Super Penalty Taxes

[Ferret]

I was reading the Money section in yesterday’s Sydney Morning Herald and David Potts talks about the penalty taxes on excess super contributions.

He cites the case of a woman who exceeded the limits by $10.30 and was hit with penalty tax of $69,754.00. I’ve seen this case quoted in Money before, but for the life of me I can’t understand how this can be.

I thought the excess tax was applied to the amount of excess contribution and could be up to 93% if both concessional and non-concessional limits are breached. So why has this woman been taxed $69,754 and not $9.58?

Does anyone here know how this could be? The articles I’ve read don’t give any insight and I’m concerned that I might be misunderstanding how the tax works.

 

[Julia]

Ferret, have a look through the Budget papers. I'm pretty sure I read in yesterday's "The Australian" report on the contents of the Budget that this quite ridiculous penalty regime has been axed.

From memory the article said that in future no penalties would apply, at least for first time "offenders" and that they would simply be able to apply to have the excess contribution returned.

Sorry i can't come up with actual link.
Obviously it needed fixing. Totally stupid to apply such penalties for situations which were often not of the individual's making.

 

[Intrinsic Value]

Ferret, have a look through the Budget papers. I'm pretty sure I read in yesterday's "The Australian" report on the contents of the Budget that this quite ridiculous penalty regime has been axed.

From memory the article said that in future no penalties would apply, at least for first time "offenders" and that they would simply be able to apply to have the excess contribution returned.

Sorry i can't come up with actual link.
Obviously it needed fixing. Totally stupid to apply such penalties for situations which were often not of the individual's making.

Part of the problem in determining whether you go over or under the threshold is when your employer pays the super to the fund.

This is where it can get confusing and catches many people out.

You may have had the super deducted in FY2010 but your employer didn't put in the funds til the next financial year.

Those funds are counted in the next financial year not when they were actually deducted.

Confusing or what?

 

[Junior]

I was reading the Money section in yesterday’s Sydney Morning Herald and David Potts talks about the penalty taxes on excess super contributions.

He cites the case of a woman who exceeded the limits by $10.30 and was hit with penalty tax of $69,754.00. I’ve seen this case quoted in Money before, but for the life of me I can’t understand how this can be.

I thought the excess tax was applied to the amount of excess contribution and could be up to 93% if both concessional and non-concessional limits are breached. So why has this woman been taxed $69,754 and not $9.58?

Does anyone here know how this could be? The articles I’ve read don’t give any insight and I’m concerned that I might be misunderstanding how the tax works.

I've heard stories where an individual makes a non-concessional contribution of say $150,400, thereby triggering the 'bring forward rule' which brings forward 3 years of contribution caps ($450k). Then they make a large non-concessional cont the following year which means they are way over the cap.

 

[Ferret]

I've heard stories where an individual makes a non-concessional contribution of say $150,400, thereby triggering the 'bring forward rule' which brings forward 3 years of contribution caps ($450k). Then they make a large non-concessional cont the following year which means they are way over the cap.

Thanks for the replies.

I suspect the situation is as Junior has described. In that case the real over contribution was not $10.30, but something much larger. The $10.30 brought about the much larger over contribution.

The article could have explained that, but it seems it just went for an attention grab.