Excess super contribution tax amendments pass

The Parliament has passed the latest amendments to the superannuation excess contribution tax (ECT), implementing the final piece of legislation to reform the unpopular tax, says Taxpayers Australia Limited (TAL).

“The rationale for ECT made sense at the time, but it went too far by imposing a very punitive rate of tax on those who made inadvertent contributions over the caps,” says Reece Agland, Head of Superannuation at TAL.

“When the concessional contribution cap was $50,000 it was less of an issue, as few mistakes were made.  However when the concessional cap was reduced to $25,000 it made the incidence of inadvertent breaches more common.  The harsh penalty and the strict nature of the law meant a lot of people were caught out and heavily penalised.”

The amendments permit individuals a choice to release from superannuation an amount equal to their superannuation contributions in excess of the non-concessional contributions cap, plus 85% of an associated earnings amount, with the full earnings amount included in the individual’s assessable income and taxed at the individual’s marginal tax rate.  The individual will be entitled to a non-refundable tax-offset equal to 15% of the associated earnings amount.

“The new arrangements are fairer,” Agland says. “It still imposes penalties on those who make deliberate choices to exceed the caps, but allows greater flexibility and an ability to correct mistakes.

“Both major parties have been committed to winding back the more egregious elements of the ECT, and I believe we have finally achieved the balance that was previously lacking.”