceed the cap.

For ultra-high income earners, your 9% SG alone may see you exceed the $25,000 cap.

So what are the implications of exceeding the contribution limit?

Amounts that exceed the contribution limit will be taxed at 46.5%, the highest marginal rate, as opposed to the 15% rate applied to complying contributions and will count towards another contribution limit, your non-concessional limit of $150,000 per annum.

For top marginal rate payers, you may think this is a satisfactory result, however, although the excessive amounts would reduce your non-concessional limit they are still treated as taxable components within your fund.

For the ultra-high income earners, your options are limited, but here is one thought: An income of around $277,750 will generate 9% SG of $25,000 per annum. You might consider requesting that your employer cease paying SG above $25,000 per annum and instead pay you a higher salary. The tax rate will be the same, but you can direct the excess salary to superannuation to form part of the non-taxable component of your fund.

If you are questioning how an employer can cease paying SG, the maximum salary requiring SG payments is $175,280 per annum. SG paid on salary above this amount is at the employer’s discretion.

Where individuals not only go over the concessional cap, but then also go over the non-concessional cap, they are liable to pay another 46.5%, therefore, they could be liable to pay 93% on excessive contributions so tread carefully.

From 1 July 2012, the ATO have announced that they will allow an individual to exceed their concessional contribution limit once, as long as the excess is under $10,000. They will have the excessive portion refunded without penalty, but it is a one-time only let off. If you exceed by only $50, that is it, your chance has been used.

If any readers have questions regarding the information, feel free to email me at andrew@hewison.com.au for further information.