29 September 2011
The Assistant Treasurer has announced changes a relief measure for individuals who breach the concessional contributions cap for the first time by up to $10,000. The concession provides some flexibility for accidental breaches of the cap.
Under the changes, individuals who breach their concessional contributions cap by up to $10,000 for the first time will have the option to have the excess contributions refunded to them. The refunded contributions would be taxed at the individual’s marginal rate of tax rather than triggering excess contributions tax. Excess concessional contributions are taxed at 31.5% in addition to the 15% tax when contributions are initially made to the fund.
The issue for practitioners and the tax office is going to be the administration of this system. The recommended administration and management required to refund the excess contribution appears onerous and unwieldy. There are almost as many steps in this process as the Empire state building.
Treasury is seeking submissions on the proposed changes by 7 September 2011.
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