What To Do If You Exceed Your Superannuation Contribution Caps
Superannuation remains one of the most effective ways to build long-term retirement savings. However, the government places strict limits on how much you can contribute each year. These limits, known as contribution caps, are designed to manage the tax concessions available within the super system.
Exceeding these caps can result in additional tax, but it does not need to be overwhelming. Understanding how the rules work and knowing your options can help you manage the situation with confidence.
Understanding The Contribution Caps
There are two key contribution caps to be aware of:
1. Concessional Contribution Caps
- Concessional contributions are generally made from pre-tax income and include employer super guarantee (SG) contributions, salary sacrifice arrangements and personal contributions for which you claim a tax deduction.
- For the 2025/26 financial year, the concessional contributions cap is $30,000 per year.
2. Non-Concessional Contribution Caps
- Non-concessional contributions are made from after-tax income and typically include personal contributions where no tax deduction is claimed.
- The standard cap is $120,000 per year. Under the bring-forward rule, eligible individuals may contribute up to $360,000 over a three-year period, provided they meet the relevant age and balance requirements.
What Happens If You Exceed The Contribution Cap?
If you exceed either contribution cap, the Australian Taxation Office (ATO) will issue an excess contribution determination notice. This notice outlines the amount of the excess and explains the options available to address it, including any additional tax that may apply.
Exceeding The Concessional Contribution Cap
Where concessional contributions exceed the $30,000 cap, the excess amount is added to your assessable income and taxed at your marginal tax rate. A 15% tax offset is applied to recognise that tax has already been paid by your super fund.
You generally have two options:
- Withdraw the excess contributions – You may withdraw up to 85% of the excess amount from your super to help cover the additional tax; or
- Leave the excess in superannuation – Alternatively, you may decide to leave the excess amount in your super and pay the additional tax personally.
It is important to note that if the excess remains in your super, it will also count towards your non-concessional contribution cap.
The ATO calculates the additional tax payable, removing the need for complex calculations on your part. Once the tax payable has been deducted, the ATO will deposit the remaining funds into the member’s personal bank account.
Exceeding The Non-Concessional Contribution Cap
If you exceed the non-concessional contributions cap, the ATO will generally offer two alternatives:
- Withdraw the excess contributions – You may withdraw the excess contributions along with any associated earnings. The earnings are taxed at your marginal tax rate, with a 15% tax offset applied. No additional penalty tax applies if the excess is withdrawn. Once the tax payable has been deducted, the ATO will deposit the remaining funds into the member’s personal bank account.
- Leave the excess in super – Alternatively, you may choose to leave the excess contributions in your super fund. In this case, the excess amount is taxed at 47%. Given the significant tax outcome, this option is rarely appropriate and is generally avoided.
Practical Steps To Avoid Exceeding The Caps
Careful monitoring can reduce the risk of exceeding your contribution limits:
- Regularly review contributions made by your employer and yourself;
- Be mindful of timing, as contributions are counted in the year your super fund receives them;
- Understand the ongoing restrictions that apply once the bring-forward rule is triggered; and
- Use ATO online services through myGov to track contributions in real time.
Wilson Pateras & Your Superannuation Contributions
At Wilson Pateras, we can help you manage your excess superannuation contributions with confidence.
Exceeding your super contribution caps can be stressful, but there are established processes in place to manage the situation. Acting promptly and understanding your options can help minimise additional tax and protect your long-term retirement savings.
Get in touch with our team if you are unsure how the contribution caps apply to your circumstances, or if you have received a notice from the ATO. We can assist you in navigating the rules and identifying the most appropriate course of action.
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