www.esuperfund.com.au

Contributions Tax


 
 
Types of contributions

There are two types of Contributions you can make to your SMSF.  Each Contribution Type and the respective tax payable on that Contribution is detailed below.

 
 
Contribution Type 1:  Non Concessional Contributions

Personal Contributions made into a SMSF from after tax income on which no tax deduction is claimed are known as Non Concessional Contributions.  Non Concessional Contributions are essentially personal contributions made into your SMSF from your own personal Bank Account and not from your Employer.  No tax is ever payable on a Non Concessional Contribution made into a SMSF either when the monies are contributed into the SMSF or when monies are accessed later on retirement.

 
 
Contribution Type 2:  Concessional Contributions

Concessional Contributions are contributions where a tax deduction has been claimed for the contribution, either by the Member or by an Employer. Concessional Contributions include the following subsets of contribution types:

Mandated Employer Contributions
Salary Sacrifice Contributions
Personal Contributions where a tax deduction is claimed

For more details on Concessional Contributions click here.  Tax is payable on Concessional Contributions made into a SMSF at the rate of 15%.

 
 
Excess Non Concessional Contributions

It should be noted that there are Contributions Limits for Non Concessional Contributions as detailed here. It is important never to breach these limits otherwise penalty taxes apply. That is to the extent you make a Non Concessional Contribution exceeding your Non Concessional Contribution limit your SMSF must return the excess contribution to the contributing Member within 30 days of receiving the contribution. To the extent that this does not occur your SMSF will be liable for Excess Contributions Tax.

If you exceed your Non Concessional Contribution Limit before 1 July 2014, the Excess Contributions over the Non Concessional Contribution Limit will be subject to Excess Contributions Tax of 46.5%. This can result in double taxation, with an effective tax rate of 93%!

If you exceed your Non Concessional Contribution Limit after 1 July 2014, the Excess Contributions over the Non Concessional Contribution Limit will be subject to Excess Contributions Tax of 47%. This can result in double taxation, with an effective tax rate of 94%!

To avoid this disastrous situation, it is vital that you keep track of all your Non Concessional Contributions.

 
 
Excess Concessional Contributions

It should be noted that there are Contributions Limits for Concessional Contributions as detailed here.  It is important never to breach these limits otherwise penalty taxes apply.

If you exceed your Concessional Contribution Limit, the Excess Contributions over the Concessional Contribution Limit will be taxed at your actual marginal tax rate, plus an interest charge calculated by the ATO (as would happen for income tax paid late to the ATO), rather than the top marginal tax rate. If you're already on the top marginal tax rate, you only need to pay the interest charge.

To avoid the above disastrous situation it is vital that you keep track of all your Concessional Contributions, noting that Contributions are regarded as being paid at the time they are received by the fund.

 
 
When is Tax Payable

It is noted in the first year your SMSF is setup the SMSF must lodge its tax return by February 28 following the end of the Financial Year.  In the second year and future years the SMSF must lodge its tax return by May 15 following the end of the Financial Year.